Getting funding for an artistic project, book, or humanitarian project can be long, arduous, and difficult process. Unless you have money and connections, (in which case you likely wouldn’t need backing in the first place), it’s difficult to raise funding from traditional investors, who will expect to see a return on investment.
Unfortunately, unless you have a groundbreaking new app or invention, you’ll probably be too small potatoes to warrant the attention of professional investors.
So, what about projects that make worthwhile contributions to humanity that can’t be measured in dollars and cents? Where are the investment vehicles for those projects?
And what about the average Joe or Jane who doesn’t have a million dollars to invest? Many people are interested in monetarily supporting creativity and innovation. They want their dollars (few though they may be) to make a difference for someone else.
Enter crowdfunding. Thanks to the internet, numerous internet platforms have come on the scene in the last decade, aiming to play matchmaker between good causes and those looking to support them. Businesses, charities, or individuals with big ideas can raise awareness and support for their projects through crowdfunding sites.
In this article, we’ll compare two of the most popular crowdfunding sites—GoFundMe and Kickstarter. We’ll explore the strengths, weaknesses, and niche markets of each.
The History of GoFundMe
Originally starting out as CreateAFund, the company that became GoFundMe was created in 2008 by Brad Damphousse and Andrew Ballester in San Diego, CA. In 2010, they expanded the features, changed up the fee structure of the business, and rebranded the site as GoFundMe.
Since then, it has expanded to become one of the largest crowdfunding platforms on the internet. In 2015, GoFundMe donations exceeded those to the Red Cross ($604 million) by more than double. To date, GoFundMe has raised $9 billion in donations.
What Can You Raise Money for on GoFundMe?
GoFundMe has few limits on what you can raise money for. Most people know about GoFundMe from social media shares for medical fundraisers. This makes sense, as one in three GoFundMe campaigns is for assistance with medical costs.
But that’s not all you can do with GoFundMe. You can create donor campaigns for categories ranging from education costs, funerals, trips, memorials, pets, and more. GoFundMe states on its website that it is funding “life’s most important moments,” so most campaigns are individuals or groups raising money for benevolent causes.
To create a GoFundMe campaign, you sign up for an account, write up your story, add pictures, or a video. Set a fundraising goal, then share your campaign on social media. All the donations you raise are yours to keep, even if you don’t meet your fundraising goal. There is no donation cap, so you can continue to raise money, even after the goal is reached.
The Fee Structure of GoFundMe
It’s worth noting that GoFundMe itself is not a non-profit. Originally, the company charged 5 percent on all donations raised. As of November 2018, that is no longer the case.
In response to customers reporting that they wanted all of their donations to go to campaign beneficiaries, GoFundMe has now opted for a “tip jar” fee model. On each campaign page, the company requests that donors add a bit extra onto their donation to keep the doors of GoFundMe open and the servers running.
Surprisingly, relying on donor’s tips has been enough to keep the company profitable thus far. GoFundMe still charges 2.9 percent and $.30 for each transaction to cover credit card fees.
Unlike many crowdfunding sites, GoFundMe offers a money-back guarantee for donors in the event of cancellation or misconduct on the part of the campaign starter.
Limitations of GoFundMe
While you can start a GoFundMe campaign in over a dozen categories, the focus is mostly charitable, not entrepreneurial. There is a business category, but most of the campaigns concern rebuilding or saving distressed businesses, not creating new ones.
Another limitation of GoFundMe is that you have to provide your full social security number to withdraw funds. This is a privacy concern to many current and would-be users. Also, the money raised by donations may be taxable as income under some circumstances.
Although the reviews of GoFundME are overwhelmingly positive, a few users have noted difficulty with customer service and making timely withdrawals.
Since GoFundMe is one of the most popular crowdfunding sites on the web, unless you already have a strong social media presence or another prebuilt audience, it can be difficult to make your story stand out.
Story of Kickstarter
In 2002, Perry Chen wanted to bring duo Kruder and Dorfmeister to Jazzfest in New Orleans but was short on cash to do so. The concert didn’t end up happening, but it got him thinking—what fs there were a way to back a project, event, or idea, and it only went forward if enough people got on board and agreed it should happen? It was out of this notion that Kickstarter was born.
This new model of fundraising officially launched in 2009, and it took off when it received $10 million from angel investors in NYC. Their headquarters is located in the Lower East Side of Manhattan in a former pencil factory.
In 2012, Kickstarter started supporting projects from the UK, and other countries came on board soon after. In 2013, Kickstarter launched its mobile app for iOS.
To date, Kickstarter has received $4.6 billion pledges from over $17 million backers, making them one of the big hitters among crowdsourcing sites on the internet.
What Can You Do on Kickstarter?
The focus of Kickstarter is projects—albums, games, inventions, events, you name it. Kickstarter has a distinctly creative focus, which may be why it has been referred to by the New York Times as “an arts organization for the post-gatekeeper era.”
Kickstarter allows campaigns in the following categories:
- Film & Video
The largest category is film and video. Roughly 10 percent of films in major film festivals (Sundance, Tribeca, and SXSW) get their backing from Kickstarter. Games (tabletop, card, and video) is the next most popular category, accounting for ⅕ of all dollars spent on the site.
Another increasingly popular category is tech gadgets. Dozens of inventors bypass traditional investors and instead get their funding from laymen and fellow tech geeks on Kickstarter. Gizmos range from robotic mops to smartphone-controlled paper airplanes to automatic cheesemakers. If you can dream it up, someone’s probably got a video with a prototype on Kickstarter.
The Fee Structure of Kickstarter
Kickstarter is a public benefit corporation, which supports a hybrid of capitalistic and altruistic values. The company aims to turn a profit, but with a charter that stipulates that they are adding value to the community while doing so.
Kickstarter charges a 5 percent platform fee for all pledges, $.20 per pledge, and an industry-standard 3 percent payment processing fee. Pledges under $10 are discounted to a 5 percent fee plus $.05 per pledge.
Each Kickstarter project has a funding goal. If the project fails to meet the expected level of funding by the deadline, no backers are charged for their pledges. This is an assurance to backers that the project will not fall flat due to insufficient interest.
In exchange for pledges, campaign creators offer rewards to donors as thank you gifts. These usually correlate with the project itself—a free meal for two from the food truck the creators started, a copy of the album they’re recording, or tickets to the show they’re putting on. Creators often have tiered rewards, offering more valuable prizes for larger donations.
Limitations of Kickstarter
Although Kickstarter projects generally benefit humanity, charitable organizations are notably absent from Kickstarter’s platform. In fact, charity and awareness campaigns are against the company’s policy. Non-profits may start campaigns, but the backers must receive something in return besides warm fuzzies.
Also, campaigns on Kickstarter are all or nothing. Even if you are a few dollars short, you’ll miss out on all of the pledged donations if you fail to meet your funding goals.
If you’re only a few bucks away from your goal amount, you may consider pushing the total past the finish line with some extra cash from your own pocket. That way you can reap the rewards of your campaign—but no dice. Kickstarter rules specifically prohibit donating to your own campaign.
What’s more, Kickstarter campaigns have a time limit. You can only raise funds for a maximum of 60 days. If you’re looking for a large amount to back a formidable project or business, it can be a challenge to create a video and social media campaign viral enough to generate that much cash in a month or two. And if you miss the funding mark, all your effort will be for naught.
Compare and Contrast
Though they both fall under the designation of crowdfunding platforms, GoFundMe and Kickstarter have as many differences as they do similarities.
For example, GoFundMe and Kickstarter originally had a similar fee structure, but recently, GoFundMe has ditched the 5 percent platform fee in favor of a virtual tip jar. Kickstarter still charges a 5 percent fee on all pledges.
Since the aim of GoFundMe campaigns is more compassionate than entrepreneurial, beneficiaries of these campaigns keep all the funds they raise. Kickstarter, on the other hand, requires creators to establish proof of concept by generating enough interest to meet a stated funding goal before any money is released.
Kickstarter campaigns have to generate this buzz in 60 days or less. GoFundMe campaigns have no deadlines or time limits and can go as long as the campaign creator wants.
So which is better—Kickstarter or GoFundMe? It all depends on your goals and needs.
If you’re a creator looking to get backing for an artistic project or for bringing a gadget to market, choose Kickstarter. For things like art installations, documentary films, or jazz albums, Kickstarter is the way to go.
If you want to fund a community-based need or charitable cause, use GoFundMe. For helping a junior tennis team get the cash to go to nationals or a neighbor whose house burned down, GoFundMe is a better option.
Crowdfunding is one of the groundbreaking internet phenomena of the last decade, and it’s a great way to connect with people who are interested and willing to help with your cause or project. But it’s not the silver bullet to fundraising.
Only 37 percent of Kickstarter projects ever make it to full funding, and 90 percent of GoFundMe causes raise the full amount. These crowdfunding sites only provide the vehicle for fundraising, not the umph to propel them to viral popularity.
In the end, a crowdfunding platform can only get you so far. YOU are ultimately responsible for the marketing success of the campaign. Many campaigns do not get any traction because of a lack of promotion, inadequate legwork beforehand, subpar storytelling, or bad SEO. (Check out some tips for a successful campaign here.)