Businesses and startups need capital at their initial stages. These needs may arise in the pre-launch or the post-launch phase. But it’s not that easy to manage the needed capital from banks and/or financial institutions. Because institutional loans need a lot of paperwork. Moreover, it takes a lot of time to process the loans. Since time is a crucial factor for businesses, the need for a speedier source of investment arose. One more factor contributed to this need. Banks and FIs are not that much interested in funding ideas. Because of these reasons, an alternative source of investment emerged in the form of crowdfunding.
What is crowdfunding?
Crowdfunding is the method of raising capital from a large number of individuals to finance a new business venture. These individuals are found mostly online via social media or crowdfunding platforms. The process involves a platform where startup owners define their objectives and investors put their money in an idea in exchange of a return or not.
How crowdfunding works?
The concept of crowdfunding involves three parties – Business owners, investors, and platform owners. The process goes as follows:
- Business owners find a platform that best suits their interest. They register on the platform and run a campaign by describing why his venture should be funded.
- Investors go through the available campaigns and identify their preferred campaigns to invest.
- Platform owners act as a bridge between these two parties and charge a fee for the service.
Why is it so popular?
Here is a list of things that contributed to the growing popularity of this method:
- Crowdfunding is a comparatively easy process to get funds for your business ideas.
- It takes less time and complexity to arrange the funds.
- New ideas have a good chance to get an investment.
- Both the small entrepreneurs and investors can operate here without any barrier.
- The platforms are completely online so everybody can gain access to wherever they are.
- These platforms act like a testing ground of your new product.
- Businesses get some early customers as investors become willing to purchase their products.
How do crowdfunding platforms make money
Crowdfunding platforms use one or more of the following revenue models to earn money from their sites.
Every crowdfunding site takes a fee for the successful collection of funds. This is the major revenue stream for them.
Platforms charge a membership fee that enables its users to run unlimited campaigns. In this model, the platform doesn’t take any cut from the amounts raised.
Loan processing fee
Crowdfunding websites sometimes act as middlemen to introduce borrowers to lenders and when a loan is processed, they get a fee from both the parties.
Portion of future sales
Some platforms take a portion of sales fundraisers are going to make in the future. This is also known as equity interest.
Advertising and promotion
Crowdfunding platforms may also offer premium services in exchange for a fee. Services may include featured campaign placement, consulting services, and others.
How much does it cost to create a crowdfunding platform
Now that you have learnt what crowdfunding is and how you can make money through this platform, you might be wondering, how much does it cost to create such a platform. The cost depends upon how many advanced features you want for your website. A thorough research helped us to break the cost into three tiers –
- Simple design – $1,000 – $1,500
- Niche website with relatively advanced features – $5,000 – $10,000
- Premium website with all the advanced features – $50,000 – $100,000
The numbers look pretty scary, don’t they? Because if you get down to it, a basic website won’t serve your purpose and you don’t have the ability to spend thousands of dollars to get a premium website. Fortunately, there is a getaway from this bottleneck situation right now.
HelpUs – your premium crowdfunding solution
HelpUs is a crowdfunding PHP script that will build you a crowdfunding platform with all the premium features. And the price won’t hurt your wallet at all. You can have a regular license with just $89. But don’t worry. Low price won’t force you to compromise with the features. You will get all the services you want to create a compact crowdfunding platform for yourself. Have a look at the awesome features that you are going to get with this crowdfunding script.
Crowdfunding is gaining popularity by the hour and for the right reasons. Due to the ongoing pandemic, more and more entrepreneurs are taking up new ventures and are in need of funding. This situation has increased the demand of crowdfunding solutions even more. So if you are planning to launch a crowdfunding platform of your own, this is the right time.