December 28, 2015

First, you need an idea. Second, you need funding. Then, you can start your business. The problem is - getting funded can be difficult. Traditionally, entrepreneurs sought investors, banks, or friends and family for funding. Now capital can be found in numerous ways, due in part to the breadth of crowdfunding platforms available. Crowdfunding is the process of funding a project through many smaller amounts given from a wide variety of people, usually on the internet. It changes the way entrepreneurs both acquire money to start their business and gauge interest in the market. Kickstarter, Indiegogo, and GoFundMe are among the most popular and well-known crowdfunding tools. They each have similarities and differences that cater towards different projects.

Kickstarter is the largest and most recognized, but make sure it's right for you. First of all, your project must fit with Kickstarter's guidelines. Kickstarter fuels creative projects - they won't accept a simple small business funding campaign. There needs to be a specific end goal for the project. Ideal candidates for Kickstarter projects are people looking to make a film, book, game or something else with a heavy creative aspect. Also, it is imperative to set a realistic funding goal. If you do not receive all of the funding goal, the money goes back to backers and you are left with nothing. This may be intimidating, but it also lights a fire under your backers and forces you to secure full funding. A feverish fan base will not only ensure you reach your goal, but also serve as a proof of concept to your idea. An audience that shares your vision and agrees with your project's goal boosts confidence in your idea. Kickstarter takes a 5% fee of the total funds raised and 3-5% payment processing fee. If you decide that Kickstarter is not right for you, check out Indiegogo.

Indiegogo differs from Kickstart a few different ways. Among the most drastic is the option to omit the full funding rule. This means that even if you do not reach your goal you get to keep the amount of money raised. This sounds like a strong pro, but depends on your project. If your backers know that this is not an all or nothing campaign, your chances of full funding may be diminished. Backers feel a lesser sense of urgency when they know you are keeping the money regardless. A backer may feel more important to the project if they know their contributions can help the project from dying altogether.

It is ultimately up to what you want your campaign to look like. Sometimes you just need money to get an idea off the ground and you are willing to take lesser chance of funding to do that. Indiegogo also has more relaxed guidelines on projects. Unlike Kickstarter's creative angle, you can fund a small business or other outlying projects. Users accept the lesser name recognition and following for these lenient guidelines. A 3% payment processing fee and a 5% fee are taken from your total funding at Indiegogo.

GoFundMe is in the same realm of crowdfunding, but usually for different purposes altogether. GoFundMe funds personal or life events, like a charitable donation instead of a creative or business idea. A GoFundMe shows your company's charitable personality and lets the public know that you make a positive impact. You can support an event that has struck a chord with an employee or the community your work is associated with. This dually serves to raise money for a good cause and build your company's altruistic brand image. On the flip side, you can use GoFundMe for company growth. Perhaps you are looking into a new office space and need some help furnishing. A GoFundMe campaign allows friends and family to contribute a few dollars and help make your dreams come true. The fees are around 5% on funds raised - similar to both Kickstarter and Indiegogo.

No matter which platform you choose one thing is clear, crowdfunding has changed the way entrepreneurs raise money. These platforms connect you with the community and garner interest along the way. Their popularity grows each year and spills over into various industries. Compare, contrast, and consider 2016 the year to get your ideas off the ground with the crowdfunding platform best suited to your needs.

Christian Larsen, Communications, Charles D. Close School of Entrepreneurship