Table of Contents
Crowdfunding can be a great way for businesses to get a cash boost without having to resort to traditional lending or grants. It lets businesses and organisations raise money from a ‘crowd’ of individuals in order to fund projects, expansion or start-up costs.
It has become increasingly popular over the last decade or so, with several high-profile companies using crowdfunding to get their businesses off the ground.
For a business to raise money through crowdfunding, it needs to sign up to a crowdfunding site known as a ‘platform’. Here, a company can generally pitch its project, or business idea to a crowd of individuals who don’t necessarily have to be professional investors. In return for contributions, the platform can help you to reward your investors, be it through cash returns or early access to products and services.
» MORE: What is crowdfunding?
Compare crowdfunding sites
There are multiple platforms out there for companies (and individuals) who want to use crowdfunding. Picking the best site for your business is key to successfully raising money, as it will ensure your pitch is in front of the right audience.
It is also important to look at the fees involved as depending on your project or business, and whether you are for profit or not, costs can differ. Here is a quick explanation of the different types of fees crowdfunding websites charge:
- Transaction fee: These cover the cost of the individual credit and debit charges associated with each payment into your crowdfunding pot. Transaction fees might be removed automatically from each incoming payment, or collated and charged in bulk at the end of a campaign. Some sites charge a flat rate, others charge a percentage of each transaction and some ask for both. Costs can vary considerably depending on payment method as well as the country from which the payment is coming.
- Platform fee: This is charged by the crowdfunding platform and generally acts as payment for hosting of your campaign.
- Completion fee: Some platforms charge additional fees on campaign completion. It generally covers administrative work associated with finalising the campaign.
- Transfer fee: Some platforms will allow you to withdraw funds from your crowdfunding pot as you raise money. However, they might charge you a fee for each withdrawal you make from the pot.
Here is our breakdown of the top crowdfunding sites available to UK businesses:
GoFundMe
Pricing:
| Transaction fee | 25p + 2.9% (for individuals and businesses) automatically deducted from every donation; 20p + 1.9% (for charities) |
| Platform fee | None |
| Completion fee | None |
| Transfer fee | None |
GoFundMe allows businesses, individuals and charities to create a fundraising page, which can contain images, videos and written messages. You will also need to set a fundraising goal, although you will still receive any donated funds if you fail to reach this target.
While fundraising pages for small businesses do feature and have enjoyed some degree of success, GoFundMe tends to be more dedicated to charitable fundraising. As such, the platform does not offer companies mechanisms to reward donors with equity, goods or services. Because of this, the platform is probably best used if your business has suffered due to theft, misfortune or some form of personal tragedy, rather than for start up funding or business expansion.
Crowdfunder UK
Pricing:
| Transaction fee | 1.9% (charities) + 20p + VAT per donation or 2.4% (personal fundraisers and for profit groups) + 20p + VAT per donation |
| Platform fee | 5% + VAT (for profit groups) or 0% (charities and personal fundraisers) |
| Completion fee | None |
| Transfer fee | None |
With Crowdfunder, businesses can raise money using a rewards-based system, though equity and debt-based agreements are not permitted on the platform.
For an additional cost, the platform’s +Extra Funding feature can match organisations and businesses with additional funding that may be available to them through national or regional schemes. This feature has earned businesses, organisations and projects tens of millions on top of the more than £250 million crowdfunded through Crowdfunder.
The site hosts a variety of business fundraising projects, such as supporting sports clubs, breweries, pubs, cafes and independent shops.
Kickstarter
Pricing:
| Transaction fee | 3% + 20p per donation (donations under £10 subject to 5% fee + 5p)* |
| Platform fee | 5% of total funds raised* |
| Completion fee | None |
| Transfer fee | None |
*VAT may be charged in addition.
Kickstarter has successfully funded more than 250,000 projects, with over $7.8 billion (£6.7 billion) pledged to projects through the platform. Kickstarter is for rewards-based fundraising, with incentives, such as equity and revenue sharing, not permitted on the platform.
Kickstarter fundraising pages are highly detailed, with project owners encouraged to share photos, videos, rewards and updates to help foster ongoing community interaction. Project owners can also nominate their initiatives for funding from Forward Funds, which are organisations that back projects through Kickstarter.
Compared to other fundraising platforms, Kickstarter is more geared towards creative businesses, such as those in the art, crafts, gaming, film and publishing industries.
Crowdcube
Pricing:
| Transaction fee | None |
| Platform fee | No fee for listing but 7% fee (+ VAT) on the final amount raised |
| Completion fee | On average 0.75% to 1.5% on all funds raised |
| Transfer fee | None |
Crowdcube supports extensive fundraising options for businesses looking to engage in equity-based crowdfunding, from gathering initial seed capital to private fundraising rounds and more. To get your fundraising listed through Crowdcube, you will need to submit a pitch and provide a level of legal, financial and compliance information.
Successful Crowdcube projects join the Funded Community, gaining access to partnerships, benefits and expertise, as well as further funding options when future injections of capital are required for your business.
Notable companies to have fundraised through Crowdcube include challenger bank Monzo, financial app Revolut and stockbroker Freetrade. The platform seems best-suited for ambitious and innovative start ups, so consider whether your business will seem out of place before applying.
Indiegogo
Pricing:
| Transaction fee | 3% + 20p per donation* |
| Platform fee | 5% on all funds raised* |
| Completion fee | None |
| Transfer fee | £25 per withdrawal* |
*VAT may be charged in addition.
Indiegogo allows new businesses to engage in rewards-based fundraising, though equity-based fundraising is not permitted on the platform.
You can keep anything you make, even if you do not reach your funding target, or you can opt to return money to investors if you fail to meet your target. You are also free to extend campaigns beyond their deadline with the company’s InDemand service.
Indiegogo has seen companies raise millions from thousands of backers, but the site is geared towards inventors and technology entrepreneurs. If you are trying to start a different kind of small business, it might be best to look elsewhere.
Seedrs
Pricing:
| Transaction fee | Between 0.1% and 2.9% per donation (depending on what method of payment used) + VAT |
| Platform fee | 6% on all funds raised (minimum £9,500) + VAT |
| Completion fee | £2,500 (+ VAT) |
| Transfer fee | None |
Seedrs is a specialist platform for growth-focused companies to engage in equity-based fundraising. It offers access to funding from private investors through an established network, as well as from small-scale crowdfunding investors.
Seedrs boasts that 90% of businesses launching a campaign on the platform hit their funding targets. The platform has funded campaigns for a great variety of businesses, from fruit and veg delivery service Oddbox to Revolut and professional football team AFC Wimbledon.
While the type of businesses raising money on Seedrs is broad, the company specialises in growth-focused companies. As such, Seedrs is probably not the place to find funding for more modest ventures, such as independent shops, cafés and trades.
What other business funding options could be available to me?
If you’re still not sure that crowdfunding is right for you, remember that there are many more funding options for businesses. These include business loans, government grants, rolling credit facilities, asset financing and angel investors.
Different sources of funding carry their own advantages and disadvantages, so think carefully about your business’s circumstances when you decide on what will work best for you. You might even decide to use a combination.
How can I compare business loans?
If you want more insight into business loans from different providers, checking out a comparison site, such as NerdWallet, can be a good place to start.
They will offer resources such as business loan tables to tell you about factors such as the terms available and the interest rate. Headline interest rates give a rough idea of how lenders compare, but the rate you might be offered will depend on the exact characteristics of your business and the loan it is seeking.
» COMPARE: Business loan rates and deals
Image source: Getty Images
About the Author
Dive even deeper
Public Liability Insurance: What is it and What Does it Cover?
Small Business Grants and Start Up Business Grants in England – Apply now for 2025
by George Harrison