Crowdfunding in Business: Types, Advantages, and Disadvantages

Crowdfunding is the concept of increasing capital online, with the simplest explanation. Businesses use it to start their projects and initiatives at an early stage.

The concept is clear: Offer an idea that people will love and that you can implement on most crowdfunding platforms. Follow reward-based systems and create opportunities for your supporters to support small amounts of cash. When you have many people to buy your product, your idea will be supported, and you will achieve your goal.

Fortunately, we are in an age where it is possible to invest in exciting product ideas, projects, and online business ideas. 

This article covers:

Best Crowdfunding Sites For Small Business

Crowdfunding Types

Does crowdfunding reduce financial risk?

Why Investors Should Be Careful About Crowdfunding?

What are the different advantages and disadvantages of crowdfunding?


Best Crowdfunding Sites For Small Business

Are you wondering where to get the funds necessary to start a business, implement an exciting project, make a dream come true, or help for charity? Crowdfunding allows us to raise funds online! We suggest which crowdfunding platforms may be the best choice.


Kickstarter is the most well-known crowdfunding site on the internet. Approximately 220 million dollars of funds have been collected for 61,000 projects that have been implemented to date. Thousands of people look at the project list of this site every second and look for the most deserving project to transfer their savings to. According to the site rules, Kickstarter accepts all kinds of creative projects and business ideas.

The process of submitting your project is also straightforward—all you have to create an account and enter your project details. Just follow the relevant instructions to write everything in detail. A team also reviews your project before it goes live.


Create a small reward at a certain price, and then those who send more money than that price will receive a reward from you if you access the resource you are looking for for your project (but you must reach the amount you set for the financial resource) For example, let’s say you set a fund target of 100 thousand USD for the project you will realize. You can give partnership at a certain percentage to those who donate USD 5 thousand and its multiples. For instance, if you are looking for funds to put an innovative product that offers a solution to humpback into mass production, you can set the pre-sale price for the product and send the product to those who donate this price if you reach the required capital.


Kickstarter charges a 5% commission for every successful project. Because Amazon’s payment system is used to get the resource, Amazon will also charge a credit card processing fee of 3 to 5% on the total resource you obtained.

If we look at the disadvantages, if your project cannot reach the fund amount you set, you cannot receive any payment. The main disadvantage is that you need to live in one of the 22 registered countries to submit a project. Therefore, if the project owners live outside of these countries, they cannot get service from this site.


This crowdfunding site can help you find resources and bring your project to life without any hassle. The design and operation of the site are very similar to Kickstarter. However, unlike Kickstarter, you can search for resources for almost any project on Indiegogo. Instead of the Supporter Award, there is a feature called Jackpot.


Anyone can use this site, with PayPal as a payment option, regardless of residing in the United States. There is also a funding plan called “Flexible Fund,” where you can get the fund even if your project does not reach the fund you aimed for; of course, Indiegogo charges more commission from you for this.


Indiegogo charges a 4% commission from each fund and 3% for credit card transactions, as well as a $25 transfer fee for non-US campaigns. If you have chosen the flexible fund plan and did not reach your target amount, Indiegogo will charge you a 9% commission and pay the remaining balance.


RocketHub is another of the most popular crowdfunding sites to bring your project to life. It is a simple 3-step process to upload your project on the site. Then you can follow the status of your project and the process.


It helps you do your projects more publicly known by enabling you to work with the best brands, companies, and marketers. Awards can range from photo exhibitions with top marketers to 4-week media promotional campaigns. These are great prizes for artists, photographers, and musicians who want to be known and seek rare opportunities.


RocketHub receives a 4% commission for successful projects and an 8% commission for projects that end before reaching the intended fund. Besides, a 4% credit card processing fee is charged.


If you want to find money online for any reason or even for yourself, GoFundMe is the best crowdfunding site you can use. Here you get funding from supporters for your campaigns, and these can be anything from personal travel fees to veterinary benefits for your pet. This place is completely donation-oriented.


Successfully reach all corners of the internet with widgets’ sharing power, a panel with social media integration, and multiple donation pages to spread your message.


GoFundMe has a 5% commission from each donation. You can use WePay or PayPal to withdraw your funds, depending on your choice; both receive a 2.9% commission to 3.5%.


The Razoo site is also another crowdfunding giant, claiming to have collected a total of $97 million for thousands of valid reasons. The site mainly focuses on profitable projects, but it also has a dedicated section for non-profit projects. Razoo divides fundraisers into 4 categories, and each has its own advantages. These are nonprofits, individuals, companies, and foundations.


One of Razoo’s strengths is undoubtedly the technology advantage that helps you communicate your projects more effectively to the world. With the old-style but extremely useful Donation Plugin and Facebook Plugin, you can create a donation tab by including these plugins in any blog. Razoo also has an iPhone application. With this application, you can manage your project and see your donors. This site can be considered as a complete example of cutting-edge social marketing.


Razoo charges a very low commission at just 2.9%. Please note that all other sites charge more than 4% commissions, including credit card fees.


If you need help finding an angel investor to fund your company, Crowdfunder can help. Crowdfunder helps new and small businesses find angel investors and venture capitalists.


The site is outside of the traditional crowdfunding approach to fund a new business idea. If you want to attract ideal investors and establish your legendary company, you should try this place.


If you want to make the application for mobile devices and want to fund your application? Then you are in the right place. Appbackr is a crowdfunding site frequented by those who wish to bring their application ideas to life. You can find supporters for your applications currently on sale or development, but supporters can also earn money because they support your application.


The concept may sound quite complicated to those who are not involved, but basically, it is something like this: When you buy the app listed on Appbackr for a lower price, that money is transferred to the developer to develop the app. After the people who make the application start to make money in the application market, Appbackr returns the application’s price to the supporters who bought the application before. For example, let’s say you buy 10 of a $ 1 app. Later, if this application is released and sold for $ 2, you will earn 10 x 2 = 20 dollars as much as the application you bought. Thus, the gem application finds funds, and you make a profit in return for your investment. Appbackr carries out all commercial transactions in these transactions where both parties win.


Usually, Appbackr has a specific commission to run its own crowdfunding business, but there is no fixed commission rate. This amount depends on the price of the application and, in some cases, various factors. Appbackr is ideal for your future application projects.


Crowdrise is a site that focuses more on real-world problems rather than ideas that can make a profit. They fund areas such as animal health, arts, culture, diseases, education, and religion. Sometimes they even advertise themselves as a fundraising platform for foundations.

However, that doesn’t mean you can’t get funding for personal purposes. Crowdrise is another platform where you can find the money for your personal needs. Fund seekers can still find financing for events in their daily life, such as birthdays, weddings, and even educational expenses.


The more people donate to a particular person, the more CrowdRise points that person earns. By looking at these scores, CrowdRise members can see which fund seeker or organization has made a more significant impact in the world. In this way, the popularity and reputation of successful projects increase even more.


Generally, there is a 4.95% commission for profit-oriented activities, but the transaction fee gets a little complicated with extra charges. You can select from various account types, from free accounts for nonprofit organizations to accounts for $ 199 per month.

Crowdfunding  Types

There are four primary types of crowdfunding for startups. Each genre attracts its audience and has its own rules. Before deciding on the type of funding, you should consider the benefits each funding type will contribute to you and your objectives.

Reward-based Crowdfunding:

Offer investors a reward for their support. If you’re funding a product or service, supporters can get early access to your products at discounted prices. However, each of your early-stage supporters will have the pride of owning the product before anyone else. Awards are not limited to company products only. It can also be a t-shirt, mug, or social media tag.

Share-based Crowdfunding:

Each of your stock supporters gets a share of your business. If you intend to launch equity-based crowdfunding, make sure you understand the rules of the platform. In fact, investigate the site with an expert financial expert.

Equity-based Crowdfunding:

In this method, they seek equity in the work they invest in you. In addition to other methods, investors expect a fixed return on the shares they own.

Donation-based Crowdfunding:

If you are a non-profit organization, you can use the crowdfunding method.

Does crowdfunding reduce financial risk?

Loans withdrawn through the bank are repaid with interest. Bringing in investors compromises your venture’s stock. By using reward-based crowdfunding, you don’t endanger your startup. On the contrary, crowdfunding is about raising capital through well-meaning people who like your idea and want you to be successful.

Why Investors Should Be Careful About Crowdfunding?

Crowdfunding investments cannot be legally offered until the CMB has clearly defined its legal regulations.

Attention should be paid to crowdfunding offers seeking investments quickly.

All investments carry risk, but small business investments carry a greater risk than usual. 50% of small businesses often fail within the first five years.

Issuers using fund portals to raise money may be inexperienced. Trace records are unproven, unconfirmed, or planned interference could be outright fraud.

Information on the investment is limited to those provided through the financing portal. Risks can arise if investors only proceed through their research to determine the issuer’s track record.

When the investment fails to perform well, the investors may have the limited legal authority to sue the issuer.

What are the different advantages and disadvantages of crowdfunding?


Crowdfunding is in addition to raising funds for the start-up/production of goods/services. It is also a test of the company’s idea that there is a chance of success in the market by looking at the number of funds it has to offer. Many proponents refer to the product of interest to the target market. Fewer supporters mean the product is not receiving the target market’s attention and maybe a warning signal to business owners that it is imperative to develop a better product, generating interest among the target audience. It also provides you an opportunity to sell a product before the product was produced. Because crowdfunding campaigns may generate pre-orders from interested customers.


Fundraising via crowdfunding is not always a guarantee of success. The key to success lies in the product or service being offered, whether it can attract consumers or not. And it isn’t easy to raise large amounts of capital through crowdfunding systems.

For the retail investor who leaves the business with money: it’s important to keep in mind: Funding a new entrepreneur or small business through crowdfunding is not always a monetary reward. But it may be in the form of obtaining the products/services that the company produces. Or not receiving anything in return

Company owners and investors who fund company owners need to understand the differences between the two types of crowdfunding systems: 

  1. Rewards-based crowdfunding, which is a trendy type of crowdfunding. The owner of the company is not required to provide any returns to investors.
  2. Equity crowdfunding is a new system that is still under development to amend laws and regulations all the time. In this system, funders may acquire company shares in exchange, but funding like this is complex and subject to US securities laws. And company owners are liable as required by law for the failure of the company. There is also a matter of the amount of money an investor can invest. The company’s amount of money will raise each year of procurement, provide evidence of finance, etc.

Are you wondering where to get the funds necessary to start a business, implement an exciting project, make a dream come true, or help for charity? Crowdfunding allows us to raise funds online! We suggest which crowdfunding platforms may be the best choice.


If you want to put your company’s plans into action, you need to know the most important thing to do things in order. If crowdfunding is the best for your project, choosing the right crowdfunding site will be the most important step.

Be careful about the fees charged, the rewards, advantages, and disadvantages of the sites. Make as reasonable decisions as possible about your funding goals, and don’t expect everything from crowdfunding sites for them to do all the marketing.

You’ll be dedicated to this job, trying to persuade people to provide you with resources to bring your ideas to life. Create a marketing campaign on social media sites like Facebook or shoot a sensational YouTube video. As a result, complete your project and make sure your project’s marketing campaign is engaging, realistic, and, more importantly, unique.

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