5 Best Crowdfunding Platforms for Small Businesses

Do you have the next great startup idea? Maybe you’re planning to overhaul the small business you recently purchased? 

You need capital to fund your endeavor, but you don’t have the collateral or track record to approach a traditional lender. Friends and family can’t help out more than they already have, and you’re not big enough to attract venture capitalists. And sure, while there are grants out there for small business owners, they may come with too many strings attached.

Fortunately, there is another option. Crowdfunding allows you to raise small amounts of money from a large number of investors. You’ve probably heard of crowdfunding but associate it either with those dire pleas for rent money that appear in your social feed or the demands of complicated tech startups — neither of which relate to the needs of your small business.  

This piece aims to give you a better understanding of how crowdfunding works and how small business owners can benefit from it. Because crowdfunding platforms minimize the hardest work of crowdfunding — i.e., finding your audience — we’ll also provide a brief write-up of some of the better-known crowdfunding platforms out there.  

The Skinny on Crowdfunding

What is Crowdfunding?

If you’ve ever walked into a Renaissance cathedral, you’ve no doubt marveled at the art surrounding you. The sculpture, the gilding, the painting, the architecture, and the design itself – all made possible through the patronage of the Holy Roman Empire. 

Crowdfunding is a kind of patronage. (Others liken it to the hat or empty guitar case street musicians leave out for tips.) You are convincing people to support you by making individual donations to your business, sometimes in exchange for goods, services, or a stake in the company.

Crowdfunding gained traction as an alternative funding source after the financial crisis of 2008 when banks imposed stricter lending requirements on small businesses. By 2023, the global market for crowdfunding had already exceeded one billion dollars. Statista claims the sector is estimated to grow 1.48% through 2028, bringing a total of $1.2 billion in funds to businesses. Other sources claim that the global market reached $1.67 billion by 2023 and that revenues will grow 16.7% between 2024 and 2031. 

Either way, crowdfunding is here to stay, and there’s no reason why you can’t use it to grow your small business.

What Are the Different Types of Crowdfunding?

There are four main types of crowdfunding campaigns: donation-based, rewards-based, debt-based, and equity-based. Let’s explore each of them. 

In a donation-based campaign, individuals pledge or donate money without expecting future revenue or reward from the service or product under development. People donate simply because they believe in you and your vision. A rewards-based campaign is similar, except that people do expect to receive some type of “reward” for their patronage — a free sample from the new product line or a discounted service are standard incentives. 

Another type of crowdfunding is debt-based or peer-to-peer lending. Your donors are lending the money, not giving it, so this is, in essence, a form of microlending. These crowdfunded loans accrue interest and must be repaid by a set period of time, just like a traditional loan.

Equity-based crowdfunding is the fourth type. Here, your audience is composed of investors, not donors, and you offer shares in the business proportionate to the amount being pledged. Equity-based crowdfunding is regulated by the Securities and Exchange Commission, and there are limitations on the amount that can be raised and the amounts non-accredited individuals can invest.

Tips for Launching a Strong Crowdfunding Campaign

• Determine your priority objective and how it will benefit your consumers and stakeholders. This means going back to your business plan. Where do you hope to be in five years’ time? What is the big picture driving growth? How does the service or product for which you need funding fit into this big picture?
• Tell the story behind your business: people are more likely to engage if they can relate to your journey and vision. In fact, Becky Center, the CEO of Indiegogo, says that “telling the story behind a product is perhaps the most powerful tool for product creators to connect with their audience and build a community.”
• Consider harnessing the power of video to tell your story. That way, you can connect more personally with your audience, have something concrete to show your network and amplify your brand across all your channels. Check out this example Kickstarter posted on YouTube. It shows you how to effectively engage your reader by telling a story before introducing the product line.  
• Leverage your mailing list and network to spread news about your crowdfunding campaign. Even if an acquaintance doesn’t want to contribute, they might be happy to share the crowdfunding link on their social media sites.
• Don’t forget about LinkedIn when engaging social media – this is where you are most likely to connect with other small business people in your industry and market share.
• Be clear in your promotions. When promoting your crowdfunding campaign, make sure to mention the platform you’re using, including details about how the platform ensures safety for contributors. 
• Keep your donors in the loop as you make progress toward your goals. This is a good way to keep your fundraising campaign in their mind without explicitly requesting more funds.

The 5 Best Crowdfunding Platforms for Your Small Business 

1. Kickstarter: Big Name Recognition for Creative Enterprises 

Kickstarter is the biggest reward-based crowdfunding platform out there, claiming to have brought over 260,000 creative projects to life and provided over 300,000 jobs. The platform supports campaigns across a number of different industries, including design, fashion, technology, publishing, gaming, and music. The focus is on creative industries, but you will see a lot of nuts-and-bolts ideas represented as well.

The platform will take 5% of the total funds raised — but only if you reach your goal. There is also a 3% + $.20 payment processing fee for each pledge. The time limit on campaigns is 60 days.

2. Patreon: Where Creatives Can Get Funding for Individual and Ongoing Projects 

Unlike Kickstarter, where people in creative industries pitch their ideas, Patreon is more like Medium or SubStack in that it allows artists, musicians, podcasters, and writers to develop a following with the platform’s support and charge subscription fees to patrons. It also features an online shop where artists can sell their work, making it a bit like Etsy as well. 

The crowdfunding platform has an interesting fee schedule — if you start at the Pro level, you get a set of basic tools to help set up your Patreon account, and the company takes 8% of the profit from your subscriptions. If you are willing to part with 12% of the profit, you can opt for a  Premium membership and get more support, including a “dedicated partner manager.”

There is no limit on campaigns; with Patreon, pitch and product are often the same thing.

3. Indiegogo: Global Reach, with a Focus on All Industries

Whereas Patreon and Kickstarter focus on creative projects, Indiegogo has a broader focus, making it a better choice if you are in a nut-and-bolts industry. A brief perusal of the featured campaigns includes a remote camera designed to analyze pet behavior, a gyro-stabilized hydrofoil, next-generation sleep buds, and a solar-based air conditioning system. This is the place to bring your next big idea. 

Indiegogo charges 5% of the total amount of funds raised. They also charge a payment processing fee of 2.9% + $.30 for each pledge. The time limit on campaigns is 60 days.

4. Fundable: Raise Capital for Your Startup

Fundable is a platform that allows you to do either rewards-based or equity-based crowdfunding. Fundable offers software solutions specifically tailored toward building your campaign. You don’t even have to design the campaign yourself; Fundable has a Guided Fundraise level that “teams you up with [their] fundraising experts to put together your pitch materials and identify the right investors for your deal.” 

Fundable doesn’t list pricing on its website, but it gives you 90 days to meet your campaign goals.

5. GoFundMe: The Gold Standard for Individuals

As you probably already know, GoFundMe isn’t for businesses seeking funds. It’s for people who can’t afford their enormous vet bills or who need enough money to pay a security deposit. It’s also a good place for nonprofits and communities to get funding for projects, as evidenced by this campaign to restore the Bar Harbor Shore Path. 

If your business has a sister nonprofit or a project that might benefit your community, GoFundMe could be the right platform for you. It costs nothing to post your campaign, but GoFundMe’s fee is 2.9% of the total amount raised, + $.30. There is no limit to the amount of time you can leave a campaign active on the site.

A Final Thought

The single most useful way to decide among the various crowdfunding options is by visiting the platforms and looking at the featured campaigns. What type of crowdfunding are you seeking? Where does your opportunity make sense? Which campaigns stand out to you? This exploration will help you select a platform and provide inspiration when you are ready to design your own campaign.