Top Three Services to Crowdfund Your Project

Business.com / Funding / Last Modified: February 22, 2017

Businesses are increasingly turning to crowdfunding to raise capital.We look at three top services that could fund your next project.

Both new and established businesses are increasingly turning to crowdfunding to raise venture capital. The idea is to entice donations to fund a project from a large number of people who contribute via a website. One of the more famous crowdfunding initiatives was Neil Young's Kickstarter campaign for the Pono portable music player, which raised more than $6 million after reaching its goal of $800,000 within 10 hours (so far the third-highest funded Kickstarter campaign). The top fundraiser to date is a May 2012 campaign for the Pebble "e-watch," which topped $10.2 million in exceeding its initial goal of $100,000.

Related: 6 Crowdfunding Tips to Attract Investors

The Kickstarter Phenomenon

Kickstarter is one of the first and most successful crowdfunding sites, raising more than $737 million for a range of entrepreneurial projects since its founding in 2009. Kickstarter's business model is to take a 5 percent cut of all projects successfully funded, meaning that the donations meet or exceed the goal set by the campaign. It also sets a high bar for success—all pledged money is returned if the stated goal isn't met within a specified period. Consequently, Kickstarter only accepts projects it determines are most likely to succeed. The criteria used and how fairly it is applied is not totally transparent. Even so, out of the green-lighted projects vetted by Kickstarter, nearly 97,000 projects were not funded.

Indiegogo -- The Original

Started a year before Kickstarter, Indiegogo has fewer barriers for prospective projects. There is no application process, and it offers a wider global platform for participation. Indiegogo also encourages not-for-profit, charitable, and humanitarian campaigns, though it does accept commercial projects. Their funding structure is also more flexible. Indiegogo keeps 4 percent of whatever you raise when you reach your goal. If don't reach the goal, there are two options:

  1. Keep the contributions raised, and pay a 9 percent cut to Indiegogo, or
  2. Return all the contributions and pay nothing

The Ubuntu Edge smartphone-desktop PC hybrid is not only the top fundraiser on Indiegogo, but also the biggest-ever crowdfunding campaign, raising some $12.8 million. Paradoxically, it is also a failed campaign, bringing in only 40 percent of its $32 million goal, which was insufficient to put the device into production. All money was returned, and Indiegogo didn't see a dime.

Related:What Crowdfunding Could Mean for Your Next Product Launch

Wefunder -- For Startups Only

Wefunder, which is restricted to accredited investors who own a piece of the venture, focuses on tech startups. This is expected to change, as Wefunder founders successfully petitioned Congress to allow private individual investments of as little as $100, which became part of the JOBS (Jumpstart Our Business Startups) Act in 2012. However, the Securities and Exchange Commission has yet to approve the key part of the legislation that allows small investors.

The top fundraiser on Wefunder was Terrafugia, which raised $10.4 million for its planned flying cars, expected to ship in 2015.

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