Companies belonging to different industries need funding from various resources to grow. In the last few years, this field has grown, and this is why people are looking for crowdfunding platform development services from experts.
The global crowdfunding market is also growing; it was valued at $17.51 billion in 2021. The market value is expected to grow with a CAGR o 16.7% and reach $42.93 billion in 2022-2028. The drivers responsible for this surge are the growing startup companies worldwide. Crowdfunding has helped multiple startup companies raise the required capital for their business. (SOURCE)
Post-pandemic donations and support for people who have lost a lot have increased. Capital donations for charities to empower people is also serving as a reason that drives the crowdfunding market. Here through this blog, we will offer you vital glimpses of every aspect that crowdfunding has within.
What is a Crowdfunding Platform?
It is a process through which anyone can gather a huge number of small donations from multiple resources belonging to various areas. With crowdfunding, many people fund a project, and the donation from a single resource can be little in this process. But with a good crowdfunding platform, one can increase donations by adding multiple donors.
Charity and contributions are the main reasons behind the beginning of crowdfunding. Various marketing strategies can drive the decision of the contributors or donors. Social causes are also influencing the crowd to support different projects by supporting them through their donations. Crowdfunding organizations are expanding their reach to a global audience by integrating them into social media platforms.
With the help of crowdfunding, the projects can begin functioning quickly. The fundraising within these crowdfunding organizations is done through different campaigns and has a pre-defined deadline. It is done with financial objectives, which are known to the contributors. There is no doubt that crowdfunding has become a prospering industry today. If you are considering hiring a team for fintech software development and supporting your fintech project, you can always consider crowdfunding. Not just fintech but any industry can choose these platforms to raise capital for their projects.
Types of Crowdfunding Platforms
There are different purposes for which crowdfunding is being used. So, it is represented in different types to suit the purpose. Here we have mentioned the major forms of crowdfunding, and they are:
1. Donating Crowdfunding
Donation is a term that needs no explanation, so donation-based crowdfunding is also done to support a social or personal cause. It is crowdfunding, where the contributors offer support to various businesses, persons, or campaigns and receive no financial return from this contribution. Generally, this type of crowdfunding platform development is dedicated to charity projects. Different contributors donate small or big amounts to meet the larger fund.
2. Equity Crowdfunding
This type of crowdfunding offers a way to raise capital online from investors and finance a business. Multiple start-ups are rooting up from different industries. With the help of equity crowdfunding, these businesses can attract investors and seek funding. In return, the investors also receive equity ownership for that particular business. These business crowdfunding platforms offer a growing opportunity to both investors and companies. After providing the necessary support to the business, the investor is authorized to a stake proportional to their investment.
3. P2P (Peer-to-Peer) Lending
With this type of crowdfunding, individuals are allowed to receive loans from other people directly. Any financial organization working as a middleman is eliminated from this crowdfunding platform. The money offered by the supporters is considered a loan and should be refunded at an interest rate fixed before the money is provided, and it has a fixed deadline for return. It is a type of crowdfunding where the money is given only to support a specific campaign or project, and when it is over, the money has to be returned to the supporter.
Read More: Discover how partnering with a P2P lending platform development company can revolutionize your fintech business by streamlining lending processes and enhancing user experiences.
4. Reward Crowdfunding
Another type of crowdfunding platform development that is demanded is reward-based. In this type, the supporters are supposed to donate to the start-ups or any crowdfunding idea. This donation is made with the expectation of gaining non-financial rewards. These rewards commonly include goods or services, T-shirts, and many others. The type of rewards offered depends upon the size of funding the supporters make for the campaigns.
5. Profit-sharing or Revenue-sharing Crowdfunding
It is another fundraising mechanism that creates a win-win situation for both the fundraiser and the contributor. The projects requiring the fund can collect it using certain campaigns. The lenders can demand the payments depending upon the financial results that the business will earn. The company can share some percentage of its revenue with the lenders annually or quarterly. The fintech crowdfunding platforms generally fall under this type.
6. Real Estate Crowdfunding
It is the type that has supported real estate projects. Within this type of crowdfunding, people are investing in different projects from the real estate industry. Small businesses desire to grow in this field but do not want to have funding. On the other hand, the investors get to invest in the project but do not have to handle the brokers, contractors, or any real estate agents.
How to Build a Crowdfunding Platform?
Developing a fundraising platform, depending on the need of the business, involves multiple steps. Here we will be talking about some of the major steps that must be followed for developing platforms for crowdfunding:
1. Market Research
Conducting a market analysis will be beneficial in understanding how to make your project visible to the crowd. When the research is done, it helps in identifying the market segments and key demographics. One can also study the chain of supply and demand for any specific industry after doing research. The motive of the product and how it will perform can be evaluated based on market research data.
2. Identifying the Market Leaders
Before developing any business crowdfunding platform that serves a specific market niche, it’s better to identify the leaders of your niche. The crowdfunding market is fragmented and has a high level of competition. So, before you put your foot in the puddle, the depth must be known to you. Learning about your competitors will give you a better start as you will get to understand the ongoing trend. By identifying your competitors, you will get a chance to analyze their good and bad decisions.
3. Deciding Monetization Model
The crowdfunding platform development is majorly done with the method where the commission is paid only when the required amount is raised. But there are other models on which one can design their platform for crowdfunding. There are different monetization models or features through which the project can get enough funds, and the investors can have revenue if needed. Some of the major ones are:
a. Rewards for Backers
The campaign will be supported and funded by the investors, but they must be offered with certain rewards
b. Time limitation
The campaigns go live within a certain duration, so the funding also has a time limitation. If the campaign fails to gather the required sum in the given time, no funds will be raised.
4. Choosing the Team
Now, based on your needs, you can decide whether you would like to involve your in-house team in developing crowdfunding platform software or you would choose to outsource. There are different perks of choosing teams; for instance, if you partner with an outsourcing vendor, it will help you to set up a dedicated development team for your project. It will also be cost-effective; however, working with an in-house team will cost you more money. But with the in-house team, you get to control every development move.
How Does a Crowdfunding Platform Work?
The principle of crowdfunding is simple; specifying the funding method is very important to raise the desired amount. The platforms that support crowdfunding enable the smooth functioning of the crowd and the fundraisers. The financial pledges can be made quickly and gathered through crowdfunding.
There are different models through which crowdfunding platforms work. Fundraisers usually pay a fee to crowdfunding platforms only if the campaign is successful. In return, the platforms supporting crowdfunding are expected to offer easy and secure services.
Most business crowdfunding platforms operate with the funding model of all -of-nothing model. The lenders will receive something once the fund reaches the target amount. The monetization model decides the working pattern for the platforms supporting crowdfunding.
Trends within Crowdfunding Projects
Stabilizing the global economy has supported crowdfunding platform development trends. These trends have allowed multiple platforms to dwell in the field of crowdfunding. Here we have provided you the information on major trends for crowdfunding, and they are:
a. Real Estate Crowdfunding
You might need clarification about how an industry can become a trend for crowdfunding platform development. Well, this industry has become a growing niche for crowdfunding. Several platforms are involved in financing their new constructions or investing in renovating projects. Crowdfunding is required, and it is also termed crowd building. It is not an under-the-rental investment but rather an investment with financial securities.
It is one of the most dynamic sectors, and the driving force behind this is the growth is investors due to crowdfunding so that their savings can be used with the diversification of investments.
b. Stabilization of the Donation Market
Another trend driving crowdfunding is the establishment and constant growth bagged by the donation market. The market of various industries is growing due to innovation. Multiple technologies are integrated, and the fund for this digital implementation can be acquired by crowdfunding.
The different types of crowdfunding platforms are helping various industries to grow. Post-pandemic and even during COVID, the donation market started rising. People started supporting various campaign ideas and donated a certain amount. It soon stabilized the donation market, which propelled the growth of crowdfunding.
Benefits of Crowdfunding Platform
If you are considering raising funds for your fintech crowdfunding platform or any other enterprise solution, it is a must that you should learn about these perks.
1. Provides Access To Capital
Start-ups or any other individual thinking of becoming an entrepreneur must come up with ideas to help them raise capital. There are numerous resources from where the investment can be expected, such as banks, venture capitalists, and others. But these are more than just the options left to raise funds for the project. Crowdfunding is one of the great alternatives that has offered a smooth way to raise funds.
2. Reduces Risk
Starting with an innovative idea is fun but is also risky and challenging. There are considerable expenses that need to be funded. The market requires evaluation and forecast, which can help businesses to secure their future steps. Crowdfunding makes things easier by reducing the risk for these start-ups by investing within market validation. It is why companies are looking for how to build a crowdfunding platform. With the help of crowdfunding campaigns, the entrepreneur can avoid giving up equity before introducing its product to the market.
3. Serves As The Marketing Tool
With the help of a well-planned crowdfunding campaign, you can introduce your overall mission and vision to everyone. The campaigns for crowdfunding platform development have to be unique and detailed. It should touch every nook and corner of your objective so that the investors can analyze the same and then offer to fund. Through these campaigns, you can easily tell everyone about your innovative ideas. The crowdfunding platforms can be integrated with social media platforms, making sharing the business agenda clearer.
4. Crowdfunding is Easier
Yes, innovative ideas were sprouting even before the concept of crowdfunding was introduced. Earlier, people also looked for funding that could support their ideas. But the process of availing those funds took more work. The traditional application process includes limited options, such as loans from banks or accredited investors. Due to the time-consuming process, many businesses were destroyed in their early stages. But with crowdfunding, this pathway became easy. Crowdfunding platform software adoption has offered exposure and help in a short period of time.
How to Make a Unique Business Crowdfunding Platform?
Every industry has adopted crowdfunding, making it hard for smaller businesses to compete with big brands. But this does not mean the platform you develop for crowdfunding cannot outshine your competitors. Here we have come up with some basic yet very useful tips that will make your platform different in a good way.
a. Work With a Niche
Platforms developed for crowdfunding can support multiple projects under one huge umbrella. But if you listen to the experts, it is better to choose a niche and work. When you choose a niche, it means you will be working with one category. It does narrow down your target audience, but at the same it becomes manageable.
If you do not choose a niche, the platform has multiple target audiences, creating a mess in the long run. Choosing one category makes attracting the target audience easy. Start-ups need help choosing which niche they want to pursue. Under this situation, the solution to invest in hiring software development services provider for designing crowdfunding websites as per your requirement will be a wise decision.
b. Consider Adding Unique Features
Whenever you think of developing a business crowdfunding platform for yourself, think about the uniqueness you can add within. Creating a platform that supports crowdfunding can be best if you integrate exceptional features. Anything different in a good way will increase the customer’s curiosity about your project.
For instance, you can create a platform where not just the crowdfunding is done, but people can connect and exchange their views through the platform. We are not suggesting turning your crowdfunding platform into a social media channel. But it can be adapted to the pattern and upgraded for crowdfunding and social interaction. It should allow like-minded people to think about creating a campaign together.
c. Offer User Friendly Experience
When we write to make it user-friendly, it has a simple meaning: creating an interface that is easy for customers. The customers must be able to navigate your crowdfunding platform easily. But being user-friendly include many other features, and your platform should have it for a smooth run.
The privacy and security of the customer investing in your platform must be taken care. Crowdfunding is connected to the transfer of money and must be safe. Protocols must be set to protect every bit of the transactional data as well as the personal data of the customer.
You must consider offering transparency with the entire process for your customers. They should learn about the objectives that your project is serving. Clarity will help you build a trustworthy bond with your investors or customers. You must be careful about regulatory compliance as the government worldwide has legal frameworks for regulating such businesses.
Essential Features Within Crowdfunding Platforms
Working out the process of setting features for your crowdfunding platform development is vital. The business model, budget, competitive market, and many other factors will be analyzed. Only then can the platform have the best of its features. Below we have mentioned a few significant features that will upgrade the quality of your crowdfunding platform.
1. Project Assistance and Support
Sometimes, start-ups visit crowdfunding platforms and need help navigating the process. They needed clarity about how to promote the campaigns or how financial management will work. In such a situation, you must add support and assistance features within your platform. It can be through a chatbot or links integration, but the users must feel comfortable knowing that this platform will help them with their issues. The support system for the users should be functioning smoothly.
2. Community Formation
A crowdfunding website or platform is not a place where only financial help can be offered. It should care for the users and enable them to interact with each other. For instance, the platform should allow users to post about their campaigns, grants, and other vital information. They should be able to create content about their creative ideas and get the attention of their target audience.
3. Funds Calculator
The feature of calculating the fund should help the start-ups to count the collections. The taxes, payments, and platforms commission everything can be calculated easily. You must integrate this automated feature within your platform so that it becomes more comfortable to use. Adding this feature while crowdfunding platform development will be advantageous for you.
4. Reminders and Confirmation
Communication is a vital aspect of any project. The crowdfunding website or platform should have a feature for users to set reminders for them. The important actions can be recorded by e-mail; thus, the users will be kept informed about every event or activity related to their project.
Conclusion
Many small businesses and entrepreneurs have been seen flourishing after choosing crowdfunding platform development for their businesses. However, being successful in the crowdfunding industry takes work. It does come with lots of challenges and requires effort. But if the necessary hard work and a great idea are put together, the businesses can get much more than just money.
There are times when the right approach or drive for campaigns through crowdfunding has helped the business create its base customers. Through this blog, we have offered you a significant brief about every concept that s related to crowdfunding. This industry is rising, so its essence is delivering the required exposure to the projects that deserve it.
