8 best crowdfunding platforms for startups
Businesses are supposed to be money-making systems but any business owner truly knows that it requires spending a lot of capital first in order to kickstart a venture and start earning revenue.
While there are many ways that a business procures funds to operate itself, crowdfunding is one of the unique ways in which a company can raise capital.
What is crowdfunding?
Crowdfunding is a type of fundraising method that involves a business listing its product or a project on a platform with a large audience. Individuals from this large audience can contribute relatively small amounts of money to raise a significant amount of capital for the product or project.
There are many crowdfunding platforms for startups to list their product/project on. The way a crowdfunding campaign usually works is by letting a business list their product or project on the platform for a certain period of time like a month or two and set a funding goal for it. Users on the platform can then choose to support and pledge to this project within the set time period.
Different types of crowdfunding for startups
Equity crowdfunding
Just like equity capital is raised by a business giving shareholders ownership based on the number of shares bought, equity crowdfunding refers to offering private online securities or shares through a crowdfunding platform.
This form of crowdfunding is used by an entrepreneur when they want more flexibility than the general and more rigid forms of raising funds.
Debt crowdfunding
Unlike other types of crowdfunding methods, debt crowdfunding is seen as a lower-risk investment option for the person contributing the funds. The repayment schedule is already decided and the amount of returns you will get is also predetermined.
So unless and until the business goes bankrupt, a supporter or contributor in this funding model will know beforehand the type of returns they will get.
Reward-based crowdfunding
It is exactly what it sounds like; reward-based crowdfunding is pledging or giving money to a business in return for a product or service at a later stage.
This crowdfunding type is generally used to launch new products or services and test how well the market responds to an idea.
Donation-based crowdfunding
This type of crowdfunding is essentially a form of gathering money for charities and is suitable for nonprofits and social enterprises.
The supporters do not expect anything in return for this type of donation and the organization trying to raise money in this method also makes this aspect clear.
Best crowdfunding platforms for startups
There are many crowdfunding platforms in India for businesses that are looking to raise funds for their venture. Listed below are some of the most renowned platforms that people use:
1. Fundable
Fundable is an equity crowdfunding platform you will find online. Founded in 2012, Fundable has grown to be one of the credible platforms for investors to find innovative businesses and invest in them and for businesses looking to raise funds to find serious investors.
2. Kickstarter
Kickstarter is not just a fundraising platform in India but is probably one of the most well-known crowdfunding platforms in the entire world.
Founded in the year 2009, according to their website Kickstarter has over 22 million backers and has recorded a total of $7,319,135,350 US dollars pledged to different projects around the world. The platform is mostly known for reward-based crowdfunding.
3. Indiegogo
Indiegogo was founded a year before Kickstarter in 2008 and is also one of the most well-known crowdfunding platforms in the world. It started off as a platform for creatives to fund their scripts and creative projects to turn them into actual films and slowly expanded to other categories.
Both Indiegogo and Kickstarter are famous for reward-based crowdfunding campaigns but people can also donate money to live projects without expecting anything in return.
4. Ketto
Out of all the crowdfunding sites in India, Ketto is one that was built in India in the year 2012. This platform is pretty well known for raising funds to help social causes and provide money to the underprivileged. With over 2.5+ lakh fundraisers, Ketto has raised over Rs.1100+ crores to date.
As the platform evolved, it has now also enabled personal and creative/business crowdfunding campaigns to be set up on its platform.
5. Catapooolt
This is a crowdfunding platform that was founded in 2013 in India. Unlike other platforms on the list, this one is not very well known.
It provides options for people to list their crowdfunding projects under many different categories such as music, literature, gaming, fashion, film, events, travel, technology, sports, environment, and many more.
6. Milaap
Milaap was founded in the year 2010 and is a crowdfunding platform for personal and social causes. The platform has helped raise Rs.1,000 Cr for 2.5 lakh different causes so far.
The nature of the crowdfunding projects on this platform is similar to Ketto and can be classified under donation-based crowdfunding.
7. Fueladream
This is a relatively new crowdfunding platform compared to all the others on this list. It was founded in 2016 in Bangalore, India.
Fueladream is an online platform and marketplace to raise funds for creative ideas, causes, charity & events.
What are the factors to consider when choosing a crowdfunding platform?
1. Type of crowdfunding
When choosing a crowdfunding platform for your startup, you should know why and how you plan to implement your capital, whether you want to give ownership of your company in the form of equity or not.
2. Legal and regulatory compliance
You should also know the legal and regulatory compliance in regard to the crowdfunding activity that you plan to conduct. You must especially be aware of the tax implications of the money that you raise through crowdfunding.
3. Trust and reputation of the platform
When choosing a fundraising platform in India, make sure you do your research to check the legitimacy of the platform and ensure that it is a legal entity that has a good reputation.
4. Funding goals and timeline
You need to be smart about setting your funding goal as certain platforms like Kickstarter do not give you the raised money if it is below the target you set for yourself. It will be returned to the
people who fund a particular amount.
5. Fees charged
Every crowdfunding platform charges a commission fee in order to run and process the entire crowdfunding campaign on its site. Make sure you check what the commission percentage is before you decide to start a campaign.
6. Target audience
Since the ‘crowd’ is going to be funding your project/product on a crowdfunding platform, make sure you also research the type of audience and people that exist on a portal. It should be people who are or might have an interest in the type of crowdfunding campaign that you plan to launch.
Choose platforms that attract potential investors who will be interested in your product.
7. Payment options
The crowdfunding platform that you choose should make it extremely easy for the general public or the users of the platform to back your project.
An important part of this is using a platform that offers convenient payment options for their backers.
8. Marketing and promotion
Choose a crowdfunding platform that offers help when it comes to marketing and promotional services to increase visibility and attract more investors for your project.
What is the alternative option to raise capital for your business?
Rather than seeking funding from investors or crowdfunding platforms, a business can establish a revolving credit line with a financial institution, such as a bank or a fintech company.
While the goal of crowdfunding might be a little different from that of getting a credit line, both these solutions help your business gain access to capital that can help you carry out business operations.
Here are some ways that a credit line can act as an alternative or even aid you to fundraise through a crowdfunding platform:
1. Flexibility
A credit line allows you to get access to a flexible amount of capital depending on the provider and use it to carry out crucial business activities.
2. Lower cost
Unlike crowdfunding, credit lines are a source of funds much lower than money borrowed through crowdfunding and hence is easier to repay.
3. Faster access to funds
Other means of financing such as crowdfunding can take months to complete. A credit line on the other hand is much more accessible and instantly available to you when you need it.
4. Builds credit history
Using a credit line for your business helps you build your credit history and improve your financing opportunities in the future.
5. No ownership dilution
In equity financing, a portion of the business has to be sold to investors. This is not the case when you borrow money from a credit line.