Which crowdfunding site is best for you?
If you're currently searching for funding, a good place to start is to briefly understand the rapidly growing crowdfunding industry, and then become familiar with the top crowdfunding sites listed below.
The Crowdfunding Industry
The crowdfunding industry has grown exponentially over the last five years, helping people raise billions in funding for everything from donations for personal art projects to equity financing for businesses.
Specialized sites have popped up for a variety of crowdfunding niches: unique experiences, charity, social impact, consumer packaged goods, gaming, real estate, startups, and more.
According to the Crowdfunding Industry Report by Massolution, in 2012 there was $2.7 Billion raised online via crowdfunding. In 2013 an estimated $5.1 Billion was crowdfunded online. In 2014 a host of different crowdfunding sites are further accelerating the rapid industry growth.
In prior years, a majority of the crowdfunding has come from what is called rewards-based crowdfunding- where people purchase products or experiences. However, the crowdfunding industry has recently experienced a game-changing shift in regulations that for the first time is now allowing investments to be made via crowdfunding, also known as equity crowdfunding. More on that below.
Two Crowdfunding Models: Rewards & Equity
Two basic crowdfunding models exist. The model that has been around the longest is rewards-based crowdfunding. This is where people can pre-purchase products, buy experiences, or simply donate. While this funding may in some cases go towards helping a business, funders are not allowed to invest and become shareholders via rewards-based crowdfunding.
As an example that illustrates how rewards crowdfunding is different from investing, OculusVR recently sold to Facebook for $2 Billion many months after it had used rewards-based crowdfunding to pre-sell it's virtual reality product. After the sale, none of the backers from the rewards campaign received any financial benefit in the sale, because they were not actual investors and shareholders. They were simply product owners and supporters. Many in the Oculus supporter community felt cheated.
On the other hand, equity crowdfunding allows people to become shareholders in a company. There are already thousands of companies online seeking and raising investment for their businesses online at sites like Crowdfunder.com and Circle Up. In equity crowdfunding, companies sell ownership stakes online in the form of equity or debt. There is also a debate about which is better for funders: Equity Crowdfunding vs. Rewards Crowdfunding.
In the US, the JOBS Act was passed in April of 2012, paving the way for equity crowdfunding. To date, only one of the two parts of these new laws have gone into effect, also known as Title II of the JOBS Act. This has opened up the opportunity for entrepreneurs to publicly advertise for investment, and for accredited investors to invest online via equity crowdfunding. Title III of the JOBS Act is still held up with regulators at the SEC.
Crowdfunding Sites (for Rewards-based)
The right site for you all depends on which type of project you have, and the crowdfunding model you intend to use. Here is a list many have found useful of some of the top crowdfunding sites.
Kickstarter
A leading rewards-based crowdfunding site where project owners have raised over $1 Billion in funding for their projects. In the company's own words, "Kickstarter is a new way to fund creative projects. We're a home for films, games, and music to art, design, and technology." Also know that the platform is not for charities or personal financing needs, and they do not offer equity crowdfunding. In 2014 they have raised the largest rewards-based crowdfunding campaign to date with Coolest Cooler at over $13M.
Indiegogo
Whereas Kickstarter is somewhat curated as to the projects it approves, Indiegogo is open to almost any kind of project (they even crowdfunded a baby), and the company has a larger international presence than Kickstarter. They only offer rewards-based crowdfunding. The site was initially founded to fund indie film and theater projects, but has since expanded to almost anything and everything from charitable causes to pet projects, but does not offer equity crowdfunding for investors.
Crowdrise
Crowdrise is a platform for donating to charitable causes. Founded by Ed Norton and Shauna Robertson early on in the growing crowdfunding industry, the company has a model similar to Kickstarter or Indiegogo, but focuses exclusively on fundraising for charities and causes.
Quirky is a rewards-based crowdfunding platform and online community most often used by product inventors and makers. Their platform isn't just for funding, but is also a place for collaborating with a crowd on the development of a product or prototype.
Tilt
Tilt (formerly CrowdTilt) is the rewards-based crowdfunding solution for groups and communities to pool their dollars and raise money together. As the company explains, a key differentiator of Tilt is the leaned-down or "simplified" experience relative to other rewards-based platforms. The average campaign size on Tilt was $1,650 as of July 2014 - smaller than that of other rewards-based platforms.
Invested.in
Invested.in is the place to go if you'd like to create your own crowdfunding platform by "white-labeling" their software.
