Do you want to start a crowdfunding website? If YES, here is a complete guide to starting a crowdfunding website business with NO money and no experience plus a sample crowdfunding website business plan template. Business ideas abound and one of the things one must look out for when starting a business is the viability of the trade. One viable business that you can start is the crowd funding business. Being a social entrepreneur can be such a wonderful experience.
If indeed you are a social entrepreneur with the much talked about ICT skills and you want to become your own boss, one of the thriving and profitable social enterprise that you can launch is a crowd funding website. A crowdfunding website is a means where people can raise funds to fund personal, charity or business projects with money raised from different people all over the world via the cyberspace. Donation is a term commonly used to describe this type of giving.
A crowdfunding website is one of the social enterprises that an entrepreneur can successfully start on a small scale and perhaps with a functional home office without breaking the bank for cash. It becomes really needful that you analyze the existing crowdfunding websites in and outside of your country. Know how many they are and the purpose they raise funds for.
Also, you would be required to check the existing competition to know their strengths and weaknesses. Knowing the weaknesses of the existing crowdfunding websites mean that you would be able to learn from their mistakes and in turn come up with a better crowdfunding website devoid of the mistakes and weaknesses of others.
So, if you have done the required feasibility studies and market research, then you might want to consider venturing into this social enterprise. If you have been tinkering with starting your own crowdfunding website but do not know how to go about it, then you should consider going through this article; it will sure give you the needed facts, figures and direction.
17 Steps to Starting a Crowdfunding Website Business
Table of Content
- 2. Conduct Market Research and Feasibility Studies
- 3. Decide Which Niche to Concentrate On
- 4. Know Your Major Competitors in the Industry
- 5. Decide Whether to Buy a Franchise or Start from Scratch
- 9. Discuss with an Agent to Know the Best Insurance Policies for You
- 10. Protect your Intellectual Property With Trademark, Copyrights, Patents
- 11. Get the Necessary Professional Certification
- 12. Get the Necessary Legal Documents You Need to Operate
- 13. Raise the Needed Startup Capital
- 14. Choose a Suitable Location for your Business
- 15. Hire Employees for your Technical and Manpower Needs
- 16. Write a Marketing Plan Packed with ideas & Strategies
- 17. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity
1. Understand the Industry
The crowdsourcing services provider industry are known to primarily crowd source funding for projects and companies. The industry also includes websites that provide access to temporary employees through an online network. These employees typically complete work through the internet, working on a project-by-project basis. Industry customers crowd source labor when it is too costly to employ full-time or part-time workers to complete the projects.
Since its emergence in early 2000, the Crowdsourcing Service Providers industry has experienced explosive growth. The growing prevalence of online services has largely driven industry growth because social workers and entrepreneurs can easily raise money and workers can more easily complete tasks from remote locations.
Crowdsourcing platforms generate revenue by charging fees to downstream businesses that use their service platforms, charging businesses a proportion of the wages they pay to workers and getting commission (certain percentage) from funds raised for a project or individual. The Crowdsourcing Service Providers industry is projected to continue to expand going forward.
The Crowdsourcing Service Providers industry will continue to experience growth in all parts of the world especially in developed countries such as united states of America, Canada, United Kingdom, Germany, Australia, South Korea, Japan and China et al.
Statistics has it that in the United States of America alone, there are about 1,664 licensed and registered crowdsourcing service providers and crowdfunding websites all across the length and breadth of the country and they are responsible for employing about 8,646 employees. The industry rakes in a whooping sum of $233 billion annually with an annual growth rate projected at 3.3 percent within 2011 and 2016. It is important to state that no organization can boast of having a dominant share of the available market in the industry.
A report recently published by IBISWorld shows that the Crowdsourcing Service Providers industry has a low level of capital intensity, which was brought on by reliance on highly skilled labor and the relative youth of the industry itself. Depreciation, used as a proxy for capital investment, is expected to account for 2.2 percent of industry revenue in 2017, while wages will take up an estimated 29.6 percent during the same year.
This means that for every $1.00 operators spend on wages, just $0.07 is spent on capital investment. The report further stated that capital intensity has grown slightly over the past five years and is expected to continue to grow as the industry matures. Smaller companies in this industry are often more labor reliant than their more established counterparts.
The crowdsourcing and crowdfunding service providers industry will continue to blossom because individuals, social workers, aspiring entrepreneurs, small scale and medium scale businesses will not relent in sourcing for funds (donations) to execute a project or support the launching and growth of their businesses.
The crowdfunding line of business is open to all and sundry; anyone who lives in the United States and who is interested in fund raising can leverage on a crowdfunding website to build their own social enterprise. It is important to state that the industry is heavily regulated to guide against fraud and criminality.
2. Conduct Market Research and Feasibility Studies
- Demographics and Psychographics
The demographic and psychographic composition of those who require the services of a crowdfunding website is not restricted to people, NGOs and businesses in your immediate community or state, but it cuts across people, NGOs and businesses all across the globe that can access the internet. This is so because most crowdfunding websites service clients from all over the world who have genuine reasons why they want to raise fund; it could be for a social enterprise, for a cause, project or startup capital for a business.
So, if you are looking towards defining the demographics for your crowdfunding website, then you should make it all encompassing. It should include business oriented people, social entrepreneurs, social workers, small and medium scale businesses within and outside the United States of America.
3. Decide Which Niche to Concentrate On
Most crowdfunding websites tend to provide services that revolve around raising funds for individuals and businesses and even providing professional advice and support. That is why it seem there are no niche areas in the industry.
But on the other hand, some crowdfunding websites may decide to major in some key areas such as;
- Operating online platforms that allow businesses and individuals to raise funds for their projects or businesses
- Operating online platforms that allow businesses to outsource tasks such as expertise-based tasks, freelance tasks, microtasks, software service tasks, and ideation tasks et al to an individual or group
- Organizing virtual networks of clients and independent workers
The Level of Competition in the Industry
The level of competitions in the crowdfunding website line of business does not in any way depend on the location of the business since most crowdfunding websites can operate from any part of the world and still effectively compete in the crowdfunding website services industry.
When it comes to crowdfunding website services, distance is never a barrier when competing for clients especially international clients. What most clients (individual and corporate clients) want is for the crowdfunding website platform to help them raise the required capital, hence they are ready to hire the services of a crowdfunding website no matter the part of the world they operate from as long as they have good track record and can deliver excellent results when it comes to raising funds for them.
But over and above, there are several crowdfunding websites scattered all around the United States and in the cyber space. So, if you choose to start your own crowdfunding website in the United States, you will definitely meet stiff competition not only amongst crowdfunding websites in the United States, but also from those all over the globe especially if you choose to specialize in working for international business men and women, and charity organizations. Besides, there are larger crowdfunding service providers that determine the trends in the industry and you should be ready to compete with them for clients.
4. Know Your Major Competitors in the Industry
In every industry, there are always brands that perform better or are better regarded by customers and the general public than others. Some of these brands are those that have been in the industry for a long time, while others are best known for how they conduct their businesses and the results they have achieved over the years.
These are some of the leading crowdfunding services providers in the United States of America and also in the globe;
- Deposit a Gift
- Circle Up
When it comes to starting a crowdfunding website, you just have to get your feasibility studies and market research right before venturing into the business. It is good to mention that a crowdfunding website is a social enterprise hence you would need to have a good track record for donors to donate on your site.
Even though the startup capital for starting and running a crowdfunding website is not on the high side, it will not be out of place if you keep a couple of things in mind before launching the business.
You will be expected to hire experts that will give you comprehensive economic analysis of businesses within the location that you intend launching your business. If you get your economic and cost analysis right before launching the business, you may not have to stay long before you break even.
5. Decide Whether to Buy a Franchise or Start from Scratch
If you are looking towards starting a crowdfunding website, you would have to start from the very scratch because you can hardly find any crowdfunding website that is into franchising. It is a business that has pretty low entry barriers hence; it is open to all and sundry.
Besides starting a crowdfunding website from the scratch is less stressful when compared to other small scale businesses which usually requires detailed groundwork before launching the business. With a crowdfunding website, you should just try as much as possible to get the right employees, user-friendly website, build business relationship and network with key stakeholders and then leverage on every marketing tool within your disposal especially the internet to market your services.
Please be reminded that most of the big and successful crowdfunding websites cum crowdfunding service providers around started from the scratch and they were able to build a solid business brand. It takes dedication, hard work and determination to achieve business success.
6. Know the Possible Threats and Challenges You Will Face
If you decide to start your own crowdfunding website today, one of the major challenges you are likely going to face is the presence of well – established crowdfunding websites on the cyberspace, and also other related fundraising organizations who are offering same services that you intend offering. The only way to avoid this challenge is to create your own market.
Some other threats that you are likely going to face as a crowdfunding services provider operating in the United States are unfavorable government policies, the arrival of a competitor within your location of operations, cybercrime (hacking and fraud) and global economic downturn which usually affects purchasing/spending power. There is hardly anything you can do as regards these threats other than to be optimistic that things will continue to work for your good.
7. Choose the Most Suitable Legal Entity (LLC, C Corp, S Corp)
Generally, you have the option of either choosing a general partnership, or limited liability company which is commonly called an LLC for a business such as a crowdfunding website. Ordinarily, general partnership should have been the ideal business structure for a small – scale crowdfunding website especially if you are just starting out with moderate startup capital.
But people prefer limited liability Company for some reasons. As a matter of fact, if your intention is to grow the business and have clients both corporate and individual from all across the United States of America and other countries of the world, then choosing general partnership is not an option for you. Limited Liability Company, LLC will cut it for you.
Setting up an LLC protects you from personal liability. If anything goes wrong in the business, it is only the money that you invested into the limited liability company that will be at risk. It is not so for general partnerships. Limited liability companies are simpler and more flexible to operate and you don’t need a board of directors, shareholders meetings and other managerial formalities.
These are some of the factors you should consider before choosing a legal entity for your crowdfunding website; limitation of personal liability, ease of transferability, admission of new owners, investors’ expectation and of course taxes.
If you take your time to critically study the various legal entities to use for your crowdfunding website, you will agree that limited liability company; an LLC is most suitable. You can start this type of business as limited liability company (LLC) and in future convert it to a ‘C’ corporation or an ‘S’ corporation especially when you have the plans of going public.
8. Choose a Catchy Business Name
When it comes to choosing a name for a business, it is expected that you should be creative because whatever name you choose for your business will go a long way to create a perception of what the business represents. Usually it is the norm for people to follow the trend in the industry they intend operating from when naming their business.
If you are considering starting your own crowdfunding website, here are some catchy names that you can choose from;
- Social Geeks Crowdfunding, Inc.
- Live The Dream Crowdfunding, Inc.
- Get the Money Crowdfunding, LLC
- Charity Enterprise Crowdfunding, Inc.
- Good Hearts Crowdfunding, LLC
- One Vision Crowdfunding, LLC
- Penny Wise Crowdfunding, LLC
- Project Excel Crowdfunding, LLC
- Brother’s Keeper Crowdfunding, LLP
- Gat Your Back Crowdfunding, Inc.
- Every Drop Counts Crowdfunding, Inc.
- Save a Dream Crowdfunding, Inc.
9. Discuss with an Agent to Know the Best Insurance Policies for You
In the United States and in most countries of the world, you can’t operate a business without having some of the basic insurance policy covers that are required by the industry you want to operate from. So, it is imperative to create a budget for insurance policy covers and perhaps consult an insurance broker to guide you in choosing the best and most appropriate insurance policies for your crowdfunding website.
Here are some of the basic insurance policy covers that you should consider purchasing if you want to start your own crowdfunding website in the United States of America;
- General insurance
- Risk Insurance
- Credit insurance
- Deposit insurance
- Health insurance
- Liability insurance
- Workers Compensation
- Overhead expense disability insurance
- Business owner’s policy group insurance
- Payment protection insurance
10. Protect your Intellectual Property With Trademark, Copyrights, Patents
If you are considering starting your own crowdfunding website, usually you may have no need to file for intellectual property protection/trademark. This is so because the nature of the business makes it possible for you to successfully run it without having any cause to challenge anybody in court for illegally making use of your company’s intellectual properties.
But if you just want to protect your company’s logo and other documents or software that are unique to you or even jingles and media production concepts, then you can go ahead to file for intellectual property protection.
11. Get the Necessary Professional Certification
When it comes to operating a crowdfunding website, you do not need to certifications. All you need is informal training that will expose you to the in and out of fundraising, managing a website and also effectively running the business.
On the other hand, if you come across any form of certification that can aid you to conduct your crowdfunding website social enterprise well, then by all mean try and pursue such certification.
12. Get the Necessary Legal Documents You Need to Operate
These are some of the basic legal documents that you are expected to have in place if you want to legally run your own crowdfunding website in the United States of America;
- Certificate of Incorporation
- Business License and Certification
- Business Plan
- Non – disclosure Agreement
- Employment Agreement (offer letters)
- Operating Agreement for LLCs
- Insurance Policy
- Contract documents
- Company Bylaws
- Memorandum of Understanding (MoU)
- Apostille (for those who intend operating beyond the United States of America)
13. Raise the Needed Startup Capital
Starting a crowdfunding website can be cost effective. Securing a standard office in a good business district, equipping the office and paying your employees and of course building a user friendly and secured website are part of what will consume a large chunk of your startup capital.
When it comes to financing a business, one of the major factors that you should consider is to write a good business plan. If you have a good and workable business plan document in place, you may not have to labor yourself before convincing your bank, investors and your friends to invest in your business.
Here are some of the options you can explore when sourcing for startup capital for your crowdfunding website;
- Raising money from personal savings and sale of personal stocks and properties
- Raising money from investors and business partners
- Sell of shares to interested investors
- Pitching your business idea and applying for business grants and seed funding from donor organizations and angel investors
- Source for soft loans from your family members and your friends
14. Choose a Suitable Location for your Business
A crowdfunding website social enterprise and most online services based type of businesses does not necessarily require that you see physically with your clients hence it can be located anywhere since most of your business deals are conducted over the internet.
The fact that you can operate your crowdfunding website from your home does not mean that a location has little influence on the success of a crowdfunding website. If you have taken your time to study the crowdfunding service providers’ industry, you will realize that players in this industry are willing to pay expensive rents in order to stay in a busy business district; a place where business activities are at its peak.
So, if you are looking for a location for your crowdfunding website, ensure that it is a place that is located in a business district in your city, a place that is visible and easily accessible and a place that has a good number of donors and philanthropists. Of course you would not want to locate this type of business in the outskirts of town. Your clients should be able to drive down and locate your office with little or no difficulty.
15. Hire Employees for your Technical and Manpower Needs
On the average, there are no special technologies or equipment needed to run this type of business except for a customized payment software, social media management software applications and other financial related software apps. So also, you will definitely need computers/laptops, internet facility, telephone, fax machine and office furniture (chairs, tables, and shelves).
When it comes to choosing between renting and leasing an office space, the size of the business you want to build, and your entire budget for the business should influence your choice. If you have enough capital to run a standard organization, then you should consider the option of leasing a facility for your office.
As regards the number of employees that you are expected to kick start the business with, you would need to consider your finance before making the decision. Averagely, you would need a Chief Executive Officer or President (you can occupy this role), an Admin and Human Resource Manager, Fundraisers and Social Workers, Accounting Officer, Business Development Executive/marketing Executive, Customer Service Officer or Front Desk Officer, and ICT Experts.
Over and above, you would need a minimum of 5 to 10 key staff to effectively run a medium scale but standard crowdfunding services organization. Please note that there will be times when you are expected to go out of your way to hire experts to help you handle some high – profile crowdfunding consultancy contracts especially from big corporations.
If you are just starting out you may not have the financial capacity or required business structure to retain all the professionals that are expected to work with you which is why you should make plans to partner with other fundraisers and experts in the industry that operate as freelancers.
The Service Delivery Process of the Business
The way crowdfunding service providers work vary from one organization to another, but ideally, a crowdfunding website is expected to first and foremost build a user-friendly and secured website with a robust company profile before throwing their website open to people, NGOs, social enterprises and businesses who want to raise funds for their project, it will give them edge over their competitors.
Basically, crowdfunding service providers present offers for members, companies and marketers to help them raise public interest and seek more potential opportunities for their projects.
The crowdfunding service will get 4 to 5 percent from every raised fund, and 3 percent will be charged for credit card processing, plus $25 wire fee for non-U.S. campaigns and projects. For instance, if you applied for the flexible funding plan and your campaign failed to reach the goal, some crowdfunding service providers will charge about 9 percent of the fund, but you still get to take the remaining funds away.
It is important to state that a crowdfunding services provider may decide to improvise or adopt any business process and structure that will guarantee them good return on investment (ROI), efficiency and flexibility; the above stated business cum service process is not cast on stone.
16. Write a Marketing Plan Packed with ideas & Strategies
As a crowdfunding services provider, you would have to prove your worth over and over again before attracting donations from donors. So, if you have plans to start your own crowdfunding website, it will pay you to build first build a successful career in the social enterprise and fundraising services industry.
So, when you are drafting your marketing plans and strategies for your crowdfunding website, make sure that you create a compelling personal and company profile. Aside from your qualifications and experience, it is important to clearly state in practical terms what you have been able to achieve in time past as it relates to fundraising, and the organizations you have worked for. This will help boost your chances in the market place when sourcing for donors.
Here are some of the platforms you can utilize to market your crowdfunding website;
- Introduce your business by sending introductory letters alongside your brochure to all the corporate organizations, social entrepreneurs, NGOs, business men and women, entrepreneurs, households and international business and charity community in the United States
- Attend international social enterprise expos, seminars, and business fairs et al
- In terms of commission, create different packages for different category of clients in order to work with their budgets
- Leverage on the internet to promote your business (when you blog regularly on key issues as it relates to your business, people would consider you an expert in the field)
- Join local chambers of commerce and industries around you with the main aim of networking and marketing your services; you are likely going to get rich donors from such networks
17. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity
If your intention of starting a crowdfunding website is to grow the business beyond the city where you are going to be operating from to become a national and international brand, then you must be ready to spend money on promotion and advertisement of your brand.
In promoting your brand and corporate identity, you should leverage on both print and electronic media and also social media (the internet). As a matter of fact, it is cost effective to use the internet and social media platforms to promote your brand, besides it is pretty much effective and wide reaching.
Another strategy is to sponsor relevant community based programs, TV and radio programs, advertise your business in relevant magazines and newspapers. Below are the platforms you can leverage on to boost your brand and to promote and advertise your business;
- Place adverts on magazines and related newspapers, radio and TV stations
- Encourage the use of word of mouth publicity from your loyal customers
- Leverage on the internet and social media platforms like; YouTube, Instagram, Facebook, Twitter, LinkedIn, Snapchat, Badoo, Google+ and other platforms to promote your business
- Ensure that we position your banners and billboards in strategic positions all around your city
- Distribute your fliers and handbills in target areas in and around your neighborhood
- Contact corporate organizations, social enterprises, NGOs, business men and women, households and international business and charity community et al by calling them up and informing them of your organization and the fundraising services you offer
- Advertise your business in your official website and employ strategies that will help you pull traffic to the site
- Brand all your official cars and ensure that all your staff members and management staff wear your branded shirt or cap at regular intervals