Crowdfunding is an innovative financing method that involves gathering funds from a large number of individuals, typically through online platforms, to support various projects and ideas. This approach enables ordinary people to become investors and helps mobilize financial resources for diverse purposes. Crowdfunding has become an integral component of the contemporary economy, playing a crucial role in:

  • Supporting startups: crowdfunding provides startups with access to financial resources during their early stages, a time when they often struggle to attract traditional investors.
  • Advancing arts and culture: crowdfunding allows artists, musicians, writers, and other creatives to raise funds for their projects, regardless of how niche they may seem.
  • Supporting charities: crowdfunding simplifies the process of raising money for charitable organizations, allowing them to respond quickly to crises and assist those in need.
  • Research and development: many scientific and technological projects receive support and funding through crowdfunding, promoting innovation and discovery.
  • Supporting social and environmental initiatives: crowdfunding helps address social and environmental issues by raising funds for projects aimed at improving quality of life and protecting the environment.

Why to create a crowdfunding platform?

Niche and target audience

The necessity for new crowdfunding platforms arises from the diverse financial needs of various sectors and target audiences:

  • Technology startups: these ventures often require substantial capital to develop and scale their innovations. Specialized platforms can connect them with investors who focus on technological advancements.
  • Arts and culture: projects in this realm often face financial constraints and need support from patrons who value artistic endeavors. Dedicated platforms can attract individuals passionate about the arts.
  • Medical research: this field needs significant funds for research and clinical trials. Crowdfunding platforms in this niche can mobilize resources to combat diseases and develop new medications.
  • Education: students and educational institutions can use crowdfunding to finance their studies or create educational programs. Platforms tailored to education can help raise the necessary funds.
  • Environmental projects: initiatives aimed at environmental protection and sustainability require funding to address ecological issues. Crowdfunding platforms can help garner support for these vital projects.

Creating new crowdfunding platforms that cater to specific niches and target audiences ensures that the unique needs of various projects and ideas are effectively met.

Potential profitability and social impact

Crowdfunding platforms offer significant potential for profitability, making them appealing from an investment perspective. Key factors contributing to their profitability include:

  • Commission fees: platforms can charge a commission on successfully completed campaigns, either as a percentage of the funds raised or a fixed fee.
  • Paid services: platforms can offer premium services to project creators, such as marketing consultations, video production, or design assistance.
  • Advertising: platforms can generate revenue from advertisements placed on their websites.
  • Affiliate programs and sales: collaborations with other companies and the sale of affiliate products or services can create additional income streams.

Historical excursion

Registering on a crowdfunding platform has gained immense popularity among entrepreneurs, creators, and philanthropists globally.

The concept of crowdfunding dates back to ancient times and has been utilized across various cultures and industries. However, with the advent of the internet and social media, crowdfunding has evolved into a global phenomenon. Historical instances of crowdfunding include raising funds for monuments, arts, and cultural events, such as the construction of the Statue of Liberty in the United States in the 1880s. Crowdfunding has also been employed in publishing to finance books and literary projects.

The development of the internet and enhanced communication capabilities made it possible for crowdfunding to flourish. Early platforms provided tools for creators and entrepreneurs to secure funding from mass audiences. Kickstarter subsequently became one of the most renowned and successful platforms specializing in funding creative projects.

Crowdfunding continues to evolve and adapt to various needs and objectives. Significant developments and trends in crowdfunding include:

  • Diverse forms: encompasses multiple forms, such as donation-based (contributions without expectation of return), investment-based (receiving a share in profits or company equity), debt-based (lending with an obligation to repay), and equity-based (purchasing company shares).
  • Expanded applications: platforms utilized in not only arts and entertainment but also technology startups, philanthropy, medical research, education, environmental projects, and other fields.
  • Global reach: the internet has made crowdfunding a global enterprise, allowing projects to attract funding from around the world.
  • Use of blockchain technologies: technologies and cryptocurrencies have gained popularity as tools to enhance trust and transparency in crowdfunding.
  • Addressing social and environmental issues: crowdfunding has become a powerful means of tackling social and environmental challenges, enabling communities and organizations to raise funds for important projects.

These trends make crowdfunding an increasingly accessible, diverse, and impactful tool for financing a wide array of projects and ideas.

A brief guide to setting up a crowdfunding platform

Step 1: Study the market and figure out whom you want to reach

  • Competitor analysis: study existing crowdfunding platforms to identify their strengths, weaknesses, niches they cover, and popular project types.
  • Demand analysis: research the demand for crowdfunding in your region or niche, including fundraising statistics from similar platforms.
  • Audience segmentation: divide potential users into segments based on interests, needs, and characteristics.
  • Create personas: develop typical user profiles for each segment to understand which features and functionalities will attract different user groups.

Step 2: Determine the type of crowdfunding

  • Donation-based
    • Description: investors (donors) provide funds without expecting financial returns.
    • Advantages: supports charitable projects, no need for repayment.
    • Areas of application: art and culture, charity, social projects.
  • Investment-based
    • Description: investors contribute funds to receive financial returns in the form of project income or increased share value.
    • Advantages: potential for high profits, supports startup development.
    • Areas of application: startups, business projects, technology ventures.
  • Loan-based
    • Description: investors provide funds as loans to be repaid with interest.
    • Advantages: guaranteed returns with interest, no project management involvement.
    • Areas of application: small businesses, personal finance, real estate.

Step 3: Develop ToR

  • Analyze user needs: conduct research to determine which features will be most in demand by your platform users, such as project creation, search functionalities, messaging, commenting, payment options, etc.
  • Define technical requirements:
    • Specify the technical characteristics, including programming languages, databases, server hardware, data security, and loading speed.
  • Describe platform architecture: outline the overall architecture, including interactions between different system components.
  • Set timelines and budget: establish the development timeframe and budget for creating and maintaining the platform.

Step 4: Select and develop design and interface

  • Develop identity
  • Prototype the interface
  • Develop the design
  • Test the interface

Step 5: Choose the right software

  • Choose software that aligns with the type of crowdfunding you plan to implement and ensure it supports project management and secure payment processing.
  • Prioritize robust data security and protection for financial transactions.

Step 6: Registration and legal support

  • Register the company:
    • Determine the legal form of your company.
    • Register your crowdfunding company according to local laws and regulations.
    • Obtain necessary licenses and permits.
    • Ensure compliance with all tax obligations.
  • Obtain legal support:
    • Hire legal consultants for ongoing legal support.
    • Develop essential documents such as user agreements and privacy policies.
    • Monitor and update legal documents in accordance with changes in laws and regulations related to crowdfunding.
  • Protect IP
    • Register trademarks and patents associated with your platform.
    • Develop policies to protect copyright and intellectual property on the platform.

Features of monetization

Commission fees from successfully completed projects

Commission fees are a percentage of the funds raised for successful projects on the platform. This percentage typically ranges from 5% to 10% of the total funds raised. The exact fee structure depends on the platform's policies and may vary based on the type of project or the amount raised.

Benefits of commission fees:

  • Incentivizes platform support: the platform earns profit only if the project succeeds, motivating it to support projects and ensure their success.
  • Significant revenue source: fees from projects can constitute a substantial portion of a platform's revenue, especially for popular and successful platforms.

Disadvantages of commission fees:

  • Potential deterrent: high commissions might discourage project authors, particularly for large projects.
  • Need for transparency: the platform must ensure transparency and fairness in calculating commissions to maintain user trust.

Commission fees are a primary monetization strategy for crowdfunding platforms, and a well-structured fee system can contribute to the platform's success and profitability.

Paid services for project authors

Crowdfunding platforms can offer various paid services to project authors to help them achieve their fundraising goals. These services provide additional revenue streams for the platform.

Types of paid services:

  • Promotion and marketing of projects: offering services for creating advertising campaigns, optimizing project pages, and other marketing efforts.
  • Support and advice: providing expert advice and support on successfully completing projects and raising funds.
  • Development of video presentations and materials: creating professional video presentations and other promotional materials to attract attention to projects.
  • Assistance with rewards for supporters: designing and issuing rewards for project supporters, which can motivate larger donations.

Paid services for project authors generate additional income for the platform and increase the likelihood of project success by providing authors with valuable resources and support.

Advertising on the platform

Advertising is another significant monetization avenue for crowdfunding platforms. This involves collaborating with advertisers and partners to place ads on the platform in various formats, including banners, text ads, video ads, and more.

Advantages of advertising on the platform:

  • Additional income: advertising partners pay to place their ads on the platform, generating a steady income stream.
  • Audience expansion: advertising can attract new users to the platform, increasing activity and funding for projects.

By integrating advertising into the platform, crowdfunding sites can diversify their revenue streams while enhancing user engagement and project visibility.

Affiliate programs and affiliate sales

Collaborating with other companies through affiliate programs and affiliate sales can provide additional income for crowdfunding platforms. These collaborations involve promoting affiliate products or services on the platform.

Benefits of affiliate programs and affiliate sales:

  • Additional income: platforms receive a commission or percentage of sales made through their site thanks to affiliates.
  • Expanded functionality: partnering with other companies can enhance the platform's functionality, offering users additional capabilities.

User acquisition and marketing

Attracting project creators and investors to a crowdfunding platform is essential for its success. Effective strategies include:

  • Provide attractive conditions for project creators, such as low commission fees, an intuitive interface, promotional resources, and continuous support.
  • Launch targeted marketing campaigns to attract potential project creators and investors. Share success stories, engage with communities, and participate in industry events to increase visibility.
  • Partner with incubation centers, venture capitalists, educational institutions, and other organizations that can offer interesting projects for your platform.

To effectively promote your crowdfunding platform, consider employing the following methods:

  • Maintain an active presence on social media to interact with your community, share project updates, news, and events.
  • Develop and publish high-quality content relevant to your target audience, such as articles, videos, infographics, and more.
  • Build a subscriber base and send regular newsletters and notifications about new projects and events on the platform.
  • Invest in advertising on platforms frequented by your target audience, including search engine ads and social media ads.
  • Optimize your website for search engines to increase its visibility and attract organic traffic.
  • Monitor the results of your marketing efforts closely and continually optimize your strategies based on performance data.

Summing up

Creating a crowdfunding platform offers a unique opportunity for entrepreneurs and innovators to contribute to the world of funding and creativity. Crowdfunding is an innovative method for raising funds, enabling creators and entrepreneurs to secure financial backing from numerous people.

Crowdfunding platforms have become integral to modern society, facilitating fundraising for startups, the arts, charities, and various other projects. They promote innovation, support creativity, and strengthen the connection between creators and their communities.

When developing a crowdfunding platform, it is essential to focus on market research and the needs of your target audience. Selecting the appropriate type of crowdfunding, developing technical specifications, and choosing the right software are critical to the project's success.

Monetizing the platform can be achieved through commission fees, paid services for project authors, advertising, and affiliate programs.

However, it is crucial to address legal and regulatory aspects, ensuring compliance with all relevant laws and regulations. Our legal experts are available to provide detailed advice and support at every stage of your platform's development. To contact us, please fill out the feedback form.