Crowdfunding platform involves pooling various small amount of investments from a large number of people via the internet. This business platform is very popular for supporting new entrepreneurs wishing to start their business in any vertical without facing any financial crises. As of July 2017, Kickstarter, a leading global crowdfunding platform consisted of 12.4 million users, with pledges of $2.865 billion and over 100,000 projects funded to date, since its launch. If you want to start a crowdfunding platform, you may have many decisions to make, including your business model and exactly how to build the platform based on that model. Below listed are the guidelines for starting a successful crowdfunding platform.

  1. Decide on the crowdfunding model

You need to decide on the crowdfunding model before you setup the platform. There are various options like equity, debt, rewards-based and donation-based funding. In rewards-based funding, backers give the money in exchange for a reward. In donation-based, donors donate to support a cause they believe in. Equity funding has the investors investing money to get an equity share in the company. In debt crowdfunding, lending is done with an expectation to get back the amount with interest.

You may offer any one of them or even create compound versions.

  1. Research and prepare a business plan

You need to conduct a market research and decide on your target audience. You can initially start with a narrow focus. As there are many different industries and groups, catering to a small niche may work best.

The information that you research and find out will help you get a clearer picture of your industry, which parts are growing, and how you can stand out from your competitors.

Create a comprehensive business plan, which will give you a step-by-step guidance to run your business. You can include everything in it like the important details about your company with its goals and objectives, target market, estimated costs, projected earnings, market analysis and plan, etc.

  1. Create a website

For starting a crowdfunding platform, having a highly-functional website is important. You need to get a website built that is user-friendly and has an intuitive website navigation, advanced project search, well-organized categories and social media integration. You also need to ensure that your website supports secure and transparent transactions.

As a startup, your platform can’t be on the scale of Kickstarter, but you can scale your crowdfunding business with the replica of Kickstarter business model. Besides, you can include the features and elements present in it to ensure the success of your business. Henceforth to create a website you get 2 alternatives to choose, first is website development from scratch and second is getting a readymade website clone from the companies who have specifically developed such platforms to serve crowdfunding businesses. However, getting a website clone is preferable in this scenario, as it saves time and money while building a website from scratch is not easily done.

FundForIdea - A Kickstarter Clone

You might love watching one such ready-made kickstarter clone script – FundForIdea, developed by ClonesCloud that lets you get started with a unique platform similar to that of Kickstarter. Additionally, this meticulous kickstarter clone can also be customized as per business requirements.

  1. Select the revenue model

Below are the two revenue models, which you can adopt in your crowdfunding website.

(A) Transaction Fees:

You can charge transaction fees from the money raised over your platform. Kickstarter uses this revenue model charging transaction fees of 5% on all projects that are successfully funded. They also charge the card processing fees of 3% to 5%. The main benefit of this model is that there is less risk for startups to raise money on the platform as it doesn’t cost them until money isn’t raised.

(B) Donation

This is a popular model, especially among non-profit or donation-based crowdfunding platforms. This model works well for charity-based websites because the donor feels a duty towards the fundraiser.

This model can be applied to platforms other than donation crowdfunding also. You can ask the funders to donate when they are checking-out.

  1. Promote your business

It is important to popularize your new fundraising website to get the initial user-base. Getting the first investor on the platform is a difficult task; no-one invests as no-one else has yet. This leads to the chicken-and-egg problem!

It is, therefore, crucial to carry out online marketing and promotional activities. You need to create a buzz around your website to get the initial investors on board. By running PPC campaigns, you will be able to get traffic on your website. You can even carry out SEO and social media activities to get higher rankings and connect with your audience respectively.

You can get involved in communities where investors are already interacting. Also get in touch with bloggers and media for your launch.

Rather than investing all your resources on one marketing medium, you can diversify and leverage the benefit of each of them.

Conclusion

These points will give you a basic idea of what exactly goes into setting up an online crowdfunding business.

Startups are launching new platforms every day, so you need to put in efforts to stand out from the competition. You have to ensure that there is proper planning in place and the required marketing and social media skills and networking for you to succeed.

Since crowdfunding involves handling people’s money, there is an increase in the risk of litigation. Once everything is setup, you need to launch your business and start marketing it effectively to attract more investors. It might take a few years before your platform starts to become known. First, you must attract smaller projects, then a few remarkable projects that can help you gain media attention. Over time, the number of investors/backers will grow, and you can showcase notable projects on social media to bring in more backers!