The whole concept of the crowdfunding business spins around two major approaches – matchmaking and fundraising deal management.
If we are speaking about the matchmaking approach, its main idea is to match investors and borrowers or donors and fundraisers. To do this effectively, a business owner needs a tool to monitor the campaigns and set commissions to make profits.
In contrast, the whole fundraising deal management process requires more teamwork and actions from the admin of the platform. The crowdfunding platform manager with the team is often responsible for the creation and promotion of the campaign, due diligence, money processing, dividend repayments, etc.
What you will learn in this post:
Crowdfunding software for matchmaking investors and fundraisers
Platforms like Fundly, JustGiving, GoFundMe, Indiegogo and Kickstarter are based on modified crowdfunding software or donor management software that allows connecting investors/donors and fundraisers.
Such crowdfunding platforms can be tailored to work with individuals or companies. They can be focused on particular industries or general causes, depending on the business goals.
The crowdfunding marketplace of such kind allows individuals and companies to create fundraising campaigns which are reviewed and approved by the admin to ensure that the campaign is following the platform’s policies. On approval, the campaign goes live and donors can pledge money until the campaign is completed or runs out of time.
Depending on the crowdfunding platform’s strategy either “All-or-nothing” or “Keep-it-all” the money raised by the individual or company can be kept by the platform or returned to the donors as well as paid in full or partially to the fundraiser.
In this context of crowdfunding matchmaking, crowdfunding software managers have multiple duties:
- Approval and rejection of campaign requests
- Due diligence
- Withdrawal requests management and overall money processing
- Fees setup
- Donation receipt issuing
- Campaign and industry performance monitoring
- Paid or featured campaigns (if the platform has such functionality)
- Dispute resolution, etc.
Ultimately, the crowdfunding platform works like a bulletin board that is used for connecting all the parties. This type of crowdfunding has similar principles to “affiliate marketing.”
What makes donation fundraising interesting
Technically, donation crowdfunding platforms may get quite sophisticated. They can allow fundraisers to promote their campaigns using embeddable donation buttons on their own website, allow for interactive social media sharing or permit the creation of custom landing pages.
For organizations, platforms may provide enterprise-level services and setup fundraising through “donation Kiosks” for local events. This device can vary from a tablet with a card reader to an ATM-like stand.
The donations crowdfunding platforms may help companies come up with sophisticated marketing campaigns and set up chatbots, SMS campaigns with embedded donation links, etc.
Crowdfunding software for P2P lending and equity crowdfunding deals
This type of crowdfunding software is technically similar in structure to the matchmaking software though it has its own peculiarities. It mostly works like investment management software and is used to conduct online and offline high-value deals.
Depending on the platform, the minimum investment size may vary from $10 to $1,000, $5,000 to $15,000, or even $100,000+.
The team behind the platform of such magnitude is responsible for multiple activities and flows including:
- Due diligence
- Investment management (investment settlement)
- Campaign and offering management
- Communication with investors (including capital calls, etc.)
- Dividend calculation and repayments
- Payment processing (via a third-party or bank transfer)
- Funding models combination (debt and equity)
- Investor type combinations (individuals and institutional) and more
Equity crowdfunding software or P2P lending software usually combines manual and automated procedures, flows, and processes which have to be smoothly interconnected and increase the manager’s performance while allowing them to make calculated decisions based on the data visualization.
This type of crowdfunding software is required for upscaling the investment management company services, entering new markets, acquiring new investors and deals, etc.
With equity and debt fundraising deals, the manager is involved in the process from the very beginning. From the registration or fundraising request application, the manager has to conduct due diligence before approving the user. With the whole risk assessment team of experienced investment bankers, this task is completed thoroughly, so the majority of fundraising deals are declined. The very few that make it, will have a chance to raise capital with the help of the platform.
When approved, the campaign manager of the crowdfunding platform will create an offering manually or request the fundraiser to create one in which case the admin will only have to approve the offering. The moment the offering goes live, the manager will notify investors via email or through other channels.
To accept payments from investors, the manager is involved too. Each transaction will either be verified by the third-party payment gateway or by the bank. The admin of the platform will confirm payments in the admin back office and will settle the investment. Investors will get a shareholder agreement. Based on the amounts and terms of the offering the repayments schedule is generated.
In the equity or debt crowdfunding platform, the role of the manager and team involvement is huge compared to the donation or reward-based platform.
The role of crowdfunding software in the crowdfunding business
Crowdfunding software is essential for operating and growing an online crowdfunding business. Not only does it make the work easier keeping all the necessary data in one place and providing insightful analytics, but also it helps managers to build their brand and drive innovation in the alternative investment field.
It’s important to mention, though, that the software itself is not the only foundation of the crowdfunding business. It’s much more important to have the business vision, marketing & sales plan, and have experience conducting investment and fundraising deals. Crowdfunding business is about connecting the dots, having great knowledge of the industry, your potential customers, and the regulatory framework of your country of operations.
That’s why it’s vital to get the above-mentioned things settled before launching your crowdfunding platform.
For starters, we’ve designed a special program which allows you to launch with minimum investments in the software and upgrade within 6 months as you get the necessary funds and traction.
We’ve simplified our software to LenderKit Lite which allows you to validate ideas, hypotheses, pitch to investors or board of directors, test and try your business model before actually launching the MVP or full-scale platform.
Interested to learn more about the LenderKit Lite offer? Reach out to us.