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Published February 15, 2023
Throughout the years, crowdfunding has become a much more viable option for raising money. Whether it’s used to bolster funds for the R&D of a new product or raise money for a school sports team, crowdfunding is well-known to produce desirable results for the groups that use it.
However, with this rise in popularity comes many new options for crowdfunding platforms. The sheer number of choices can be overwhelming at times, which is why we’re here to help you pick out the right crowdfunding platform for your needs. After reading through this guide, you’ll have a much better idea of the type of platform you should use to raise the funds you need.
Initial Setup
Before we can get into the main things you should consider when you choose a crowdfunding platform, you need to figure out a few things about your fundraising goals and game plan. Jumping into a platform without figuring these things out will hurt you in the long run.
Determine Your Goals
Obviously, the main goal of any fundraiser is to raise money, but that goes without saying. If you have that listed as your main goal, you need to dig deeper. Determine what that money is for. Are you trying to create a new product, or do you need money to keep current programs up and running?
Regardless of your answer to this question, you need to figure out your main goals before picking a platform and bringing it to the masses. People need to know what their money will be going toward. If they don’t have a clear understanding of how the funds will be allocated, they’ll be much less likely to give.
Create a Game Plan
Once you have your goal in mind, it’s time to create a fundraising campaign game plan. You’ll need to compile a compelling campaign description that’ll make people want to give. Consider including photos and videos to accompany the campaign description.
If your campaign is raising funds for a product, showcase some concept art and fully describe what the product does. If the funds will go toward running an after-school program, let people know what their money will cover for the students. Basically, you need to know how to market your crowdfunding campaign effectively before choosing a platform to host it.
Finding the Right Platform
Now that you have the basics of your campaign in place, it’s time to figure out how to choose the right crowdfunding platform for what you want to achieve. There’s much to consider here, so we’ll cover each point individually.
Determine a Preferred Structure
When it comes to online crowdfunding, three main structures are used. These are the rewards model, the lending/equity model, and the donation model. You’re likely most familiar with the rewards model since most of the bigger crowdfunding sites use this option. This model gives backers something in return for donating certain amounts of money. This could be the finished product or access to exclusive content you create for your backers.
The lending/equity model isn’t as popular for most crowdfunding users. This is because lenders usually get a portion of the future profits you make or shares of your company in exchange for donating. This model makes sense for people who struggle to initially start their business, but it’s not great for those looking to raise money for other reasons.
Finally, we have the donation model. This is the most straightforward option because backers receive nothing in return for their donations. This method will leave you with more money in your pocket, but it’ll be harder to sell people on the idea of donating. However, if you’re raising funds for a good cause, people will likely be more than happy to send you money through a trusted online donation platform.
Consider the Support Options
Once you’ve nailed down the structure you want, it’s time to look into support options from the companies that provide your desired structure through their platform. Potential features include social media integration for easy online marketing and step-by-step guides on how to make the most of your campaign. Finding a platform that offers 24/7 support will also be very useful to help you avoid running into future roadblocks.
Decide on Possible Payment Methods
The way that donors will pay is another thing to consider. Paying with credit cards is a common option because that’s what people are used to, but when it comes to crowdfunding, two other donation methods are often available.
The first is authorization holds. These allow the crowdfunding platform to check whether the backer has the funds available to donate. Then, the bank will hold onto the funds until the campaign is over. The other method is known as capture. In this method, the platform takes the money right away but will give it back to the donor if the need to do so ever arises.
Look Into Potential Restrictions
One thing to remember during the selection process is that no platform can do it all, so you’ll need to look into the potential restrictions of each website. Since people will be exchanging money through these platforms, there will be specific rules that all parties must follow.
These restrictions will protect your company or program and the people who donate to you. They’re important to know before you sign up since they could restrict what you want to do with your campaign. Be sure to fully read the terms and conditions of a platform before you begin.
Don’t Forget About Platform Fees
It should be obvious, but one thing many new crowdfunding users forget about is that these platforms need to make a profit somehow. That means you need to look into platform fees to determine which will best accommodate your budget. One of the more common options for websites is charging a small fee to sign up. If you don’t make your goal, you could get refunded this money, which removes a lot of the risk for you.
Other platforms take a percentage of your total profits. The deductions usually come straight off the top of the donations, saving you from paying the platform a lot of money after the campaign is over. One thing to watch out for is hidden fees. If a platform looks too good to be true, it might have some hidden fees that you need to look into.
No matter which payment method you go with, the important thing to remember is that using a crowdfunding method like this for your fundraiser will put the most money back into your pocket as possible. Other fundraisers will have you put your earnings toward products sold or the initial setup costs of the event you ran. Crowdfunding is a great way to get back almost everything people gave you, especially if you use a donation-based platform.
