How To Create a Crowdfunding Platform [The Ultimate Cheat Sheet]

What do early-stage startups and independent artists have in common? The need for funding. And crowdfunding is more than capable of providing them with it. It can help finance a new business venture and raise extra money to bring any creative project to life.

How To Create a Crowdfunding Platform The Ultimate Cheat Sheet 1920x1080 1

If you are about to create a crowdfunding platform, you’re in the right place. In this article, OpenGeeksLab reveals how to develop a crowdfunding platform and take the most out of it. It’ll help you decide on the platform niche, business model, functionality, monetization options, and other nuances needed to build a crowdfunding website that will take off.

Highlights

  • Crowdfunding is booming. Crowdfunding demand was estimated at 12.3 billion U.S. dollars in 2021, forecasting to double by the time 2027 arrives with an 11% CAGR.
  • A simple way to raise funds for dream projects. Preparing to start a successful crowdfunding campaign takes, on average, 11 days and 400 words to present the funding project.
  • Favorable opportunities. Crowdfunding offers backers multiple benefits for investments. Depending on the investment type, backers can get the product they invested in, an equity share in the company, certain interests they agreed with, or satisfaction from charity donation.
  • The size of fundraisers and sponsors is not the limit for crowdfunding. One of the top benefits of the fundraising platforms is the unlimited size of funding projects and amounts that backers can invest. Compared to traditional ways to raise capital, crowdfunding website development opens more opportunities for all parties: creators get funded, backers can get lower tax burden, and platform owners can earn revenue from running their own platform.
  • Getting advantage of the market growth. Forecasts show that the market can expect growth of transaction worth with an annual rate (CAGR 2022-2025) of around 2%, resulting in a total amount of 1,209.1 million U.S. dollars before 2025 arrives. It stands as a good reason to create a crowdfunding platform.

Crowdfunding: Benefits and Market Overview

Traditional fundraising usually comes up with a limited count of investors and many regulatory issues that may limit project progress. On the other hand, crowdfunding has a simpler investor verification process and no rough limits for the amount sponsors who want to invest. Thus, we are fortunate to have fundraising platforms to overcome these hurdles and use new opportunities for capital raises. You can see the difference in the picture below.

Traditional fundraising implies limited amounts from one or several investors who invest with equal terms. Crowdfunding, in turn, allows for an unlimited count of investors with different terms and sums.

Source: the European Commission

Crowdfunding platforms are flourishing and widespread amongst various industries, but mostly cover fields like IT, philanthropic organizations, real estate market, agriculture, entertainment, art initiatives.

Statista claims that the annual transaction value of crowdfunding is over $1bn. globally, whereas the U.S. takes first place, reaching over $500m in 2022.

According to Zippia, the approximate common amount per crowd investing campaign is around 5,270 U.S. dollars whereas the average amount raised by successful fundraisers is as high as 28,656 U.S. dollars. If we talk about fortunate projects they get on average 96 U.S. dollars from each individual backer.

Knowing what benefits all parties help make better decisions before dedicating time and money to crowdfunding. Let’s look at the juiciest perks of crowdfunding below.

1. Unlimited Number of Sponsors

Funding from many backers can be a fast way to raise finance with no upfront fees. This goes well for non-profit or art projects. We can see how it worked for The Veronica Mars Movie Project where fundraiser Rob Thomas used crowdfunding website development services to get financing for the movie creation. As a result, the campaign surpassed the goal of 2 million U.S. dollars with an extra three million raised.

2. Get Attention Through Online Platform

Launching a project or business via an online platform can boost marketing outcomes and build hype around a new venture in media. For example, the Hong Kong crowdfunding project Fiido X presented an electric folding bike that gained high popularity together with the capital of 1.5 million US dollars from over a thousand investors.

3. New Way to Generate Funds

Even well-known brands sometimes need some extra dough to build their new products, and crowdfunding can be a great new source to generate capital. Ostrichpillow used fundraising to gather financing for their unique eye mask idea. By showing all the features and usefulness of their new product through their campaign page, the company gained over $300,000 from over 7,000 backers within just 25 minutes!

4. Items Pre-Selling

Pitching a crowdfunding campaign allows businesses to pre-sell products or ideas that are not on the market yet. Moreover, this helps to evaluate consumer feedback and decide whether it has a future to grow or not. Here is when the Sirui’s 24mm anamorphic lens campaign arises as a promising use case. The company gathered almost 2 million U.S. dollars from 2,000 backers who became happy owners of their product.

5. Get Feedback on New Project

The big advantage of crowdfunding website development solutions is that entrepreneurs can often get the public’s reaction and expert guidance on the idea they share. The First 3D Luminous Colored Wooden World Map is an excellent example of a successful campaign that stood out not only by using graphics to represent their product but also by their communication with investors. They gave regular updates to backers and responded to every comment to keep their communication the best way possible which resulted in over 800m U.S. dollars from over 3,000 sponsors.

After reviewing the most successful cases out there, let’s move to a list we compiled to guide you through the core features of fundraising apps. We hope it will help you get inspired to build a crowdfunding website that makes a difference.

Crowdfunding Platform’s Essential Features

Creating a crowdfunding platform takes around four-six months. The estimated time depends on the development course, required functions, chosen tech stack, team size, and many more nuances. Let’s dwell on the primary functions you need for crowdfunding platform development.

First things first. Crowdfunding apps are two-fold marketplaces and their features are designed to cover two main roles—creators and backers. Below you can see must-haves for each user group.

For Investors:

Choosing the project to invest in can bring a lot of headaches to backers, so to win their loyalty, a platform needs to have an easy-to-use profile, convenient search, informative project filters, advanced analytics, and frictionless payment options.

1. Creating Profile

Funding a project for many platforms is enough to sign-up via email or social media account. There is no need to be an accredited investor with a certain amount of capital to start backing so that any adult can donate or buy a share in the organization.

2. Search Page

Providing investors with the ability to quickly find projects according to their interests is crucial. This feature must include the possibility to choose categories and project timing. Backers should see the campaign’s duration and the current amount raised on the search page, short description, photo, or video to present the idea.

Crowdfunding platform development possesses basic and advanced features to cover creators’ and backers’ needs.

3. Project Details

After finding an interesting idea that matches the chosen criteria, backers need to see more details about the project. These are creator profile, rewards promised, number of investors, full presentation, or the product’s business plan.

4. Statistics

Often investors support more than one campaign, which requires crowdfunding platforms to provide sponsors with the ability to see a regular update for campaigns they finance. An analytics dashboard must reflect ongoing projects’ reports, and other data to see how projects evolve.

5. Backing Options

Popular crowdfunding platforms provide various financing options for sponsors, letting them choose the amount of money to invest and desired rewards. This option widens the opportunities for backers, making it easy to support selected campaigns. In the picture below, you can see some of these options.

As shown in the picture above, investors can choose from several backing options and get diverse perks.

The example shown above better works for social projects and donation-based fundraising, otherwise, donors should get more valuable rewards like equity or products.

6. Payment Methods

Depending on the platform rules, the fundraiser gets money when they close their campaign or reach their goal. When a backer contributes to a project or company, money goes straight to an escrow account of the platform and stays there until the end of the campaign.

Integrating the most popular payment gateways with multiple options increases opportunities for sponsors from different countries, so people will be able to finance projects globally.

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For Fundraisers:

Creators’ profiles can’t be the same with backers, since the main functionality is way different. As much as sponsors need categorizing and analytics, fundraisers should have easy campaign settings and management options.

1. Profile

Creators complete the registration via email, social media, or phone. After successful sign-up, fundraisers need the ability to fill in all necessary data, including personal information and payment details. Creating updates or chatting with backers and platform managers helps engage more followers and solve issues more quickly.

2. Campaign Management

The main functions of a crowdfunding platform are tools for creating a fundraising campaign. Creators need an intuitive interface to start their campaign quickly, filling in the information shown below:

  • Primary data about owners, project category, description, presenting content, location, and campaign duration.
  • Minimum fundraising goal.
  • Rewards backers can get.
  • Project overview, business plan, challenges, and so on.
  • Identity confirmation.

You can add various data according to your platform category and target audience.

3. Social Media Sharing

The ability to quickly market campaigns through social media or email raises donation chances with a conversion rate of up to 50%. That is why each project needs the ability to easily share their ideas via social media.

4. Payments Types

The two standard payment methods include all-or-nothing type or partial payment type. The first one means that the fundraiser gets payment in case of gathering the aimed amount of money, but not less than that. The second type allows creators to receive money for the project even if the minimum financial goal is not met.

Investors prefer an all-or-nothing method that reduces the risks of financing unsuccessful projects. On the other hand, fundraisers prefer the partial payment method so they can get funding to create their project in any case.

5. Analytics

Smooth and robust account administration helps streamline and keep track of actual fundraising processes. A dashboard is an analytical instrument that pictures the latest statistics and progress, displaying funding sources, grants balance, reward popularity, and average deposit payment.

Such a tool allows fundraisers to see how the project evolves, will it reach the goal, when it possibly happens, and give hints on how to motivate the audience to invest more. Common statistics include fields shown in the picture.

With a killer dashboard at hand, creators can easily keep track of fundraising progress: the sums gathered, days left to gather the final amount, an average donation, and so on.

Knowing the needs of different types of users can help with analytics criteria eliminating user experience hurdles, and keeping people engaged with your crowdfunding app on a deeper level.

Build a Crowdfunding Website: Where to Start

It can be puzzling when you need to start a new app and don’t know what to begin with and where to look at. Therefore, to develop a successful app like this, it is a must to understand and follow the step-by-step process not to miss a thing. The guidance below will help you create a crowdfunding platform that will stand out.

1. Find Your Niche

Niche crowdfunding platforms and sites have become more popular. Such platforms are dedicated to one niche, a product category, which helps to fast-track their success. They help owners emerge in the crowd of giant fundraising aggregators that took years to evolve and gain a big stream of creators and backers.

Picking a specific niche allows you to separate your project from the others and nourish value to your fundraisers and backers. Gathering creators and donors interested in one genre helps get more recognition from like-minded users and is a great way to harvest dedicated backers. As you can see on the diagram, some categories stand far ahead of the other ones, showing that niche choice really matters.

Food and beverage, technology, and media hold leading positions in equity funding.

Source: StartEngine

Some niches like real estate can be too crowded, but plenty of other categories can play well for you. The main idea is to take a slot that is not established yet or provide more attractive conditions and fees in the existing category.

2. Set a Goal

Start your crowdfunding website development by establishing a business goal that will be realistic and clear. That will require setting measurable criteria that will help you assess development progress. The classic options are:

  • Final release date.
  • Features for implementation.
  • Amount of funds backed on the platform in the first few months.
  • A number of backers or creators actively engaged with the app.

These clear goals will keep you and your crowdfunding platform development company motivated for visible achievements.

3. Build Communication

Creating a crowdfunding platform with a strong community encourages investors to contribute more as it is easier and feels safer to finance someone they understand and feel empathy for. On the other hand, fundraisers have more opportunities to gain desired financing goals faster.

You can engage the community by defining your mission and letting the audience know what you’re striving for. People tend to share their beliefs and get inspired to achieve common goals.

Another way to build communication is to share success stories of backers and creators that motivate sponsors to contribute to specific ideas and bring them to life.

On top of that, letting users comment on campaigns encourages them to ask and answer questions or share visions that make the platform alive and real.

4. Provide More Reward Options

While creating a crowdfunding platform consider that each baker has their own motivation. When some desire to get creators’ products, equity share, or another commercial purpose, others contribute with altruistic impulses.

Knowing your niche will help you reconsider the perks for your crowdfunding platform development since they are closely connected to your platform category as well as your target audience. In any case, allowing investors to choose from various reward options helps encourage them for more contributions.

5. Ensure Security

In crowdfunding website development, you must provide protection for your client’s sensitive data, monitor suspicious moves, confirm profiles, block users, catch dishonest campaigns, spot questionable profiles, and take actions to protect investors’ funds.

Top platforms like GoFundMe and Kickstarter have crowdfunding platform development teams who monitor suspicious moves, confirm profiles, and block users who can’t meet platform regulations.

Backers want to be sure that their financing goes to where it is expected. Therefore, while crowdfunding platform development, you must comply with global regulations.

  • Anti-Money Laundering (AML)
  • Payment Card Industry Data Security Standard (PCI-DSS)
  • Know Your Customer (KYC)
  • General Data Protection Regulation (GDPR)
  • Gramm-Leach-Bliley Act (GLBA)
  • Sarbanes-Oxley (SOX)
  • Consumer Data Right (CDR)
  • The Canadian Payments Act (CP Act)

As for local restrictions, CDR regulates financial relations in Australia, whereas GLBA and SOX regulations work in the U.S. For this matter, it is better to decide on how to create a crowdfunding website considering all the rules to build a crowdfunding website that will stand out by its trustworthiness and a reliable safety policy.

Creating a crowdfunding platform can become a cakewalk using the latest technologies, how-to tips, and, what’s more, experts who know all the ins and outs of this process. A crowdfunding website development team can save you time and eliminate possible issues in the future.

Types of Crowdfunding

There are four main types of crowdfunding—donation-based, equity-based, reward-based, and loan-based—to opt for while crowdfunding website development.

Crowdfunding app development sticks to the four main types: reward-based, equity-based, donation-based, and loan-based crowdfunding.

Now, let’s look at the crowdfunding models in more detail.

Equity-Based Crowdfunding

When you create a crowdfunding platform using such a model, fundraisers receive financing from backers who, in turn, become part owners of the businesses they support. This type of sponsorship works well for particular businesses, but not for all.

Successful crowdfunding platform development projects are FundersClub that mainly works with trusted startups from Bay Area, EquityNet that serves creators seeking seed capital and debt financing. One more example is CrowdFunder which cooperates with venture-capital-sponsored early-stage startups.

Loan-Based Crowdfunding

In this option, a platform is being an intermediary between creators and donors. Fundraisers get the funds they require to create projects, and later, backers get invested money back with the agreed interest.

For instance, you can create a crowdfunding platform like the UK-based CapitalRise that specializes in real-estate projects and promises up to 12% returns to investors who decide to finance such projects, and can be an excellent alternative to bank loans with a higher return percentage. Also, the Peerform platform uses a loan-based model specializing in credit card debt refinancing and consolidation.

Reward-Based Crowdfunding

With such a model, fundraisers get investments for ideas in exchange for their services or products. Creating a crowdfunding platform with a rewards-based model gives enough freedom for creators since it can vary from a cap or shirt with the company’s logo to naming a story character after a particular sponsor for book publishing.

Let’s look at WeFunder, IndieGoGo, or Kickstarter as an example of crowdfunding platform development with such models. The first one gathered about 56 million U.S. dollars since its foundation in 2013. Whereas IndieGoGo and Kickstarter take the top spots in the rating of all crowdfunding platforms globally, helping aspiring entrepreneurs and small-scale businesses get a green light for their ideas.

Donation-Based Crowdfunding

This model is quite simple since sponsors invest in creators’ ideas without expecting anything in return. With such a model, donors can satisfy their altruistic impulses.

GoFundMe is one of the most well-known examples of how to create a crowdfunding website using a donation-based model. This site encourages its audience to fund non-profit organizations to make a better world and help individuals who need financial support.

While picking a crowdfunding app development contribution model, think of the peculiarities of your platform and choose an option that fits your category best. When we talk about services for artists, an investment-based model won’t work best, as it means sharing copyrights with backers. On the other hand, if you want to build a crowdfunding website for on-demand economy businesses, that model can be a great option.

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Development Approach: Pros and Cons

Deciding on a development approach will help you understand how to create a crowdfunding platform eliminating possible hurdles in the future. Below you can see options that are commonly used for this purpose:

CMS-based Development

Open-source applications allow making solutions for raising funds using ready-made plugins and templates. So, when you choose this method, you can avoid thinking of how to build a crowdfunding platform from scratch.

Mainly, open-source CMSs are available for free, but if you need to add extra features or functions, you have to pay for specific plugins and themes.

When you create a crowdfunding platform, the main issue of CMS-based options is that some functionality can be unavailable to execute without modifying code. Moreover, CMS-built crowdfunding app development products are more tending to hacking.

White Label Development

Such a method helps build a crowdfunding website by taking ready-made modules for crowdfunding platform functionality. Following this path, vendors can quickly provide you with the desired platform and throw it to the market.

Creating a crowdfunding platform this way shortens time to market and may require fewer efforts, but you lose flexibility. So, building a white label solution may not suit the specific needs of your business idea that will turn into a need to modify code in the future. On top of that, if you choose this option, you don’t have any control over the tech stack.

Custom Development

Custom crowdfunding software development gives businesses the highest flexibility and scalability since it is made according to their specific project needs. Creating a crowdfunding platform with this method means partnering with a software vendor that takes over decisions on the technology stack, functionality, elements to implement, and platform design that will fully display your company’s digital identity.

While thinking about how to build a crowdfunding platform, you should consider all the pros and cons of different approaches to pick an option that best suits your case.

Hiring a team of pro software engineers who know the nuances of custom crowd investing website development helps eliminate any possible risks and get a future-proof solution.

Crowdfunding Platform Monetization

Many owners start a crowdfunding site receiving their revenue by setting service fees. Being one of the most popular options, this is not the only way to monetize your platform. You can pick the best option to generate revenue from four main methods below:

You can build a crowdfunding website with advanced features or provide special services that will need to be paid for by users. These can be campaign advertising or management, branding, or presenting content creation. Also, you can offer fundraisers extended profiles that will display advanced campaign statistics.

Commission

As mentioned above, this is the most common way to earn money when you start a crowdfunding site; thus, it shows its efficiency well. Creators do not pay a thing before the financial goal is met, so the platform gets a fee only if the campaign is successful. The average fee is 5%, but it starts from 2% and can be up to 20% considering certain conditions. If you’ve chosen this model for a crowdfunding website, it should get a constant stream of backers and fundraisers to get a good profit.

This monetization option is also one of the popular profit generators while crowdfunding website development. Using this model in your app, you get extra revenue from advertising various products.

Campaign Promotion

Since fundraising campaigns can take several months to reach their financial goal, they go down in the search results, getting lost amongst new ideas. Think of how to start a crowdfunding website allowing creators to highlight their projects for better visibility since it can be profitable for both parties.

Based on the chosen platform type, you can pick the right revenue method that will bring profit for you and your customers.

Win the Race With Custom Crowdfunding Platform

Create a crowdfunding platform and benefit from industry growth and popularity that opens up long-lasting business opportunities. The market is projected to grow and expand through niche crowdfunding software products.

If you are up to entering the industry, choose an experienced team of pros who can create a crowdfunding platform that satisfies your organization’s needs. The OpenGeeksLab crowdfunding platform development company can fit in with your current business processes or build a brand new app that will be ready to meet ever-changing market demands.

Contact us right away; our specialists will call back to discuss your idea.

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