🗂️ Niches for Crowdfunding Platforms & Platforms Case Study
💻 What is better: open-source, white-label, or custom software development?
⚙️ Top Features for a Crowdfunding Website or App
💳 How to Choose a Payment System Suitable for Crowdfunding
💵 How to Monetize Crowdfunding Platform
Crowdfunding has drastically changed the investments market and already helped thousands of young entrepreneurs on their way to disrupting the market. Looking for investors is no longer so challenging, and projects with little hope for investments from venture capitalists can now easily reach a wider audience to find “the one(s)”.
Additionally, there are multiple studies that represent the increasing popularity of crowdfunding. For example, Statista expects the crowdfunding market to be twice its current size in just 6 years, which equals $25.8B. What is also impressive is the fact that from North-American investors companies get $17.2B dollars yearly.
To build a crowdfunding website, you can work with an experienced development team (image by Samuel Oktavianus)
The crowdfunding business is still relatively new and doesn’t require as much effort as other forms of funding your start-up, which is exactly why it has a huge potential. So, if you want to create a crowdfunding platform to be one of those who bring fresh ideas and donors together — welcome!
To help you better understand each niche from its technical and simply not most obvious sides, we’ve prepared a list of the most helpful features that can be used in each crowdfunding platform niche.
The most famous crowdfunding platforms for sharing content are Kickstarter and Patreon. And while Kickstarter has the usual crowdfunding news feed (you see all creators looking for funding and some of the content they offer for it), similar to other Social Networks, Patreon has a more advanced way of collecting funds. It’s based on a subscription system: you choose an artist, follow them for a fee, and only then you can see their content.
Patreon has one great feature you should take note of — since this platform is used mainly by well-known creators, the site offers users to connect with Social Networks and see if people they follow use Patreon or not. This way, you can easily redirect users to your platform from other Social Networks.
Moreover, to satisfy the needs of those who have a specific request on who they want to invest in, you can add filters by category or geolocation so that your users will know which creators are available within the set filters.
To start a crowdfunding platform, you can go for different crowdfunding niches and work with software development companies within the industry (image by Patreon)
A good option might also be to rank startups by popularity. For example, you can make a daily update to see which projects get the most money or the most payments today.
Another great idea might be to provide the ability to set up several membership levels with different subscription fees. For a respective payment, a subscriber gets early access to the content, exclusive video, and/or merch shipments once in a while. This way, all users with various financial statuses can support the project and choose a comfortable payment plan for themselves and their wallets.
For a Patreon-like platform, make sure to allow and offer to set up recurring payments. We also suggest sending push notifications a few days before and on the day of the payment so subscribers won’t lose access to the content. In case there’s no need to perform transactions on a regular basis, you can simply offer users to connect their bank account to your platform. Meaning that they won’t have to type in the details again.
Because of the difficulties associated with Covid-19, charity exchanges have become much more active. However, the charity field is much more complex than the creative one, so there’s more monitoring of investment spending. To show that money is being used only as needed, volunteer organizations must submit reports.
Some platforms, such as GoFundMe, automatically process transactions and do itemized reports for charities and nonprofits to make this process easier. You can also set up auto-posting of these reports, or you can automate emailing the donors.
To create a crowdfunding platform that will actually help crowdfunding campaigns raise funds, consider offering various crowdfunding options (equity-based, reward-based, donation-based) (image by Cristina Gabrieli)
Since charity platforms often raise money to fund healthcare, the time for fundraising can be very limited. And then, an excellent option would be to display campaigns that have tight fundraising deadlines on the top.
To raise money for charity, people often organize thematic events. Thus, you might add a simple ticket purchasing system or integrate a whole booking system into your platform.
If you’d like to learn more about building your own booking software, take a look at our article dedicated to this topic:
How to Create an Online Booking System for your App or Site
Additionally, to support the campaigns even at offline events, such as fairs, you can consider implementing direct QR-code payment. This way, the money would be automatically included in the general report since transactions would still be processed through your platform.
Crowdfunding is a popular way to fund early-stage startups. Co-founders share their stories, idea, and purpose to get loyal followers, who will support them financially for early access to the app or some bonuses in return.
It can also happen that some startups are only interested in attracting accredited investors and not just anybody. So crowdfunding platforms sometimes limit the accessibility to funding projects, just as Fundable does.
It means that as a part of the registration, investors need to verify their “financial status”. For this, potential investors might have to provide some of the following data:
After that, an investor is considered credible and may receive complete information about the startup on demand. Others may only see a brief project description.
If you want to create a donation-based crowdfunding site, consider allowing marketing campaign creators to offer special bonuses so investors get something in return (image by Fundable)
Such investing relationships normally imply rather significant amounts of money and, thus, require strict financial monitoring tools. For example, the Know Your Customer (KYC) and Anti Money Laundering (AML) concepts would work well together here.
To pass the KYC check, donors and startups must provide a passport or ID card. The system then searches a person/company through various databases, lists of terrorist or extremist organizations members. Selfies with the document in hand may be requested for additional verification. In addition to this, the user’s bank accounts, biography, and place of work can also be verified.
Surely, you don’t have to set it all up yourself. There are plenty of Banking-as-a-Service companies with access to ready-to-use KYC and AML tools. We will take a closer look at choosing a Payment Gateway provider but here is a couple of them with KYC/AML tools: MangoPay, Solarisbank, Railsbank.
We’ve also done a BaaS providers case study with tips on how to choose them if you’d like to learn more:
Which BaaS Provider to Choose?
But even after admission, startups, and investors are constantly monitored, checked several times to rule out the possibility of money laundering or fraud.
Such platforms are meant to help raise funds and solve lawsuit problems. Anyone with a legal issue, no matter how big or small, can post a campaign for public or personal reasons. CrowdJustice is one of such platforms. So, let’s take a look at how they organize their environment.
First of all, it allows the users to choose the way to access fundraising. For example, if a user knows a specific circle of people who are ready to help them out financially but still want some kind of infrastructure behind, it is possible to share access to it through a link. Public access to donations also remains an option, of course — even small public cases sometimes collected more than was needed.
Legal crowdfunding campaigns usually have a high funding goal since such a project can be time-consuming (image by CrowdJustice)
To comply with regulatory requirements when charging money, you can set up a transfer method directly to the lawyer’s account right away. The same will be shown in the reports, and donors would know that the money is spent on the case. Campaign creators can send backers case updates during and after the fundraiser, so they can see the progress.
If the user wants to raise more money than originally pledged, CrowdJustice has created a stretch target option that only works after closing the initial target. This allows you to continue to raise money on a legal issue. If the client couldn’t reach the initial target, the platform doesn’t charge them fees.
Banks are often discouraged from investing in agriculture because of the high risks. . Moreover, such projects often need a large number of funds because of how large-scale they can be, which most likely exceeds the maximum investment amount from a single investor. Taking that into account, crowdfunding platforms have become wild cards for agricultural projects.
Agriculture crowdfunding platforms put a lot of emphasis on educational content and blogs. This is done to attract more investors to this challenging field and break stereotypes. Harvest Returns, for example, created a complete guide about investing and making money in agriculture and farming.
Agriculture crowdfunding is relatively new to the market and requires specific marketing campaign approaches (image by Cropital)
Such platforms usually have a limit on the amount of contribution. In that way, investors support different farms and thus reduce the risk of losing money. Cropital has gone even further and shows a risk rating even at the preview stage of the campaign. It is generated with the help of local authorities and based on the interviews the platform conducts with new applicants.
Plus, because of big investment sums, often only approved investors can finance agriculture on platforms. Harvest Returns asks for an ID or Social Security Number when registering to verify the donor’s solvency.
This niche is the fastest growing one in crowdfunding. It’s a good alternative for donors who want to invest in real estate but don’t want a long-term commitment.
Just like agriculture ones, platforms like RealtyMogul post educational content on their blogs — since real estate is also considered to be complex and tricky, education is highly important. There, you can find educational articles and videos about real estate investment trusts (REITs), markets, commercial real estate, and investing.
A real estate crowdfunding website might be a great solution to attract funds from one of the most beneficial industries worldwide (image by RealtyMogul)
PeerStreet, on the other hand, allows investors to book spots as soon as sales start. Therefore, it emphasizes the importance of quick but strategic decision-making, which is also the truth about real estate.
There’s also an opportunity for PeerStreet users to automatically reserve a certain project. Donors can set up specific project criteria. Then, as soon as a suitable offer appears, donors are given a reservation for 24 hours so that they can look at the project. If they find the project not suitable, they can simply cancel the reservation.
Additionally, PeerStreet has a deposit feature. Backers can put money on deposit, get interests, and later invest the money in real estate.
When you have decided on the niche of your platform, you can already think about the way to make it a reality. There are three approaches to building a platform: open-source (like WordPress), white-label (like LenderKit), and custom development. To help you decide which method is right for your project, we created a table with the advantages and disadvantages of each.
You just buy access to the platform and customize the site using built-in templates
Compared to open-source, there are more plugins and site design solutions.
📱 Customization & Security
very aspect of your platform will be designed the way you want while keeping it as secure as possible
The platform has significantly shorter time-to-market frames
Even though it’s cheaper than custom development, you still might get a sufficient design customization level (if you choose the right white-label provider)
🧩 Flexibility & Experience
Any changes can be made at any time, as soon as you need them. Plus, custom developers can always share their experience and advise you since you work with them personally
The functionality choice is limited to what the vendor offers
❌ Updating Limitations
If your app will be based on a shared server, you won’t be able to perform system updating as the code won’t be fully isolated from other digital products
Custom development will cost more than open-source or white-label developmen
Open-source platforms are easier to hac
Websites created on the white-label solution might look really similar since clients of the same company have access to the same customization options
Creating a platform from scratch will take a lot of time
There isn’t a single set of features that fits every crowdfunding site perfectly — everything is individual and strongly depends on the chosen niche. But in general, some features are necessary for a platform to be user-friendly. Here’s what we find the most important, relying on our experience.
Often this list can be the home screen/dashboard of the platform. To simplify the search, you can divide campaigns into categories. This is useful if you’re working with several niches. That way, donors can quickly find projects that might interest them.
Creating a crowdfunding platform implies creating a place to list every crowdfunding campaign you have on your crowdfunding software (image by Leonid Arestov)
You can also set up recommendations that will depend on previous donations or views. Kickstarter, for example, also uses ML to improve suggestions’ accuracy.
When visiting a campaign page, users expect to see detailed information:
To start a crowdfunding business project, take a look at what features platforms that work in the investment industry like Kickstarter have (image by Miretta Männistö)
If it is a startup or any business, the investor should be able to request a business plan, a list of previous investors, or other documents. And then, the donor will decide if he wants to finance the project.
Surely, to provide all the mentioned above data, you need to create a campaign control panel for fundraisers. There, they should also be able to add some content like videos or pitch deck presentations. It can significantly increase one’s chances to get investments since campaigns with personal videos raise 105% more money (compared to those who have none). The information should also be verified.
If the project has been successfully validated, a campaign profile should appear on the panel for money raisers specifically. It should include all the basic information, a list of transactions and their details, chats with investors (if there is such a feature) and platform support, reports, etc.
A crowdfunding platform like Kickstarter should provide tools for fundraisers to actually start a crowdfunding campaign and track the incoming funding afterward (image by Olga Staromłyńska)
If it’s a reward-based crowdfunding platform, campaign creators should also be able to see which rewards people choose most often and which ones are not popular and, thus, may need to be refined.
To increase activity and establish contact with investors within your website or app, you can send them notifications. If a donor opens the campaign, views it, clicks to pay, but for some reason doesn’t complete the process, you can send them a reminder. It will increase the likelihood that the person will still donate.
You can add desktop notifications to your crowdfunding website and push notifications to a mobile crowdfunding project (image by Aleksandar Savic)
People will be pleased to receive a notification or email after the payment, thanking them and informing them that the transfer was successful. You can also send notifications to backers about how their contributions are appreciated — people need to know that others are grateful for the help.
It’s important to remember that you need to be able to manage the crowdfunding platform. Administrators of the site should have access to the control of such processes:
You might need an admin panel for your crowdfunding site so you could control your business from the inside (track funding transfers for AML control, for example) (image by Mário Rodrigues)
However, you only have a choice when building a platform on your own. If you use open-source or white-label options, an admin panel would be provided to you.
Since people from different countries will most likely use your crowdfunding platform, the payment gateway should support multiple currencies and their exchange. Some payment systems may be disabled in several countries, so it is better to connect a few of them.
For a crowdfunding site, you’ll surely need a reliable banking partner (image by Shakuro Branding)
The most popular payment gateways are PayPal and Stripe. But it is better to choose the systems which suit your crowdfunding business model. For example, the best choice for a startup crowdfunding system that works only with certified investors will be payment gateways with automatic KYC/AML checks.
The payment system is the main tool in a crowdfunding platform. Apart from basic payment functionality, such a business requires a higher security level. We looked at some payment systems that can make the payment process safe and legally compliant. Here they are:
200 countries/regions and 25 currencies
2.9% + 30 cents per transaction
High-level risk management but a rather simple identity verification
Available for businesses in 46 countries but accepts payments from anywhere
2.9% + 30 cents per transaction
Protects data by Payment Card Industry Data Security Standard (PCI DSS) but don’t report using KYC or AML
29 countries and 14 operational currencies
2.7% + 30 cents per transaction
AML/CFT and KYC compliant tools, follows GDPR standards
Is for investing specifically, however, works with some countries in Western Europe
0.95% of the value of your invested funds, per annum. Doesn’t charge any upfront or performance fees, or investors who don’t earn returns
Automated KYC/AML verification, ongoing security monitoring, and risk management
Available for businesses in 31 countries, payments from 119 countries
2.7% + 30 cents per transaction
Multiple levels of KYC verification, functional fraud protection, and prevention system
Take into account that fees may vary depending on your specific needs and crowdfunding niche.
Now, let’s talk about how you can make money off your crowdfunding platform using a chosen business model.
You might charge a success fee after a campaign gets its money. The success fee is a percentage of the sum withdrawn only when the campaign is fully raised. That’s what Kickstarter does, collecting 5% of the money raised. Some platforms may not charge, such as charity projects.
Another way to monetize crowdfunding websites that operate on a membership model is to charge a fixed fee every month. Meaning that for whatever number of crowdfunding campaigns you pay the same amount of money. This might be attractive to fundraisers who might have to work with larger investments in their business since they’ll pay a fixed price for whatever sum they’ll get.
A crowdfunding platform can also provide advertising services. Or you can also place the campaign at the top of the search or on the home page for a percentage of the total amount.
You can surely combine all 3 of these monetization strategies to get a diversified source of income. Just make sure to keep the balance.
Starting your own crowdfunding platform might be really challenging. However, with the right approach, it will definitely be worth it — being a vendor for money turnover has always been profitable.
Let’s summarize what we’ve talked about in this article and what the “right approach” is:
If you still have questions on how to start a crowdfunding website or need help with development –– our team would be happy to help you! Press the button below and we’ll be there in a blink!
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