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Crowdfunding takes the “crowd” element that has been applied to many Internet-based ventures (such as cloud computing, online petitions, etc.) and applies it to the funding of dreams and projects that would not be able to raise the needed funds with just typical, local connections. We compare two of the leading crowdfunding platforms, Kickstarter and Indiegogo, and give you the pros and cons for each, so you can maximize the chances that your project will get funded.
The idea is to tap as many people as possible and gather many small donations that add up to a significant amount in aggregate. Crowdfunding sites such as Indiegogo and Kickstarter enable young entrepreneurs, inventors, artists, filmmakers and others to fund their projects by accepting monetary contributions from anyone. Unlike venture capitalists, in return for their equity, contributors get to be part of the project in one way shape or form. Depending on the donation amount, contributors are given various tokens of appreciation, which can range from signed copies of a book to credits in a film to personalized fishing trips by the project owner. The crowdfunding space is crowded (literally), as there are estimated to be over 1,000 crowdfunding platforms trying to get in on the game (some names you might recognize: ArtSpire, RocketHub, CrowdRise, ArtistShare, FundAnything). Why? The platform that offers the service can charge a commission for hosting the project and funding platform, and with enough traffic this business model can be quite lucrative.
The list of competitors in this space is nearly endless, and is growing every day. But there are only a few players that have enough traffic to create an effective marketplace. It’s also worth noting that crowdsourcing platforms target different niches, from art and film to disaster relief and other non-profit industries. The two platforms we’re comparing in this article, Indiegogo and Kickstarter, are the leaders in their space and they’ve also been around longer than most of their competitors.
Indiegogo and Kickstarter are two of the largest and most successful crowdfunding sites on the Internet today. While Kickstarter is currently the larger of the two, it differs in its review criteria (more stringent), project acceptance (Indiegogo will accept any project), as well as fee structure and funding goals. For example, while Kickstarter charges a 5% fee (commission) and requires 100% funding for you to be eligible to keep your raised funds, Indiegogo has only a 4% fee for the same 100% funding requirement, but they also offer a Flexible Funding option that will let you keep whatever amount you’ve raised, even if you don’t reach 100% of your funding goal (which you set), but in return carries a 9% fee. In the reviews below, we outline in more detail the differences as well as pros and cons between the two crowdfunding services.
Indiegogo operates from its base in San Francisco and hosts over 200,000 projects in more than 200 countries. Indiegogo launched in January of 2008 at the Sundance Film Festival, approximately a year after Kickstarter, which at this point had a significant head start. Initially, Indiegogo focused exclusively on independent films, hence the name Indiegogo. A year after launch, however, Indiegogo started accepting projects from any category, most likely in an effort to compete with rival Kickstarter. Indiegogo’s largest project at the time of writing is Let’s Build a Goddamn Tesla Museum, which raised over $1.3 million. The effort is part of the Tesla Science Center at Wardenclyffe project, which aims to raise $10 million to create a science learning center and museum worthy of the Tesla (electric car) legacy.
- Any project is accepted.
- Flexible Funding option allows you to keep funds raised, regardless of % raised by deadline.
- Their general fee (4%) is lower than Kickstarter’s 5%.
- You have the option of using Paypal, credit card, or bank account to collect contributions, whereas Kickstarter forces you to use Amazon Payments, which charges an additional 3-5% fee.
- Automated review process, many low quality projects make it through. This makes this a harder place as a potential investor to find what might be worth your time and money.
- Their Flexible Funding option carries a 9% fee.
- There’s been some scrutiny around the way money is handled; for example, someone could open a project on behalf of someone else, and pocket funds at someone else’s expense.
Kickstarter, headquartered in Manhattan, launched on April 28, 2009. As of October, 2012, Kickstarter hosted over 75,000 projects with an average 43.85% success rate (projects that reached their goal and were funded). The largest Kickstarter project funded at the time of this writing was Pepple: E-Paper Watch (over $10 million raised), a smartwatch that can display messages from a smartphone.
- A manual review process ensures a higher quality marketplace.
- Project review and fund management is more rigorous, promoting a higher quality experience.
- The Kickstarter fee (5%) is slightly higher than that of Indiegogo (4%).
- Amazon Payments (used to collect your Kickstarter contributions) is a required payments platform for U.S. based creators (U.K. creators may use a bank account). Amazon charges an additional 3-5% fee.
- Unlike Indiegogo, Kickstarter does not accept projects in all industries. They focus on arts, food and technology.
Harvest is a feature film by local North Carolina filmmaker S. Cagney Gentry. It has been a lifelong dream of his to make this film a reality, and the Kickstarter campaign to raise the funding necessary to produce the film is currently active. “Harvest explores the life of an aging mountain man who finds himself haunted by the specters of a changing world.”
Fundraising for Harvest is based on Kickstarter’s reward system. Rewards for contributing to this film include signed posters and DVDs, production notes and photos, and at higher levels a guided fly-fishing trip, Associate Producer credit on the film, and a 4-course, Southern-inspired, home-cooked dinner for up to 6 in your home. This gives you some ideas as to the types of rewards you can offer with your crowdfunding initiative. And of course, with contributions starting at only $1, Cagney would love it if you would donate to his film (we did and are excited to be a part of it as it comes to fruition)!
The JOBS act was signed into law by President Barack Obama on April 5th, 2012. Its significance? You may have noticed that both Kickstarter and Indiegogo operate primarily on a rewards type of system, instead of offering equity in a venture. The JOBS act effectively allows crowd-funding sites to offer equity in exchange for contributions to projects. This could make fundraising not only a lot more appealing to investors, it could help significantly increase the pool of funds available to entrepreneurs. The one criticism of the JOBS act currently is that it requires audited statements for projects that raise more than $500,000. This is a headache that may put a cap on the kind of fundraising that takes place.
Nevertheless, crowdfunding site Fundable is taking full advantage of the JOBS act and is offering both awards and equity based funding.
Have an idea that you’d love to put on Indiegogo or Kickstarter to raise the funds needed to make it a reality? Or have an experience with a crowd-funding service you’d like to share? Please comment below. You never know, you might find some backers from our web community, WeRockYourWeb.com to help make your dream come true!