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29 September 2022

How Much Does It Cost to Start a Crowdfunding Website

Are you looking to do the cost to start a crowdfunding website?
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Crowdfunding venues such as Kickstarter, Patreon or Indiegogo are very popular among users, because thanks to them you can quite simply find investors for your project or, conversely, support the launch of your favorite product, film, music album, video game, etc. The creators of such sites also receive their benefits, usually in the form of a small commission from each crowdfunding campaign or advertising, which makes these sites an excellent investment target.

Next, we will examine in detail the five main factors that most affect the cost of developing a crowdfunding site: a niche, a fundraising model, design and functionality, marketing and development approach. But, before moving on to these factors, decide on the following things:

  1. If you want to create a simple site or something more complex. A simple crowdfunding site can be launched quite quickly and relatively cheaply, for example, using existing SaaS solutions - from 10 to 1000 dollars a month. In addition, WordPress has a large number of themes and plugins for such projects - from 0 to 500 dollars. If your plans are for something complicated, you will need an individual solution: creating from scratch or based on an existing platform - from 5 to 50 thousand dollars.

  2. If you want to create a new site or implement crowdfunding into an existing site. Integration is simpler and cheaper, but there may be security and usability issues. You can do this using various plugins and widgets to launch crowdfunding campaigns. Typically, this approach is implemented for sites whose owners are engaged in publishing, sound recording, art, ecology, e-commerce, charity or politics.

  3. If you plan to launch a site for earnings, or it will be a non-profit project. In the case of a non-profit project, you need to rely on the low cost of developing and maintaining the site, therefore it should be as simple as possible. If this is a commercial project, then it is best to start with a certain niche and a unique value proposition, however, you should consider the possibility of scaling the web site.

Describing how much it costs to create a crowdfunding site, we will focus on the most popular option: you want to create a new site for making money (with monetization).

1. Platform niche

Top 10 crowdfunding platforms and their specialization. Source of the image

Choosing a niche is important, because the higher the competition in the selected niche, the more money you need to invest in creating and promoting a crowdfunding site. If you want to compete with Kickstarter, Indiegogo, GoFundMe, Patreon and other market leaders, then you need a platform that will surpass these projects.

This means that you need to create a unique platform with functionality and design that will distinguish your project from direct competitors. Therefore, you need to either make the best crowdfunding site, or come up with some kind of chip that will attract attention and be useful to users. It could be a new financing model, technology, or something else. And, of course, the creation of such a project will cost several tens of thousands of dollars.

It is much simpler and more correct to go the other way: choose a niche with minimal competition and start with it, and then gradually expand your reach. That is how almost all major crowdfunding platforms started: Kickstarter - small P2P projects, Patreon - support for YouTube channels, Indiegogo - film industry. Now these niches (industry + country) are occupied, but you can bet on:

  1. Other countries. Now the crowdfunding market is developing very rapidly in China, Eastern Europe and Latin America. Moreover, there are many countries where people do not know English and other international languages, and therefore cannot use crowdfunding sites that are leading in developed countries.

  2. Unpopular niches. Angeldorm helps students raise money for tuition, books, equipment, internships and more. Catincan helps with the integration of new features in open Source of the image software. FaithLauncher is engaged in Christian projects. GetGayFunded serves only the LGBT community. As you can see, the crowdfunding market is full of various niches that can be used as a base for launching your website.

  3. Local projects. Would you like a restaurant with a specific cuisine, a cinema, an ice rink or something else to appear in your city or area? Many residents have similar desires, but no one embodies them, because it requires money. Your site can bet on this market.

  4. Social projects. In many developing countries, urban and rural residents are willing to invest in developing local infrastructure, but they are afraid of corruption and fraud. A crowdfunding platform based on a distribution registry (for example, blockchain) can solve the problem of both corruption and fraud.

  5. With early investment in the construction of residential real estate in developed countries, similar problems can also be solved by blockchain, hashgraph or another version of the distribution register.

If we talk about the cost of launching a crowdfunding site in the context of choosing a niche, then in the case of projects for a market with high competition, it is from 50 thousand to 200 thousand dollars (+ marketing). If this is a market with low competition, then you can use SaaS, white label and WordPress solutions, therefore the budget of such a project will vary from 500 to 5,000 dollars or from 20 to 200 dollars a month in case of SaaS solutions with a subscription.

2. Crowdfunding model

Basic crowdfunding model. Source of the image

The choice of crowdfunding model(s) also significantly affects the cost of creating a site, since their implementation requires the development of appropriate interfaces and functionality. So, the most traditional and simplest model of fundraising implies that your site will have a description of the project, bank account number or crypto account. To create such a site you need no more than $ 1000 (or less), if you do not bother with the design and editor.

If you need a more complex model, for example, when investors participate in the project in exchange for a share in the capital, then we need a system that will collect money, calculate the share of each investor and issue a “digital” certificate of ownership. Now this is done with the help of blockchain, smart contracts and property tokens. The launch of such a site is much more expensive - from 10 thousand dollars + expenses for licenses and other permissions (10-100 thousand dollars depending on jurisdiction).

Here are descriptions of the most popular crowdfunding models:

  1. Donation. The simplest approach, which involves transferring money without any compensation or rewards. Previously, it was mainly used in charity and politics to search for campaign finance. Now it is used by almost everyone who works on the Internet or just spends time there. To launch such a model, you need a relatively simple payment solution for donations directly to the project account with a parallel calculation of the funds raised. Example - GoFundMe.

  2. Rewards. Assumes assistance to the project in exchange for non-financial remuneration. The reward can be simple, for example, in the form of a note with the word “thank you,” or significant, for example, in the form of a product sample or early access to content. If you are developing a crowdfunding site to finance physical products, then the fundraising system will be as simple as with the donation model. If we are talking about Internet content, then we need a system that automatically gives access to hidden content, like on Patreon. Other examples are Kickstarter and Indiegogo.

  3. Debt. It involves the financing of projects on credit with the subsequent payment of both invested money and interest on them. There are several types of debt-based fundraising: P2P, P2B, B2B. To launch such a platform, you need a system that, in addition to raising funds, will calculate interest and make automatic payments on them (or remind about it). In addition, some guarantees of rights to repay the debt will be needed, that is, one cannot do without an appropriate state license. Vivid examples of such sites are Lending Club in the USA and Kiva Microfunds in the UK.

  4. Equity. Assumes support for startups at an early stage of growth in exchange for participation in capital (usually for stocks or a share in a business). The key difference from other types of crowdfunding is that those who invest their money become co-owners of the business or shareholders. This model is usually used when starting blockchain startups (ICO, STO). Examples: AngelList, CircleUp, Fundable, and Crowdfunder.

3. Website design and functionality

The next factor affecting the cost of launching a crowdfunding site is the design and functionality of the platform. For markets with low competition, in most cases, a simple but unique design and basic functions are enough, which costs relatively inexpensively - 3-10 thousand dollars. If you plan to compete with Kickstarter, Patreon, AngelList, GoFundMe, Indiegogo or Lending Club, then expenses will be measured in tens, or even hundreds of thousands of dollars.

The following 7 functions are included in the basic functionality of a crowdfunding site:

Registration and Login Form. If your site does not just publish bank account numbers to which inverters can transfer money, then the login and registration form should be both simple and complete enough for your site to comply with KYC / AML rules. This is important, because now there is a trend towards constant tightening of the rules of supervision by regulators.

The CapitalRise Registration Form is a great example of simple, clean design

Powerful account management. Account and content management should also be simple and clear, so that users immediately understand what and how to do, what results it will lead to. In addition, investors also need the ability to track their activity on your site. To do this, you need records of all transactions, reports, charts with information about investments.

Investor activity charts on the RealtyMogul website

The initiator of crowdfunding campaigns, in turn, needs functions to launch and change them. What specific tools are needed in your case depends on the fundraising model. So, if this is a loan-based model, you need a system of collecting money and calculating (paying) debt and interest rate. If this is a system of rewards, then we need a system with automatic comparison of the volume of investments with certain levels, the achievement of which gives the right to a particular award.

For example, when collecting money for developing a game, it can be: $ 10 - thanks, $ 50 - early access to the game, $ 100 - game and branded T-shirt, $ 1,000 - VIP edition, and the character in the game will be called your name.

Monetization and project management. As the owner of the site, you should have the ability to manage the web platform, user profiles, categories, projects, content, the monetization system and the KYC / AML verification procedures, and you also need a powerful system for monitoring the status of all this in real time. Statistics and reports are also required.

Fundme crowdfunding platform admin panel

Payment and Withdraw Functions. Most often are used PayPal and Stripe solutions, since these systems are familiar to everyone. But, you can also use LemonWay, Reyker or GCEN payment gateways, as these solutions are designed with focus on crowdfunding and investment processes and operations. At the same time, do not forget about local payment systems and cryptocurrency. However, in the case of cryptocurrencies, be careful, as not all countries allow them.

Comparison of popular payment gateways. Source of the image

Security & Support. In addition to protecting the site and users' personal data, you also need to somehow solve the problem with scammers, who are a lot in the crowdfunding market. For this, KYC / AML procedures are needed, but they may not be enough, so sites often manually check all campaigns before publishing them. It will also help to avoid problems with ethics and trolling, for example, if someone decides to collect money for the re-release of Mein Kampf.

Responsive Design and Application. Another mandatory feature without which a crowdfunding site will not be successful, as modern users use several different devices to access the Internet. And these are not only phones, tablets and computers, but also smart TVs, game consoles, VR devices and even smart refrigerators and microwaves.

Kickstarter mobile app screenshot

At the same time, it is important not only to implement responsive design on your site, but also to develop a mobile application, since 80% of users prefer to use web services with their help, and not through a browser. The cost of creating such an application varies in the range from 3 to 50 thousand dollars.

4. Marketing strategy

What marketing channels does the business rely on in 2020. The Manifest poll on the left, the Clutch poll on the right.

We wrote about this in detail in the article “What is the average marketing budget for small businesses”, so now we simply outline the main channels of promotion and how much money they spend on average:

  1. Search engine optimization (SEO). From 100 to 5000 dollars a month. It includes analysis of search queries to form the SEO core, creating links and optimizing text content. The specific cost depends on the scope, country, number of pages and keywords (word forms).

  2. Content marketing. From 500 to 10,000 dollars. This amount includes the study of the target audience, the development of a content plan, the creation of content (text, images, photos, audio, video, graphics, memes, etc.).

  3. Social Media Marketing (SMM). From 200 to 10,000 dollars a month.

Ads on Facebook, Instagram, Twitter, YouTube and LinkedIn depending on the target audience. At the same time, it can be both regular advertising (banners, ads, recommendations), and influence marketing.

  1. In-app advertising. From 500 to 10 thousand dollars a month. Aki Technologies survey showed that Internet users consider such advertising to be better and more personalized, therefore they trust it more, therefore, it is more effective than other approaches.

  2. Pay Per Click (PPC). From 500 to 50 thousand dollars a month. It's about advertising in search engines and on sites such as Amazon, Alibaba and other popular sites. Along with advertising on social networks, this is the easiest and fastest way to increase traffic.

  3. Affiliate programs. From 5 to 50% of income. At first, this is one of the best channels, as it allows you to pay a referral at the expense of future profit. You can pay a certain amount or percentage, for example, $ 5 or 5% of the commission from each transaction, respectively.

  4. Email marketing. Free or from 100 to 1000 dollars per month. Free if you already have a database of potential users, and you yourself create a sales letter. If not, you need to create or buy such a base, as well as create letters to attract people.

5. Related expenses

Crowdfunding platform is not only a site, application and social networks. It is also the personnel and equipment that support its work, as well as a legal entity that needs to be established and obtained for it relevant permits and licenses. All this also requires money, which must be taken into account when calculating how much it costs to launch a crowdfunding site.
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