The Different Crowdfunding Platforms Available
Crowdfunding platforms are varied and your choice may affect your overall success. In this post we go over some different types of crowdfunding platform in a way that should help you choose the best one, whether you are looking to get funding or an investor. Crowdsourcing platforms are also improving all the time and this page may also help you decide which one is most likely to meet your needs in the longer run.
Choosing a Crowdfunding Platform
There are many crowdfunding platforms out there and it can be overwhelming to choose one if you are either looking for capital or a potential investor. One way to narrow your choices is to look at the crowdsourcing platform behind the site – how exactly is money raised and then given to the project or purpose? Subtle differences in crowdfunding platforms can lead you to the best fit site for you, againwhether you are receiving funds or an investor. Knowing the major choices can help a lot with your initial decision of which crowdfunding platform to go with since there are many good choices out there. In this sections we are not reviewing actual websites but instead giving you a tool to narrow your choices by looking at which of the crowdfunding platforms is for you. What follows are the major categories of crowdfunding platform.
Direct Money Crowdfunding Platforms:
The most straightforward of the crowdfunding platforms simply pass along money given by investors to the person looking for help with a project or purpose. Kickstarter and Idiegogo are two examples of sites using this classic form of peer-to-peer lending. Often structured much like loans, these peer-to-peer lending instruments provide the capital with a repayment schedule of some sort. Of course these types of agreements are connected with school and educational funding where there is nothing to really have equity in (although there is something called human capital contracts, but that is a topic for another day!). These crowdfunding platforms are also used for other purposes outside the business realm and again where there is really nothing to get any equity in, such as personal reasons including adoption expenses.
Direct money crowdfunding platforms are most commonly used for school loans, personal reasons that do not lead to any product or service equity, business improvement that does not directly relate to a product or service, and charitable purposes. While it can be used to fund product and service expansion and development, equity funding is more popular for those purposes.
Competitive Crowdfunding Platforms:
A variation of the first category, competition crowdfunding platforms pit different companies or products against each other. So instead of browsing through countless potential companies or products to invest in and merely choosing among them, investors instead collectively vote to see which company will get the cash. In many cases investors can still choose which company to invest in, but there is also a pool of money which will only go to the winners of the voting. In this case the investors have a little less worry though less control as well. They are putting up financing and then counting on the crowd to choose where it will ultimately go.
Competitive crowdfunding platforms are usually used for business and the arts where products can be compared and contrasted by the crowd. Sometimes competitive crowdfunding platforms don’t require a payback and are merely a way for the crowd to get involved more closely with a promising product or service.
Combination Crowdfunding Platforms:
Of course there are many crowdfunding platforms already that provide combinations of opportunities. WeFunder for example provides regular “cash” as well as equity transaction possibilities. These sites that allow for all types of peer-to-peer lending are popular of course with those who want a wider choice of how to spend their investment. Of course these types of sites do very little for the person hoping to narrow their choices, but then again, after a while you may want just one site if you are planning to invest in several different ways. The great thing about these combination websites is that you may even be able to move your project from one category to the other – for example maybe you were hoping to get funding that would have minimal payback terms but you have to move it to more of an equity type ask because you could not attract enough money the other way. This type of site is also great if you want to run two types of campaign at the same time – of course you would need to disclose this intention to any people in the potential crowd members but after you do that you might raise one set of money by giving insider perks while still giving equity to those in the crowd willing to give higher amounts.
Differences Between Crowdfunding Platforms
There are many types of crowdfunding platforms available, and as a person looking for peer-to-peer lending or an investor looking into crowdfunding to round out your portfolio you need to choose which one is the best fit for your purpose carefully. Of course the most widely known and recognized is the direct method of posting a purpose or product on a website and asking for start-up money to get it produced or started. For many this is a perfect approach especially when a relatively small amount of money is needed and you don’t want a heavypayback schedule. A slightly different kind of crowdfunding platform is the competitive approach, where the crowd collectively votes on the project or purpose that will get funded. This approach helps to narrow the choices and helps the investor know which choice is favored beyond her or his preference. Equity crowdfunding may be the most popular choice for those people and companies looking for a much larger sum, and this choice clearly has the highest risk/reward potential on both sides. And finally we have charity funding where money is designated for a charitable purpose and no payback is made.
Here is an interesting article from Yahoo! about how a platform for crowdfunding and a VC firm joined together
Crowdfunding Platform Results
These are the major types of Crowdfunding platforms available, with more sites coming on-line as time goes on. There are many excellent sites, too many to review, but you can narrow things down by choosing the type of platform you are interest in in the first place. Look at the projects that have been successfully funded at a particular site and see whether it matches what you are hoping for. See how many investors of the type you need seem to be attracted to the site in question. And aside from this site go to message boards (Like this crowdfunding forum) and other online resources where people share their experiences. See also information on specific types of sites, such as this list from the Huffington Post of real estate crowdfunding platforms.
Which type of crowdfunding platform may be right for you as an investor or someone looking for funding? In many cases the choice is quite clear and easy, but in others there may be more than one good choice or it may be harder to decide among many suitable crowdfunding platforms.