How to Use Startup Crowdfunding Software
Startup crowdfunding software helps private equity, venture capital, and angel investing firms to build an online investment business and close more private capital raising deals on a scale. If you are in a crowdfunding business, you have to know how to choose business crowdfunding software for startups and how to use it efficiently.
What you will learn in this post:
What is startup crowdfunding?
Startup crowdfunding may refer to:
Equity capital raising – when people invest in an early-stage company that is not listed on a stock market. The investment is made in exchange for the shares which means that investors are getting partial ownership of the company and are eligible for a respective share of the company’s profit.
Peer-to-peer lending and crowdinvesting – when people invest in a business not for a share in the company but expecting that the invested funds will be returned with interests on top of them.
How Does Startup Crowdinvesting Software Work?
Crowdfunding platforms can benefit from startup investing software in many ways:
- The application of proper software increases deal flow;
- The platform experiences increased customer conversion rates;
- A good startup investing software allows to track investment and fundraising performance and provide insightful analytics to platform managers, etc.
Let us check on the LenderKit example of how a properly developed crowdfunding software tackles 3 major flows of a crowdfunding platform:
- Capital raising
Investors and fundraisers have to create an account on a crowdfunding platform before they are allowed to either invest or raise capital. They submit applications to the crowdfunding platform where a dedicated KYC manager or identity verification provider reviews the applications to identify whether the user complies with predetermined requirements.
If the user complies with the requirements, they are permitted to register an account. If a user fails to pass the KYC requirements, the application to create an account will be denied, however, they can retry once they gather the required info to pass the identity verification process.
Crowdfunding software automates the processes and with it, it saves time for both you because you do not have to revise all the applications manually, and for users because they get feedback without any need to wait till your team processes their registration requests manually. However, regulators stress on the need to have a manual verification manager in case you rely on software for the identity checks too much due to potential errors.
In a LenderKit-powered crowdfunding platform, the user registration process looks as follows but can be customized:
- The user has to provide the basic data to create an account.
- Further, the user self-identifies themself as an accredited or non-accredited investor or a fundraiser.
- Finally, the user sends the required documents for KYC/KYB checks and completes all the verification procedures online.
Once the account is created, the user gets access to a dashboard. All the investment data is displayed and can be managed from there. The user can access the wallet, check transactions history, browse offerings and make investments or in case of a fundraiser, send campaign pitches to your campaign manager.
To make investments, Investors need to have money in the digital wallet on the platform. LenderKit may use an escrow wallet provided by integration partners such as Lemonway or FundAmerica or other providers that fit your business requirements.
From the investor, the following steps are required:
- The investor adds their bank account information and tops up the wallet
- Further, they choose an offering they’d want to invest in
- After the proper analysis is performed from the investor’s side, they can invest in a specific offering
The entire process is transparent and easy to understand. All that an investor has to do is to follow detailed instructions and provide the required documentation.
For capital raising, the following processes applies:
- A fundraiser submits an offering on the platform. It can be an equity, a debt, or a donation offering. The offering types can be disabled or customized to fit your crowdfunding platform type and operations. Once the offering application is reviewed by the fundraiser, they have to submit it for review which the campaign manager will perform on the platform side.
- Further, the fundraiser has to wait for the approval of their offering.
- Once the offering is approved, the fundraiser can start marketing it in compliance with regulatory requirements.
How crowdfunding software can help you to launch your platform?
Using a flexible white-label crowdfunding software, such as LenderKit, you can speed up the platform building process and save significant costs. So, instead of developing your platform from scratch, you can use pre-built layouts and have our team customize them for your brand.
With the crowdfunding software back office, you also get an interactive investor portal and marketing site. There, fundraisers can create their offerings, and investors can invest in them.
A powerful back office represents an admin area where you can manage investing and fundraising activities, create roles, establish fees, and manage your platform’s operations.
Do not forget that the software you choose shall cover your business model’s functionality. So, equity crowdfunding, debt crowdfunding, donation crowdfunding, and reward-based crowdfunding platforms will have their own flows. As an option, you can combine several investment flows to offer your users more flexibility.
Benefits you can expect crowdfunding software to deliver
When using our crowdfunding investment software, you can rely on the out-of-box features and integrations or request to build custom ones. Here are some of the out-of-box LenderKit features:
A GDPR management module – GDPR requirements are applicable to platforms that operate in all the EU countries, but also companies registered abroad and dealing with customers from the EU also collect, store, and process customer information. The GDPR module helps your business to adhere to data protection rules and policies.
E-wallets are already available, and they can be used for all the financial activities required in crowdfunding investment: investing, withdrawing, repaying, balance top-up, and other operations.
Established investment flows enable you either to choose one suitable for your business model or combine debt, equity, and donation flows to provide your users with more options.
Secondary market: you can allow your users not only to invest and raise funds but to trade securities on your platform. It will help your platform to reach the wished liquidity level faster.
Fees management setup: it enables you to set up custom fees on different actions and monetize your platform this way.
Permissions settings: you can set up roles for your team and grant them different permission levels depending on their duties.
Integration with payment gateways: if you want to automate payment processing or get a money management partner with a license. Usually, good crowdfunding software comes with all the required payment gateways already integrated depending on the region where you are going to operate. For the USA, UK, Europe, and MENA region, different payment gateways are needed because every region has its own regulatory requirements.
Do not forget to check whether the selected crowdfunding app comes with a mobile application. In the USA alone, 46% of users prefer their mobile devices over PCs. In developing countries, this share is even higher because smartphones are cheaper and provide in most cases the same functionality as a computer. Therefore, if the software you have selected doesn’t come with a mobile application, you lose a significant part of the potential audience.
LenderKit offers all of the mentioned benefits – you can choose any option for your crowdfunding platform. With the crowdfunding software, you get a good number of out-of-the-box features to make your platform run smoothly and in compliance with the local legislation if it fits, or we can customize the solution on demand to match your specific business needs and regulations.