Differences Between Major Crowdfunding Platforms

lawtrades crowdfunding platforms

Before you begin using any of the major crowdfunding platforms, it may be helpful to be introduced to their operations. By acquainting yourself with the missions and basic functions of these platforms, you will be better informed as to which may be best for you, your company, or organization. Not all crowdfunding platforms are created equal. Some cater to specific audiences, while others can be utilized by virtually anyone. We will review some of the best crowdfunding sites.

These differences are part of what makes crowdfunding an enjoyable investment, as well as a potential source of seed capital. Traditionally, startups and other significant projects have been funded by venture capital companies and other major investors. Traditional models place the risk of investment on only a few individuals or companies. Similarly, traditional models place significant pressure on startups to meet the interests of a minimal number of investors. However, a crowdfunding campaign allows many people to assume minimal risk while investing in interesting projects or startups and takes some of the pressure off those seeking seed funding. Major differences in the prime crowdfunding platforms are generally grounded in the kinds of projects they seek to support.

Kickstarter

Founded in 2009, Kickstarter is one of the most established and well-known crowdfunding platforms available. Once referred to as “the people’s NEA (National Endowment for the Arts)” by The New York Times, Kickstarter describes its mission as, “help(ing) to bring creative projects to life.” Unsurprisingly, Kickstarter is therefore an excellent platform for artists, designers, game makers, musicians, and other creative individuals and startups.

According to its homepage, nearly 15 million individual contributors (referred to as backers) had invested in almost 150,000 funded projects as of July 2018. Each individual or company seeking funds chooses a minimum funding goal and sets a date by which that goal must be met. The general public is then given the opportunity to contribute to the campaign, often in exchange for advance access to a finished product or some other incentive. If the minimum goal is not met by the target date, no funds are collected from anyone who has contributed.

Benefits of using Kickstarter include the fact that Kickstarter claims no ownership or significant interest in any Kickstarter projects funded through the site. However, Kickstarter also offers no guarantees that campaigns on its site will deliver on their promises, so there is some risk to Kickstarter backers. Campaign managers also are not guaranteed insulation from legal action any backers may take if a campaign’s outcome fails to meet expectations.

Indiegogo

Indiegogo seeks to crowdfund “the next big thing.” Unlike Kickstarter’s primary focus on funding campaigns with creative aims, Indiegogo aims to both fund and provide a marketplace for trendy tech projects, designs and “clever products.” Investors seeking to back an Indiegogo project must invest a minimum of $100, of which Indiegogo charges a five percent fee and Stripe Credit Card processing charges a fee just over three percent. These fees have not kept individuals from visiting the site, however. Since Indiegogo launched in 2008, the company reports that its site receives roughly 15 million visits monthly.

This site is broader than Kickstarter, as virtually anyone can attempt to launch a campaign, provided that their endeavor meets basic requirements. And unlike Kickstarter, those choosing to launch a campaign can keep the funds they have raised, even if their campaign does not meet its target goal, provided that the campaign returns a nine percent fee back to Indiegogo. One of Indiegogo’s unique perks for investors is guaranteed shipping within the marketplace. When the public is able to choose from a host of crowdfunding sites, perks like this can go a long way towards attracting potential investors.

AngelList

AngelList is more versatile than Kickstarter and Indiegogo, because it acts as a job search platform as well as a crowdfunding site. It specifically focuses on startups, both in terms of employment and investment opportunities. Investing in startups is free on AngelList. This is not necessarily a good platform for singular “great ideas” but can be an excellent forum for startups to gain financial traction. Startups can also post job listings and seek out potential employees on this platform. The company’s most basic mission is to “democratize” the crowdfunding investment process.

Republic

Republic is a subsidiary of AngelList. If AngelList exists to democratize the crowdfunding investment process, Republic serves to further that aim within the more specific field of equity crowdfunding among non-accredited investors. Republic has a lower minimum investment required than Indiegogo does. An individual seeking to support a startup on Republic can invest a minimum of $10.

The site provides a host of educational materials in order to better ensure that potential angel investors understand their role and rights. Republic chooses the startups it is interested in helping to promote, so unlike Kickstarter and Indiegogo, not everyone is a potential candidate for crowdfunding on this platform. And unlike these other platforms, investors may be able to receive financial returns if a startup does well under specific conditions.

Seeking Experienced Counsel

If you have questions about what crowdfunding platform might be a good fit for your big idea, please reach out to the experienced team at LawTrades. We can help guide you through the process, provide helpful tips for a successful campaign and advise you on any other aspect of the crowdfunding process you may have questions about. Starting your campaign off on “the right foot” can mean the difference between success and unnecessary challenges.