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How To Create A Crowdfunding Site

Jim GarlockBy: Jim Garlock

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Whether it's an up and coming musician looking to fund their musical project, or a small-to-midsize business gathering extra cash for a philanthropic event, crowdfunding sites have become the go-to source for rolling in the extra dough.

Today, many businesses and individuals want to create a crowdfunding site instead of using existing sites.

These platforms are especially popular in real estate, agriculture, space/science, nonprofit organizations, energy, and music/entertainment industries. In fact, Forbes estimated that real estate crowdfunding alone will be worth more than $300 billion by the time 2025 arrives.

Customized crowdfunding platforms can better serve the unique and detailed needs of the entrepreneur or business owner. It's important to consider functionality, payment processing options, business models, and other aspects to ensure an optimal outcome.

In this article, we'll talk about how to create a crowdfunding site to showcase your brand while achieving substantial financial gains amidst a sea of charitable individuals.

Find Your Niche

Find Your Niche

First things first, you must choose the fundraising niche that you want to fill. This will make your marketing campaign much more efficient since you'll better understand who your target audience is.

Sometimes, it's best to cast a smaller, more precise net over a group of people than a wide one. Casting a wide net will allow you to reach a larger group of people; however, you may be reaching those who are less likely to arouse interest in what you're offering.

Narrow your focus to one main niche, or possibly a small handful of niches.

There are tons of niches to choose from that offer lucrative fundraising opportunities. However, the best way to find success in allocating funds for projects within a specific niche is to stick to what you're passionate about.

If you're a musician, filmmaker, or an entertainment promoter/agent looking to raise funds to launch new projects, shoot films, or record an album, then the music/entertainment niche is the right choice for you.

Agriculture is another popular niche choice that many entrepreneurs find themselves needing added funding for. This niche is mainly dedicated to funding sustainable food movements.

Narrow your focus to one main niche, or possibly a small handful of niches

One of the fastest-growing crowdfunding sectors is the real estate industry. Real estate has made enormous progress when harnessing the power of crowdfunding websites.

Real estate companies everywhere have utilized crowdfunding sites as an excellent platform for investing in commercial real estate. Realtors would agree that crowdfunding is an excellent alternative for those looking to get involved in property investments but don't want the long-term commitment or have the means to save a deposit for a home loan.

There's an unlimited range of niches to choose from to build a successful crowdfunding site. Whichever platform you choose for whatever niche market you decide to raise money for, make sure that you market your project in a way that speaks to people on a personal note.

This is the most effective way to get people interested in your cause and get the most out of your fundraising efforts.

Crowdfunding Business Models: Choose Your Platform

Crowdfunding Business Models: Choose Your Platform

The business model attached to a crowdfunding platform may vary from one program to another. The way you gain a profit is the nucleus of your crowdfunding project.

These are the leading crowdfunding platform types to choose from:

Now that you're aware of the different types of crowdfunding platforms, it's time that you better understand them so that you can make an informed decision on which to choose.

P2P Lending Crowdfunding

P2P Lending Crowdfunding

P2P lending is the most popular crowdfunding business model since it allows an entrepreneur or business to borrow money from a group of people instead of a bank.

For social lending structures (social projects), borrowers may not have to pay any interest on the loan. In this case, some platforms are designed to use P2P or P2B loans instead.

P2P lending websites connect investors who want to lend money to entrepreneurs or entities that need money.

More and more businesses and entrepreneurs are discovering the benefits of P2B and P2P lending software development.

Even if a borrower's credit isn't great, a P2P lender may be willing to accept the risks involved for potential benefits or a cause that they believe in. This business model also gives more customization options to borrowers and lenders.

Interest rates are usually between 6% and 36%, and loan amounts may vary between $1,000 and $40,000. The average repayment term is about 36 months.

Companies or entrepreneurs that own custom crowdfunding platforms for P2P lending make money by allowing others to use them. In this case, they make money by being the intermediary (middleman) and charge a small percentage-based fee.

Zopa is a well-known P2P lending crowdfunding platform utilized by millions of businesses and entrepreneurs looking to expand their budget for specific projects.

Reward-Based Crowdfunding

Reward-Based Crowdfunding

Reward-based platforms include donations, and they provide a specific reward to donors. The reward structure may offer a single benefit or have multiple tiers.

Kickstarter and IndieGogo are massively popular reward-based crowdfunding platforms utilized mainly by artists, musicians, designers, and filmmakers to fund everything from music and films to technologies and designs.

When it comes to reward-based crowdfunding, the magic is in the name - "reward."

When the creator defines a clear funding goal, they must achieve that goal to receive the money. Kickstarter funding is all-or-nothing, meaning you don't receive the money if you don't reach your funding goal.

Investors pledge money to projects in exchange for a reward, which typically relates to the project itself. Rewards can be either tangible or intangible (symbolic).

Donation-Based Crowdfunding

Donation-Based Crowdfunding

Donation-based platforms are suitable for charitable projects, business expansion projects, or other types of projects where donors have the assurance that they're contributing to a specific project.

This may encourage higher donation amounts and often inspires more confidence in donors. They also know that they can expect updates as the project progresses.

GoFundMe is the most popular donation-based crowdfunding platform, resulting in a total of $5 billion in donations for charitable causes.

This platform offers the simplest ideology out of all of the crowdfunding sites to choose from. However, donation-based platforms don't provide any incentives or financial returns to investors or contributors.

For donation-based crowdfunding, you have to sell people on the cause that you're fundraising for.

It doesn't necessarily matter what your cause is. What matters most is how you showcase your cause to the public and persuade them to care enough about it to cough up the cash.

If you decide to choose this platform, consider creating a campaign that pulls at the heartstrings. More often than not, people will donate to a cause that relates to them on an emotional level.

Common donation-based crowdfunding initiatives include nonprofits, charities, disaster relief, and medical bills.

Equity-Based Crowdfunding

Equity-Based Crowdfunding

Unlike reward-based or donation-based business models, equity-based crowdfunding platforms allow contributors to become partial owners of your company after trading capital for equity shares.

Contributors for equity-based crowdfunding projects receive a financial return on investment and a share of the profits in the form of a distribution or dividend.

This profit may be a set percentage or in tiers that are based on contribution amounts.

EquityNet and Startup Valley are well-known equity-based crowdfunding platforms, offering businesses and entrepreneurs the opportunity to become a part of something potentially profitable.

Hybrid-Based Crowdfunding

Equity-Based Crowdfunding

Hybrid-based crowdfunding platforms incorporate a blend of some of the models that we previously discussed.

The emergence of hybrid-based crowdfunding came from its appeal of harmonizing traditional crowdfunding elements with the broad experience of equity investments.

Hybrid crowds are widely employed and are currently only seen in equity-based crowdfunding.

Hybrid crowds only use lead investors, highly experienced investors who invest in a substantial amount in equity crowdfunding campaigns.

Select A Monetization Method

Select A Monetization Method

Your crowdfunding platform is not just a tool used to promote and implement new ideas; it's also a valuable source of generating revenue for a cause that you believe in.

When it comes to finding a monetization method for your crowdfunding site, you must align your objectives with your goals. This means that you must consider which type of platform you've chosen (as mentioned prior) and find out which monetization model best supports it.

Membership Fees

Membership fees and subscription-based crowdfunding models, just like your country club or local gym, charges a monthly fee to run your campaigns on the crowdfunding site.

For instance, crowdfunding sites like Fundable charges a monthly fee to fundraise using their platform.

Success Fees

For this particular monetization model, the crowdfunding site will receive a small percentage from your initiative's sum of campaign collections.

For instance, the Indiegogo platform collects 5% of all of the funds that you raise.

Success Fees

Loan Processing Fees

If you wish to charge loan-processing fees for your P2P lending crowdfunding platform, you can charge a certain percentage of the amount users borrow.

For instance, Landbay charges a small percentage for new loans and the overall balance of the loan annually.

Promotions & Advertising

A highly effective way to monetize your crowdfunding site, which absolutely everyone who's raising money for a cause or event should do, is through promotion and advertising.

Let users create campaigns on your platform and charge them a fee for each individual campaign, per campaign package, or a monthly fee for unlimited campaign ads.

A Portion of Future Sales

Instead of taking a percentage of the sum of the full amount of collected funds from the campaign creator, you could take a portion of the creator's future revenue.

Think of it as an investment in your customers.

For instance, PledgeMusic takes a decently-sized 15% from artists' future sales after they've fundraised on the site.

Your monetization model choice will depend entirely on your chosen crowdfunding business model and niche for your platform. Make sure that you select a monetization method that is both beneficial for you and for your users.

Crowdfunding Payment Processing

Crowdfunding Payment Processing

The term crowdfunding is pretty self-explanatory; it refers to raising funds from a crowd.

You can advertise a million marketing ad campaigns on several social media sites and through different digital channels all day long.

However, you'll never be able to get to those funds unless you implement a third-party payment processing system.

When it comes to choosing a payment gateway, the sky is the limit.

There are tons of different payment gateways that you can choose from to integrate within your crowdfunding platform.

Choosing the best one depends on three major concerns:

  1. Payment Data Security

  2. Ethical Issues

  3. Settlement Structure

You want to find the right payment gateway system that adheres to legal and regulatory concerns, security measures, and have the crowdfunding-specific functionality that you require.

Payment gateways like MangoPay, Goji, LenderKit, LemonWay, GC Partners, or GoCardless are excellent choices to implement into your crowdfunding platform.

Remember to consider your business model, niche, and monetization method when deciding on a payment gateway. This way, you can ensure that each component of your platform orchestrates alongside one another perfectly, providing a profitable solution that you can use to achieve greatness!

Custom Crowdfunding Site Development

Custom Crowdfunding Site Development

Before you begin developing your own crowdfunding platform, it's essential to consider your development approach.

Do you want to utilize an open-source CMS website like WordPress? Or, perhaps you'd be more comfortable with selecting a white label solution.

Both options are acceptable, but neither will give you the amount of flexibility and resources you want.

Creating a custom crowdfunding site means hiring an expert developer, or team of developers, to create the ideal solution that satisfies your business and fundraising needs.

For high-quality crowdfunding software development services, choose Chetu. We have over 20 years of experience developing every kind of website and application you can think of.

We're confident that we can augment your existing team or provide you with a brand new team to build a successful crowdfunding site promptly, efficiently, and affordably.

Disclaimer:

Chetu, Inc. does not affect the opinion of this article. Any mention of specific names for software, companies or individuals does not constitute an endorsement from either party unless otherwise specified. All case studies and blogs are written with the full cooperation, knowledge and participation of the individuals mentioned. This blog should not be construed as legal advice.

Chetu was incorporated in 2000 and is headquartered in Florida. We deliver World-Class Software Development Solutions serving entrepreneurs to Fortune 500 clients. Our services include process and systems design, package implementation, custom development, business intelligence and reporting, systems integration, as well as testing, maintenance and support. Chetu's expertise spans across the entire IT spectrum.

- See more at: www.chetu.com/blogs

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