The contemporary world is full of conveniences which release us from hard work, like hunting and gardening for food and so on. Modern gadgets and mobile app development make the world much comfier and give us a bunch of spare time to be creative in all possible spheres. But often we don’t have enough material resources to turn our dreams into reality. Many brilliant ideas were buried because of the fear of losing money. Today, we have instruments to promote ourselves and find resources. You can get what you need, do what you love and be happy! Crowdfunding platforms give us such opportunities. So let’s check out, what is it and how it works.
What is crowdfunding and why is it popular?
Today, fewer people believe in banking systems. We have already experienced several economic and banking crises. It’s very difficult to get help from the government as well. Such reasons make us think about alternatives on how to live out our dreams, make business and help others.
Crowdfunding is a cooperation of people whose common aim is to raise money for any kind of project, both profitable or unprofitable, in any field of our lives. Such raisings are usually held by means of special platforms.
Let’s suppose, you have made a research and a business plan, you have a description and a budget for your future project. Then, according to the project’s specifics, you choose the most effective platform to make the world find out about you. You specify in the description, how much you need for the project and start raising. If you have got all the amount – you win! If during the specified term you haven’t got what you’d planned, all of the money is sent back to the donators.
Why are people willing to donate and what are their expectations?
Mostly, it’s a desire to have a unique, hi-tech device, game or software, which doesn’t exist on the market yet. In case the project has successfully raised the claimed money or even more (which also happens!), the backers usually get a discount for the purchase and an opportunity to become one of the first owners. This type of donation is called reward-based and is the most common.
More serious reason to fund is to become a stakeholder in the future project. This is a totally another level and supposes donations starting from $100.000. It’s not just a donation, but an investment. And this type of funding is called equity-based crowdfunding or crowdinvesting.
Pretty often people donate because they just want to help, to be useful. This is a charitable investment. It mostly takes place in social, medical and political projects, also in the sphere of art, music, science and ecology. This often happens when the aim of a project is to help a single person or a community.
What is the profit for crowdfunding platforms?
Сrowdfunding platforms surely do not assist people for free, but it’s much more profitable than a bank loan. All of them take some commission from 4 to 15%, have terms and conditions, which vary. The most common being 5% fees.The project is a winner if it gets the needed sum of money within a certain term. If not, all the money are sent back to the donators. Also, some will give the money even if the claimed amount was not raised. But stats show that those projects, who choose “all or nothing” strategy win much more often because it creates a plot and makes the participants more excited.
The most famous crowdfunding platforms
Kickstarter is the most successful platform. Since 2009, over 3 million backers have invested into 35000+ ideas in multiple areas about $450 million. The philosophy is “all or nothing”. The commissions are 3-5%. According to the platform’s stats, 44% of the published projects raise the necessary amount of money.
Indiegogo is the nearest competitor of the previous platform. It exists since 2008 and has never limited the fields of fundraising. It has two types of campaigns. Fixed, like “all or nothing” and flexible, which means that you can still get money whether you have achieved the goal in raising or not. The platform fees are 5% and 3% are the third-party credit card fees.
GoFundMe is another business-oriented platform which has assisted in getting over $105 million for over 300 thousand projects. The commission is fixed, it is 5% from the raised sum.
There are many others, like YouCaring, Teespring, Patreon, Razoo, GiveForward, PledgeMusic, Sellaband which successfully work in the business sphere, charity, creativity, and music.
What are people raising money for? The most famous winners
Entrepreneurs and teams of associates try to get money by means of crowdfunding for everything, you could ever imagine. These are movies, art projects and music, science, charity and social projects, various devices, robots, software, games and even blockchain startups. Here are some loud examples:
- Pebble watch, compatible with iOS and Android smartphone by means of an app. It raised over $20. 000. 000;
- Computer game Star Citizen with over $142.000.000 raised, while the term for bidding isn’t over yet!;
- Oculus Rift, famous VR glasses with $2.437.429 raised at KickStarter;
- The Scanadu Scout, a medical device which cooperates with your smartphone and allows you control to your health condition. It got $1. 664. 375;
- Golem, a supercomputer, with $8.600.000 budget which was raised in 29 minutes!
- Barack Obama was also raising money for his campaign at KickStarter)
And many others, not so famous, but still successful projects. So, you see, there are big games, which happen thanks to crowdfunding platforms!
Creating your own crowdfunding product
The first question is, will it be a desktop software or a smartphone application for iOS /Android or both. All these variants surely require a team of professional developers.
Now, let’s analyze which aspects should be taken into account in the crowdfunding product development.
The development of any crowdfunding app or a platform requires two payment profiles implementation – a startupper, a donor and the platform’s wallet for collected fees. A project owner should be able to see the earnings, but get an access to the account only when all the conditions for the particular fundraising are fulfilled.
Your platform should provide donors with a big choice of cards and systems to make the payments, especially for the most popular ones like Visa, MasterCard, PayPal, WePay, Amazon Payments, Stripe and so on. Cryptocurrency is also popular among the donors, so make this payment option possible too.The bigger the choice is, the higher the chances of any person from anywhere in the world will give money to a certain project.
To let users make financial transactions, you can either develop your own payment system or use SaaS solutions in this sphere and ready-to-use APIs.
If you choose the first variant, your platform should get appropriate certification and find licensed partners for payment processing and banking. This is a pretty uneasy and long way, which may cost you big money. Several years may pass, till you get all the needed licenses and permissions.
The second way is much preferable if you don’t want the process to last for ages. Payment systems such as PayPal, WePay, Stripe, Dwolla and others provide developers with APIs and comprehensive instructions on the subject.
Today, the high-security level is a must for any internet service or app. Here. it is vital because people can give millions by means of your platform!
The most commonly used yet highly effective method is encryption. Without encryption, all the data which is sent to the server looks like the usual text. This makes all the personal info, like banking credentials, vulnerable to frauds. SSL is one of the most popular and safe encryption protocols. It can be implemented for iOS and Android solutions as well as for the web.
All needed safety methods must be implemented, to make people want to place projects on your platform without any fears and doubts.
Steps to success
Once the development process is finished, another piece of work starts! Promotion is not less easy than coding. You may have a great platform, but you should get project owners and users to make it alive!
Branding is an imperative part in any product creation. The logo, colors, and fonts should look stylish and make people recognize you among other similar products. Memorable UI should go together with functional, logical and intuitively clear UX design. Do not save on any of these components or you risk not to be taken seriously by your audience.
Finally, your platform is ready. Now it’s time to attract clients. How to start? At the very beginning, when no one knows about you, ask your friends and partners, and friends of your friends to place their projects on your platform. Let them be not about millions at first. The main aim is to make even several small projects achieve their goals. Your success is your startupers’ success. Give the project owners some instructions on how to attract donors and make people in their community and around the world find out about them. Place some useful content on the topic for the newcomers at your platform. Also, add such features as sharing projects via social nets, sending invitations to join funding, and so on.
Use all the possible means to make people to find out about you. Write articles and posts, make videos and tell your story and your user’s success stories. Make email newsletters about how crowdfunding can help business, organize advertising campaigns etc. Don’t stop trying new ways to draw attention!
Show your stats: people like to see real numbers, even if they are not stunning. Let people feel that you can help them get real results.
For higher efficiency and more professional level, it is advisable to hire a competent and creative SEO. You may do this part of work at the start, but promotion is a far uneasy task, so you better substitute it to a professional.
Crowdfunding website development – real case
At Cleveroad, our team of developers has released a crowdfunding platform called CrowdGiv.
The platform is dedicated to non profitable projects. Each fundraising project is designated to a certain charitable organization which gets money directly from the donors. There are Team campaigns and Individual campaigns. Both campaign types can add some description with pictures and video and share their projects via social nets. But only Team campaign has an option of inviting friends to boost donations.
Speaking about the development process, the whole project took 1500 hours. The payment processing system was created by means of PayPal and ProPay. The platform is SSL certified which guarantees safe connection with a server. Administrator control panel was created on the basis of Inspinia pattern. Angular.JS and Node.JS were used for building front-end and back-end.
Before you decide to start
Crowdfunding gains popularity all over the world and gives much more opportunities as compared to standard ways such as bank loans. It’s definitely uneasy anyway because alongside with a business plan you should be 100% creative in the IT marketing and very cooperative. But it is well worth the effort! This experience will change your life and bring you and your prospects a lot of pleasure and profits! Isn’t this tempting to help people become happy? Creating a crowdfunding platform will definitely give you this opportunity.
Olga Anoshyna is a Writer at Cleveroad. It is web and app development company in Ukraine that successfully implements various projects of any complexity. The main goal of the company is to provide clients with quality and exceptional software.