Even if you’ve never heard the term crowdfunding, you’ve probably come across an example of it on social media. Crowdfunding simply refers to the idea of raising funds for a project or cause through a large group of people online. Individuals or small businesses can take advantage of it to get early-stage support for their ideas.
There are typically three types of crowdfunding: reward crowdfunding, debt crowdfunding, and equity crowdfunding. With reward crowdfunding, you raise your funds by reaching out to supporters, who receive a small gift or product sample if they pledge a certain amount. As for debt crowdfunding, you receive a loan and pay it within a specific time frame — some prefer this over a bank loan because it can be much faster. And last, but not least, equity crowdfunding means you give a portion of company ownership to the people who provide you with funding.
When you’re looking for a site to fundraise, you want to check for fees as well as if it’s an all or nothing site. Many platforms will take processing fees from each contributing transaction as well as a small percentage of your overall earnings, while a few sites use an all or nothing model, which means you only get your money if you reach your intended goal. Below, we take you through some of the Internet’s best crowdfunding sites.
Best Overall: Kickstarter
Kickstarter is one of the biggest names when it comes to crowdfunding, known for helping tech and creative entrepreneurs fund their projects before getting a loan or raising money for venture capital. The company has raised over $5 billion with more than 182,000 (as per June 2020) projects funded since its inception in 2009. Potential funders can browse a number of verticals from arts and film to publishing.
It’s also easy to use on the fundraising side—begin by setting your goal and then a time period to complete it. FYI: before your campaign can launch, you'll have to be approved by Kickstarter. For each level of money raised per individual, you set a small gift or personal experience for your donor.
Kickstarter is an all or nothing platform, which means that you don’t get your funds unless you complete your campaign. It also means that the funder’s credit card won’t be charged unless you meet your campaign goal. The fee is 5% on top of processing payment charges (3- to 5-%) per transaction. If you raise enough money, there’s a 14-day waiting period for funds.
Runner-Up, Best Overall: Indiegogo
Indiegogo users are usually creating campaigns for tech innovations, creative works, and community projects. The crowdfunding platform works similarly to Kickstarter, except it doesn’t have an exclusively all or nothing fundraising model.
Users choose between two options: fixed and flexible funding. Fixed is best for fundraisers where your project needs a certain amount of money while flexible is good for campaigns where you’ll benefit from any funding. With flexible funding, you will get your funds whether or not you meet your goal; with fixed funding, all funds are returned to your donors if you do not meet the campaign goal. However, there are no fixed funding fees for campaigners who do not meet their goal as opposed to 5-percent for flexible funds and fixed funds that do meet their goals. There’s also a processing fee of 3% and 30 cents per transaction. The minimum goal for either type of fundraiser is $500.
Best for Nonprofits: Causes
Causes is the world’s largest online campaigning platform focused on social, political, and cultural issues. It brands itself as a social network for people who want to make a difference faster and more effectively. It boasts over 186 million users in 156 different countries. The site is great for nonprofits that want to build a donor community without spending too much money and resources on networking. As it runs ads, Causes is free of charge for users.
On your crowdfunding page, you can collect donations and pledges, raise awareness, and share relevant media to potential donors. In addition to fundraising, Causes is a social networking platform that allows you to find people with common interests as you look through categories such as animals, human rights, and the environment. It also provides a platform for creating petitions for advocacy. It’s not exclusive to registered nonprofits—individuals can also access and raise money on the platform for programs and ideas that they care about.
Best for Creators: Patreon
Patreon is popular among digital creatives, such as YouTubers, podcasters, and bloggers. As opposed to you collecting one-off campaign donations, you have a subscription model where patrons regularly contribute a set amount of money every month or per creation. The site allows artists to form relationships with their fans, and creators can even deliver exclusive content to their Patreon subscribers as an incentive to continue funding them. Suffice to say, this service works best if you regularly share work on your personal platform. Otherwise, pledgers do have the option of canceling their subscription if creators don’t produce content.
Patreon collects a 2.9-percent fee and 35 cents from each pledge. The site boasts two million active patrons and over 100,000 active creators. While its service appears niche, Patreon is actually the fifth largest crowdfunding site behind GoFundMe, Kickstarter, Indiegogo, and TeeSpring.
One drawback with Patreon is that it doesn’t market creators as much as sites such as Indiegogo or Kickstarter, which have entire verticals and pages on their projects for potential donors to browse.
Best for Personal Fundraising: GoFundMe
You’ve probably seen a handful of GoFundMe fundraisers on social media at one point or another for emergencies and charitable causes, but businesses can use it as well. The crowdfunding site collects a 2.9-percent processing fee and 30 cents for every donation. As it’s not an all or nothing fundraising site, you keep everything that you raise. Plus, there are zero personal campaign funding fees for those based in the United States.
GoFundMe has had many successful campaigns, including the Las Vegas Victims Fund ( $11.8 million) and the Time’s Up Legal Defense Fund ($24.2 million). This site is a good option if your fundraiser goes towards a service-based cause, such as medical needs or emergency relief. There are a few caveats, however: Conventional startups may not raise as much capital on GoFundMe, and it’s important to be mindful that only one in ten campaigns ever get fully funded on the site.
Best for Equity Crowdfunding: CircleUp
If you’re building a consumer brand, it’s worth looking into CircleUp, which has helped raise $260 million dollars for 196 startups. It offers both equity capital and credit financing. It provides a platform to network with experts, retailers, and entrepreneurs. You can also connect with accredited investors, who have a net worth of at least $1 million and an annual income of at least $200,000. Other perks include access to special lines of credit and market insights using Helio, CircleUp’s proprietary machine-based learning technology for making company strategies.
The company is best for entrepreneurs who are looking to scale as opposed to develop their ideas. The selection process is fairly competitive, and typically you also need to have a revenue of at least $1 million to be listed on their site.
Best for Business Loans: LendingClub
Lending Club is a crowdfunding site that provides up to $40,000 for personal loans and up to 5300,000 for business loans. It’s a form of debt crowdfunding that’s usually easy to qualify for and is often faster than going through a regular bank. As opposed to most equity crowdfunding, it won’t require things such as business visits or plans and projects.
With Lending Club, you get your loan with a 3-year or 5-year term, according to its website. Interest rates can be high depending on your credit score—the total annualized interest typically ranges between 10.68 and 35.89 percent. LendingClub requires at least one year in business, $50,000 in annual sales, no recent bankruptcies or tax liens, and ownership of at least 20% of the business. In other words, you should be in good financial health.
What Is Crowdfunding?
Crowdfunding is a popular form of fundraising, and it’s been used for a variety of reasons as varied as social justice causes, funding new businesses, helping with medical needs, or funding real estate projects. Basically, crowdfunding is just raising money online from multiple people to fund something. Businesses and individuals participate in crowdfunding to raise money.
How Does Crowdfunding Work?
Crowdfunding works by having multiple people individually contribute a small amount to a project, a new business, or a cause. Usually, the pool of people is large and they may not know each other, which is where the “crowd” in crowdfunding comes from. Instead of having just a few investors fund the venture, crowdfunding allows a lot more people to give a little bit of money.
There are three types of crowdfunding:
- Reward crowdfunding: You reward contributors with a product sample or a gift if they give a certain amount
- Debt crowdfunding: Instead of getting a bank loan, you get a loan from crowdfunding and then repay it
- Equity crowdfunding: You give your contributors equity in the company in exchange for cash
How Much Do Crowdfunding Sites Charge?
Different crowdfunding sites charge different amounts. Make sure to read about all of the fees charged by the site before signing up. Sites will typically charge a fee for processing payments, which may range from 3%–5% per transaction. Some sites might also require that a minimum amount be raised or else the contributors get their money back, so make sure you’ll be able to hit your target.
Are Crowdfunding Sites Worth the Cost?
Crowdfunding sites can be a great way to raise a large amount of money in a short period of time. However, the fees can add up, so you want to make sure it's worth the cost to use the site. If you have a popular product or cause, a piece of content that went viral, or a large social media following, then it may be easier to justify the expense. Keep in mind that you need to raise awareness of your crowdfunding campaign so people can donate.
How We Chose the Best Crowdfunding Sites
We researched and reviewed the most popular crowdfunding sites to narrow it down to our top picks. We selected the very best crowdfunding sites based on their features, their track records, their number of users, what type of crowdfunding they offer, their costs, and more.