Small business capital: Six crowdfunding options to consider
Consider these six crowdfunding options to help launch or grow your business.
Widely used by scientists, entrepreneurs, and social leaders as a way to create communities around projects, RocketHub allows users to set funding goals and promise their backers rewards, usually in the form of goods or services that result from the project. Funding is based on a flexible model, where users can keep any pledges made whether financial goals are met or not.
Equity crowdfunding site AngelList is exclusive (it only funded 383 businesses in 2015), and favors startups that already have high profiles via previous big investors or prominent founders. Groups of SEC-accredited investors form "syndicates," which collectively seek startups with AngelList profiles in which to invest.
Kickstarter uses a rewards-based model to fund a variety of creative initiatives (minus social campaigns), from startups to art pieces. While rewards don't have to be a result of the Kickstarter project, doing so can help backers become more emotionally invested. Kickstarter's all-or-nothing model means that if the funding target is not reached, none of the funds pledged are received.
Peerbackers is a community-based platform that funds entrepreneurs and innovators with campaign consulting services, including marketing and media production resources, workshops, and speaking engagements. They've also launched the Crowdfunding Academy, which offers education and support to those interested in crowdfunding.
Rather than offering investors and donors an equity stake in a company,Indiegogo employs a system of perks. Companies can choose between flexible and fixed funding, and Indiegogo's integrated analytics feature allows companies to keep track of their audience and contributions.
Not included here is debt crowdfunding, which differs from the equity and rewards-based crowdfunding examples above. With debt financing, investors extend a loan to a company and receive a fixed rate of return every month.
Learn more about crowdfunding.