8 Alternative Crowdfunders To Fund Your Business
When we survey the socio-economic landscape for entrepreneurs, two seemingly incongruous things stick out. First, recent economic data indicates that the rate of startup business creation in the US is near its 40-year low. Second, over this past decade — the very decade that has seen a nadir in entrepreneurship — young companies have raised billions of dollars from (mostly) ordinary people through crowdfunding campaigns. In fact, Kickstarter (the biggest rewards crowdfunding platform) has facilitated the raising of $3.4 billion since its birth in 2009.
From these facts, we can deduce that entrepreneurship is widely popular among Americans in 2017, if only as a spectator sport and not a participatory one. What also becomes clear is that people can be readily persuaded to financially support new businesses if they stand to benefit from that support!
If you’re building a new business at this moment in history, you may well be considering giving crowdfunding a go. You’ve probably heard of the “big three” crowdfunding giants: Kickstarter (see our review), Indiegogo (see our review), and GoFundMe (see our review). However, there are plenty of reasons why you might want to seek out an alternative crowdfunder. Maybe you’ve read accounts of how the process of crowdfunding on Kickstarter has become unduly influenced by investor-backed campaigns and crowdfunding agencies. Or perhaps you want to be able to offer rewards to your backers in a different way than the Big Three allow. Maybe you want to give people rewards on a continuing basis and not just once. Maybe you want to give donors equity in your company instead of a mere gadget or trinket.
The point is, there’s no one right way to do crowdfunding. Different crowdfunding platforms may have more to offer you than others, depending on your particular business type. The following alternative crowdfunders may help you tap the coffers of The Crowd in a different manner than the more established platforms.
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Perhaps it’s a bit of a stretch to refer to Patreon (see our review) as an “alternative” crowdfunder, considering their rising popularity and outsized public profile in the creative industries. However, their approach to crowdfunding still stands as unique. Patreon was founded in 2013 by a musician who was frustrated by the lack of ways for up-and-coming artists to effectively monetize their work. He saw his friends set up Kickstarter campaigns for support with one artistic project, then struggle to come up with a rationale to launch a second Kickstarter campaign for their next endeavor. Seeing an opportunity to offer a more rational crowdfunding model for creatives who release content continuously, he started Patreon.
Unlike Kickstarter and just about every other rewards crowdfunding platform, Patreon operates almost like a subscription service for artists and other content creators. People who like your work can sign up to financially support you on either a per-month or per-creation basis. In exchange, they get access to exclusive content that you make available only to your paying followers, whether it be an LP, drawings, videos, podcast episodes, or just about anything else under the sun.
Patreon takes 5% of the money you raise in fees, which is pretty much the standard rate in rewards crowdfunding. Unfortunately, an additional ~5% goes to the payment processor, which is more than Kickstarter’s payment processing fee rate of approximately 3%. For most creatives on the site, however, the convenience of not having to launch a whole new campaign for their every endeavor makes Patreon quite the cost-efficient prospect nonetheless. What’s more, Patreon is more relaxed than many crowdfunders when it comes to permitted content, allowing for a wider spectrum of expression than the competition. From the political irreverence of Chapo Trap House to the various hentai artists using the platform (not gonna include any links here, sorry), Patreon supports content creators other crowdfunders might shy away from.
Read my Patreon review if the idea of long-term crowdfunding sounds appealing.
You may not have heard of Fundrazr (see our review), but, as it happens, it is Canada’s largest crowdfunding platform. It might not have the name recognition of some of its larger competitors south of the 49th parallel, but this rewards crowdfunder has some distinct advantages for certain kinds of businesses.
First off, FundRazr doesn’t pre-screen campaigns before allowing them to fundraise, nor does it limit the duration of your campaigns. It also permits you to keep whatever you raise even if you don’t reach your funding goal. These are three things Kickstarter doesn’t allow. What’s more, FundRazr’s fees match those of most of the crowdfunding industry (5% to the platform with an additional ~3% for the payment processor), so you’re not paying extra for this flexibility.
Another unique feature offered by FundRazr is Crowdfunding As A Service. If you choose to use this, you can host funding campaigns on your own website, under your brand, not that of FundRazr. Essentially, this turns FundRazr into a white label crowdfunder. Hosting crowdfunding campaigns for people in your community under your business’s name can provide your brand with a nice image boost.
Check out our FundRazr review to see if what’s good enough for Canada is good enough for your business.
3. Kiva U.S.
What if there were a way to get crowdfunded support for your business in the form of a loan instead of a gift premised on future rewards? What if I were to tell you that these loans come with 0% interest? Does this sound too good to be true? Well, Kiva U.S. (see our review) shows that this concept is indeed a reality.
Kiva U.S. is a nonprofit P2P (peer-to-peer) small business microlender whose funding campaigns resemble those of other crowdfunding sites, except in this case, your backers are lenders who chip in to offer you a loan. Kiva U.S. operates on the principle of “social underwriting,” meaning that your loan-worthiness depends not on your credit score (Kiva U.S. doesn’t even check your credit score) but on the trust of the community. The hope is that you’ll be motivated to stay in the good graces of the community, which is especially important if you decide to seek a second loan from said community!
Of course, you’re getting a loan, not a gift, so you’ll have to pay the money back if you don’t want Kiva telling the business credit agencies of your misdeeds. However, these loans carry no interest whatsoever. Neither are there any origination fees. You are only responsible for paying back the principal. You can raise as little as $25 to as much as $10K. For the right type of business, it’s a remarkable funding deal.
Read our Kiva U.S. review if the idea of interest-free loans for your business appeals to you.
With the most generic name in the crowdfunding industry, Crowdfunder (see our review) is far from a generic crowdfunder. In fact, Crowdfunder is a pioneer in the field of equity crowdfunding. Equity crowdfunding is a form of investment in which your backers are investors who fund you in exchange for equity in your company, not gadgets or other exclusive content. Equity crowdfunding has only recently become legal thanks to the passage of the JOBS Act in 2012.
Crowdfunder lets you raise money from accredited investors (this term refers to people with high incomes and/or significant wealth and doesn’t necessarily denote any particular skill in investing). This is a crowd that likes to keep a pulse on the next big thing, so if your new business is one of the rare startups with exponential growth potential, Crowdfunder’s investors may well want to get in on the action.
Crowdfunder is unique in other ways as well. Crowdfunder doesn’t collect the funds pledged to your venture — you have to collect the funds offline from the investors themselves. Accordingly, neither Crowdfunder nor any payment processor takes a cut of what you raise. However, you will need to purchase a subscription package in order to fundraise on the platform. Crowdfunder’s monthly subscription packages start at $449 per month.
It’s not for everybody, but Crowdfunder’s unique flavor of equity crowdfunding holds great potential for the right kind of business. Read our Crowdfunder review for more information.
Ulule bills itself as the “the 1st European crowdfunding site” though they host campaigns from North America and Australia as well. Ulule strives to lend a human touch to rewards crowdfunding, offering personalized coaching to all Ulule project creators, which (according to Ulule) has produced a 68% funding success rate for projects on the site. Ulule claims that this is a “record rate among international mainstream crowdfunding platforms.”
Ulule maintains a consistently bright and cheerful feel throughout the site, and its focus is on fashion, design, games, music, and art. Ulule is worth considering as a crowdfunding platform if you have items of value to offer as rewards that might have a particular appeal to the European market, as Ulule is more of a known entity there. As for fees, Ulule charges 6.67% of all funds received by credit card and 4.17% of all funds collected via check or PayPal.
Fundable (see our review) is a hybrid crowdfunding platform in that its hosts both rewards- and equity-based crowdfunding campaigns. Not just anyone can start a campaign on this site — as with Kickstarter, Fundable pre-screens all campaigns to determine their suitability for crowdfunding. Another trait it shares with Kickstarter is the fact that the funding campaigns are all-or-nothing. If you don’t reach your funding goal, you collect $0, and you do not pass Go.
Instead of charging a platform fee on what you raise, Fundable charges a flat monthly fee of $179. Unfortunately, this means that you can end up in the red if your campaign doesn’t hit its marks. And while Fundable charges a fee of about 3.5% for payment processing for rewards campaigns, it does not do so for equity campaigns, because all payments are made offline from the investor to the campaigner in a Fundable equity campaign.
There’s something of an air of exclusivity around Fundable, but certain businesses may stand to benefit from this unique platform. For instance, you can start off with a Fundable rewards campaign, and if you’re successful, you can use your success to demonstrate the appeal of your product to investors and pivot to an Equity campaign without having to go to another service.
Check out our Fundable review if you’re intrigued.
The other equity crowdfunding platforms I’ve covered thus far have been for accredited investors (i.e. rich investors) only. Wefunder (see our review) is different. It is, by a significant margin, the largest equity crowdfunding platform that lets non-accredited investors (everyone) invest in your business. Sometimes referred to as Regulation Crowdfunding, Wefunder is the one company that has figured out how to do it right.
Regulation Crowdfunding has only existed since May 2016, when the provision of the JOBS Act authorizing it finally took effect. It’s fair to say that the kinks are still being worked out. However, if you want to get in on this new field and feel like a pioneer, Wefunder is the platform to go with. It does charge $195 to launch your campaign, however. Wefunder also takes 7% of what you raise in fees. However, all payment processing fees are paid by the investors.
Read our Wefunder review if you want to get in on Regulation Crowdfunding.
So far, we’ve covered rewards crowdfunders, debt crowdfunders, and equity crowdfunders. However, Kickfurther (see our review) is difficult to even classify! Truly an alternative crowdfunder, Kickfurther is entirely unique in that instead of raising money in exchange for rewards or equity shares, you offer your backers the chance to purchase inventory on consignment. Your backers also get their own Kickfurther-branded online store in which they can sell your products.
It’s an odd arrangement, so I’ll try to explain it using an example. Perhaps the most prominent project on Kickfurther was the Vaportini, a weird alcohol vaporizing system. If you backed the project, you were offered a 16% return on your investment in the event that 88% of the inventory is sold. To be sure, it’s an odd system, but if you like the idea of having your backers help finance your inventory purchases and having some of them sell your product online, you might want to look into Kickfurther.
One caveat for backers: Kickfurther doesn’t appear to do a good enough job ensuring that backers get paid what they’re due. In fact, a comment was left on my review from one of the backers of the Vaportini, claiming that the company took their money and defaulted on the payback “with no enforcement, follow up, or communication from Kickfurther.” I found other reports from backers of Kickfurther projects with similar stories. Bottom line: Kickfurther may be an interesting prospect for businesses with unique products to sell, but backers have ample reason to be wary of the platform.
Read our Kickfurther review if you’re interested in crowdfunded inventory purchases and/or alcohol vaporizers.
I wanted to take you beyond the Kickstarters and Indiegogos of the crowdfunding world to show you some of the innovative — and sometimes downright bizarre — crowdfunders out there doing it their own way. There’s no “right” way to conduct a crowdfunding campaign. It all depends on the type of business you own and the sort of product, service or experience you have to offer. Know your options, then dive in and give it a shot!