There are many crowdfunding platforms which startups can use to raise money and build a community of supporters. The question is, which one is the best to use. Ultimately, startups should choose whatever platform best fits their goals.
This article will compare three of the most popular crowdfunding platforms; Kickstarter, Indiegogo, and Patreon.
Kickstarter is the most well-known crowdfunding platform at the moment, and it has been credited with over 400,000 successfully funded campaigns, receiving more than $4 billion in pledges from 17.2 million backers. At the moment, the crowdfunding platform has over 13 categories and 36 subcategories ranging from the creative arts and food industry to the publishing and technology industry since its launch in 2009.
The team behind Kickstarter believes that art and creative expression are essential to a healthy and vibrant society. Their mission is to help bring creative projects to life. Every project is developed independently on a platform where the general public can fund them in return for rewards or the finished product itself. This reward-based crowdfunding model can be traced back to the roots of the subscription model of arts patronage.
The Kickstarter platform is split into creators and backers. Creators are those who present their project ideas and create campaigns, while backers are the ones who fund them. To create a successful Kickstarter project, creators need to set up a page to display all the details of their project using text, video, and photos to tell viewers about their project. From there, creators then set a funding goal and a deadline, including different rewards that backers can receive by pledging a specific amount. Generally, different levels of support will provide different rewards.
Kickstarter has many general rules and guidelines that creators must abide by for their projects. However, they are designed to ensure that people adhere to the crowdfunding model. Rather than placing orders for products, people are supposed to use Kickstarter to people are backing projects rather than placing an order for products.
Campaigns can generate lots of attention for free
Since the platform is quite popular, there are many tech magazines, online publications, blogs, and individuals who browse through Kickstarter regularly to see what new campaigns have recently been launched. Companies that create engaging, eye-catching campaigns can gain lots of free publicity when they get noticed. This could help grow a brand even if their crowdfunding efforts were not successful.
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Free until the goal is met
This is no upfront charge on the platform when a startup signs up on Kickstarter. If a project does not get fully funded on Kickstarter, the only costs a startup has to pay are the ones they generated internally to create and market the campaign.
Offers an easy-to-use interface
Once a campaign goes live, it is straightforward for startups to keep track of what is happening with the campaign. They will receive up-to-date statistics, be able to communicate with backers easily and be able to promote their campaign in multiple ways. Startups are also allowed to purchase a domain name that can redirect their campaign and embed it onto their owned media.
To get their crowdfunding cash through their campaign on Kickstarter, the startup has to meet their funding goal. Failure to do so means the startup won’t get they could’ve raised from the pledges.
All successful campaigns must pay a fee
While there is no initial cost, if a startup’s campaign is successful, Kickstarter will take 5% of all the cash donated as a commission for the startup crowdfunding on the site. Additionally, up to 3% of payment processing fees can cut into a startup’s funds.
Companies cannot pledge toward their own project
While startups may use other fundraising methods to help supplement their Kickstarter campaign, including raffles, silent auctions, or door-to-door sales, the money raised from those efforts cannot be added to their Kickstarter campaign because businesses are not allowed to pledge for their own campaigns.
Backers can easily forget they have pledged
Because of the length of the crowdfunding campaign, which is up to 90 days, early supporters might forget that they pledged a campaign, and when the charges go through on their online payment method, they may dispute it. This makes it difficult for some startups to access all the cash that was pledged.
Created one year before Kickstarter, Indiegogo is a crowdfunding platform that brings users together and allows them to raise funding for their campaigns and contribute to others. Indiegogo’s campaigns are where new and groundbreaking products are launched even before they hit mainstream markets. Through the platform, backers have the opportunity to support entrepreneurs and new technology from the earliest stage of development. They can browse campaigns, read stories from the entrepreneurs themselves, evaluate the stages of development and any potential production risks, and then fund the projects they want to help succeed.
No need to be fully funded
Indiegogo, unlike Kickstarter, allows startups to collect all funds from a campaign rather than the all-or-nothing framework. If they want to earn cash, even if their campaign is not entirely funded, the fees are higher, but the startup will be compensated for their crowdfunding efforts.
More time to meet fundraising goals
Unlike Kickstarter, which has a maximum period of 90 days for any crowdfunding campaign, Indiegogo allows a campaign to be live up to 120 days. This provides startups more time to begin marketing their campaign to their target demographics, especially if they have not done any pre-campaign work to increase their exposure. However, since most contributors tend to donate at the beginning or end of a crowdfunding campaign, it can also be a disadvantage if not used effectively.
Offers charitable crowdfunding platform
In addition to their standard platform, Indiegogo also offers charitable crowdfunding options. Indiegogo’s Generosity platform helps users run fundraisers for personal causes, and charitable crowdfunding campaigns are also available. The rates paid to these campaigns are lower than those charged to regular campaigns, allowing each campaign to retain some of the money donated to the cause.
Automated promotion through social integration
Indiegogo provides each startup’s campaign with a full range of promotional tools customized to meet particular requirements. This includes automatic promotion to the startup’s preferred social media sites, ensuring that their content and posts reach their target audience. Startups need to tell their story, and Indiegogo will help them share their message with the world.
Not as popular
Compared to Kickstarter, Indiegogo does not have a wide brand exposure, with overall traffic levels on Kickstarter being about 4x more. That does not mean that a startup won’t be able to benefit from their crowdfunding campaign going live. It just means that they need to work a little bit harder to get the exposure they want from their target demographic and find more creative ways to generate interest in what they are offering.
Can place startup in a financially compromised position
Even if a startup does not receive total funding for their campaign, they are still contracted to provide rewards if they have offered rewards in their campaign. This can put a startup in a weak financial position if they do not have the budgetary infrastructure they were expecting to have. Ultimately, they need to pay for the internal infrastructure costs to get the rewards out to the people who contributed.
While Kickstarter charges a flat 5% only on successful campaigns, Indiegogo will charge a 9% fee on the total amount raised if a startup chooses to take the cash donated but did not meet their fundraising goals. However, with the addition of Generosity, more startups can meet their financial obligations when the unexpected happens.
Patreon is a crowdfunding platform specifically created for artists, online celebrities, and influencers who work in the content creation and development industry. Patreon has seen a huge growth in publicity over the past few years. Its approach to rewards-based crowdfunding is unique, which is what sets it apart from Kickstarter and Indiegogo. Generally, with the other two crowdfunding platforms, backers support creators with one-time pledges in exchange for rewards. However, Patreon’s model is that patrons subscribe to a creator’s content and make recurring payments on an ongoing basis in exchange for access to their content. Patreon prides itself on being a crowdfunding site for creators because it helps them earn a consistent, steady income from The Crowd. Patreon is particularly well-suited to content creators like viral video makers, online journalists, bloggers, and musicians because of its funding model.
When startups create an account on Patreon, they are asked to categorize their projects and work into the platform’s 14 different categories that include: video & film, writing, drawing & painting, podcasts, photography, science, crafts & DIY, music, comics, animation, games, comedy, education, and dance & theatre. Patreon is ideal for entrepreneurs and creative teams that are continuously engaged in creating content. For startups with other kinds of projects in need of crowdfunding like non-creative business projects, medical emergency fundraising, and others, they should check out Kickstarter or Indiegogo instead.
Continuous crowdfunding for creators
Once a campaign goes live, startups can add more information to their page, which can be viewable by everybody or restricted to payments depending on the reward level they choose. When it comes to funding, startups can choose either monthly payments from patrons or “per creation” payments.
Facilitates reward giving
Like other rewards-based crowdfunding platforms, Patreon lets startups offer rewards to their “patrons,” though, unlike Kickstarter, the platform only recommends it, not requires it. The platform suggests the following when considering what rewards to offer:
- Access to a startup’s patron-only feed
- Photos/videos of the startup’s process
- A live chat with the startup’s patrons via Patreon’s mobile app
- MP3 downloads
- Physical rewards (recommended for higher-tiered patrons only)
Fewer content restrictions than other crowdfunding platforms
While they have released a more definitive list of Community Guidelines, Patreon’s initial appeal to creators was that their content restriction policies were more relaxed than those of other crowdfunding platforms.
- Multiple subscription plans available
- Patreon Platform Fee: 5% + payment processing fees
- Hosted creator page
- Patreon communication tools
- Patreon Platform Fee:8% + processing fees
- All the features in Lite
- Different membership possibilities
- Extensive analytics and insights
- Tools to create a promotion for special offers
- Workshops led by other content creators
- Unlimited access to app integration
- Priority customer support
- Patreon Platform Fee:12% + processing fees
- All the features in previous subscription plans
- Assistance from Patreon’s partner managers
- Membership merchandise
- The ability for multiple accounts
Limited help section
While most reviews are primarily complementary, its Help section is not as extensive as it should be and not clear for startups looking to see how funding on the platform works and what portion of their funds go toward processing fees. At the moment, the information is there, but it takes a bit of time to sift through and dig through information.
No built-in promotional tools
Unlike Kickstarter and Indiegogo, Patreon does not have built-in promotional tools except for the ability for startups to add social media links to their campaign.
Past issues with funds collection
Even though the premise of the crowdfunding platform is to gain recurring payments on an ongoing basis, it seems that it can be challenging to get people to make a regular financial commitment to a startup, depending on how often they look at the startup’s content. Generally, though, it is a more complex proposition for many than making a one-time donation.
In addition, a serious issue arose in 2018 when numerous creators and startups saw significantly lower payments than previously obtained due to Patreon’s refusal to accept their subscribers’ payments. Along with that, many creators and startups found that they could not access their remaining funds on that platform, with Patreon citing “suspicious behavior” as the reason for this restriction. As mentioned in the first disadvantage, because of its limited help section, the creators who were going through those problems often received no feedback, clarification, or help from the platform.
Whichever crowdfunding platform a startup chooses, it is essential to know that an effective crowdfunding campaign should be a part of an overall business strategy. Regardless of whether the campaign is on Kickstarter, Indiegogo, or Patreon, brands need to implement strategies, planning, and efforts to make it successful. They can either create these strategies on their own or with the help of PR professionals like Pressfarm.