How to Start a Crowdfunding Platform and Become a Fintech Unicorn

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Yuliia Podorozhko
Market Researcher

Thinking of launching a fintech startup but don't know where to start? Building your own crowdfunding website or investment application might be a good idea. This sector of the fintech market is increasingly popular and some niches are barely covered by existing solutions. 

The MadAppGang team has extensive experience building fintech solutions, so we created this  quick start guide to provide inspiration and pointers on how to create a crowdfunding platform. But before we get down to business, let’s review why crowdfunding is a good business idea.

Why build a crowdfunding platform?

Crowdsourcing became increasingly popular in 2009 among entrepreneurs who needed to fund startups. That year, the entire market was worth US$530 million. Since then, the crowdfunding market grew rapidly from US$1.5 billion in 2011 to an impressive US$12 billion in 2021. And it's not the limit. By 2027, the crowdfunding market is forecasted to hit US$24 billion.

Crowdfunding history since 1997. Source: Fundable

It's clear that crowdfunding’s popularity is on the rise. And there’s a good reason for this: it's highly favourable to everyone involved. Let's have a closer look at the advantages:

For investors:

  • Offers an easy start in venture funding
  • Small investment opportunities
  • Possibility to create diversified portfolios
  • Less bureaucracy, so there’s no need to pay intermediaries
  • Tax relief 

For entrepreneurs:

  • Feedback and, sometimes, expert guidance on how to improve an idea
  • Fast way to raise capital and a good alternative to bank loans or traditional funding
  • Lower loan fees
  • Loyal customers among investors 
  • Possibility to draw press attention to your project

Creating a crowdfunding platform is undoubtedly a wise business idea for entrepreneurs given the number of benefits it offers users. By building a smart service with a team of experts, you might just become the next crowdfunding unicorn and surpass Kickstarter, GoFundMe, and Patreon.

How to Start a Crowdfunding Platform 101: Choose Your Niche

Before you start on the actual build, you need to decide what kind of crowdfunding you want to run. Start with picking a  crowdfunding niche, that is, the industry or sector your platform will target. Not only will this define the design of your app or website, but it will also help you create a solid marketing campaign.

Finding the right niche

The general concept of crowdfunding is to raise money from a large number of people. However, this doesn’t mean that all crowdfunding platforms are the same. The first and the most obvious difference is the platform’s niche. There are crowdfunding platforms covering real estate, education, movie and music production, natural resources, renewable energy projects, and more.

Moreover, it's possible to find crowdfunding services for pretty surprising niches. With the Ioby platform, for instance, it's possible to get funding and volunteers for community projects. Inhabitants of the Bronx and broader NYC raised money for the cleaning and beautification of Rainey Park using Ioby. Also, thanks to loby, people in Pittsburgh cheered up lonely seniors over a Covid-19 lockdown with free art lessons.

Example of Ioby crowdfunding campaigns. Source: Ioby

As you see, almost any idea can be viable for your crowdfunding project. Though, it’s best to choose the sector where you have expertise. Knowing the industry, you know what your potential users are looking for and how to cover their needs with your service. Furthermore, a good understanding of your chosen industry comes in handy when you need to estimate your profit.

Choosing a crowdfunding model

Crowdfunding services differ not only by niche. According to the type of contributor’s consideration, there are three types of crowdfunding platforms:

  • Rewards-based crowdfunding – In this model, contributors receive rewards in the form of product or services, these are usually tiered according to the pledge amount, or they can pre-order an upcoming product.  The most famous platforms of this kind are Kickstarter and Indiegogo. These platforms support entrepreneurs and artists while investors can get early access to new products and can even gain co-developer titles. 

Kickstarter crowdfunding platform. Source: Kickstarter

  • Debt-based crowdfunding – These function much like lending platforms and contributors lend money in return for interest. Essentially, it's like bank crediting but without the expenses for the middleman (bank) service. Startup companies can receive loans at lower rates on platforms like Lending Club or Prosper while investors take home more interest. 

  • Equity-based crowdfunding – Equity crowdfunding platforms help innovative projects get off the ground when banks and venture capital firms are unwilling to take part. In return, contributors receive equity that may rise in value considerably over time — especially if the process culminates in an initial public offering (IPO). Services such as Fundable, AngelList, and StartEngine are good examples of equity crowdfunding. 

Examples of equity crowdfunding campaigns on Crowdcube. Source: Crowdcube

Which crowdfunding model is the most promising?

Today, the equity crowdfunding model is considered the most promising for several reasons, not least because it’s a solid alternative to debt-based models:

  • It gives easy and debt-free access to capital for startups

  • Allows contributors to diversify portfolios, start investing with a small sum of money, and potentially become a beneficiary of another unicorn like Apple, Flixbus or N26

Moreover, in March 2021, the US Securities and Exchange Commission (SEC) extended the limit companies can raise through a Regulation Crowdfunding campaign from US$1.07 million to US$5 million in any 12-month period, a five-fold increase. This means that companies can get larger amounts of funding faster and bring their products to the market in a shorter period. This, in its turn, benefits investors as the value of their portfolios rise faster.

Sahil Lavingia was the first entrepreneur to test the SEC's new rules. Although Mr Lavigna wasn’t sure that tiny stakes in his startup would be in demand, his project Gumroad raised US$5 million in 12 hours. It was a huge success that gave access to IPO-like deals to a larger number of people, and also showed the audience's support for the community-driven projects.

Gumroad's example is also a strong message that people are ready and willing to invest as long as the process is simple and transparent. Equity crowdfunding platforms give people with average income the chance to invest in startups and emerging growth companies. This opportunity was once available only to the wealthy but today, everyone has access thanks to equity crowdfunding. 

How to build a crowdfunding platform

Once you’ve chosen a niche and a business model for your project, you should decide how exactly to build your crowdfunding platform. Decide on a development approach and a list of features. Let's take a look at the development options you have.

Development approach

There are three development approach options available, and each has its pros and cons: 

  • Open-source systems (CMS) – Free and paid CMSs such as WordPress allow you to build a website using ready-made templates and plugins. In this way, you avoid having to create everything from scratch, which saves time and money. However, you'll still need the help of a developer to set up your crowdfunding platform, add functionalities, and keep an eye on security as CMS-based platforms are easier to hack than custom ones.

  • White label – This is an off-the-shelf software package that is fast to set up and launch to market. However, such platforms offer less flexibility than a custom solution. Using a white label platform, you may not be able to add certain functionalities or scale your project. Apart from that, you might have difficulties supporting your white label crowdfunding, as you don't have any control over the technology stack. 

  • Custom crowdfunding development – Frequently, this approach requires outsourcing to a development team. And even if it looks quite expensive at first glance, this is the only way to get full freedom with the design, technology stack and choice of features. Besides, building a custom crowdfunding platform is a step-by-step process that allows you to be flexible and modify the product according to your end users’ ever-changing needs and expectations.

Crowdfunding platform core features

As soon as you decide how to create your crowdfunding platform (and with whom), it's time to specify what features the final product will include. Based on your platform's type and niche, some functionalities will vary. There is, however, a list of core features that you should add regardless of whether it’s a reward, debt, or equity-based platform:

  • Sign-up/Sign-in – Not only should sign-up and sign-in be easy, but also secure. As crowdfunding is a fintech project, it should comply with all regulations and provide bank-level security. Based on MadAppGang’s experience, we recommend activating two-factor authentication (2FA) for users and verifying their IDs and photos.

  • Account management – Campaign management should be clear and effortless. Neither party should struggle to figure out what is going on, how much money is raised, or who paid who. Ideally, you need to provide users with account statistics in the form of charts and tables.


Example of a user profile on equity crowdfunding Fundable. Source: Fundable

  • Payment gateways – Not only do you need to enable safe transactions for users, but also give them a choice between different payment methods. Just think how many people avoid Kickstarter because it doesn't accept Maestro, Visa Electron and PayPal payments.

  • Platform backend management – Don't forget to make the platform administrator's work comfortable. Add the following to the site administrator's panel: a dashboard with a complete list of statistics about users, projects, and transactions, payment logs with gateways, and a message board.

Final word

There has never been a better time to bring your crowdfunding startup to life. Due to the constant market growth and favourable legal initiatives in the industry, creating a crowdfunding platform is a promising endeavour. Particularly if we're talking about equity crowdfunding, as they provide an attractive alternative to traditional investment methods for investors with modest budgets.

The best way to create a crowdfunding platform that’s tailored to your business is to hire an experienced software development firm, such as us here at MadAppGang. Work with us and we’ll create a secure crowdfunding platform that’s fully compliant with fintech regulations, and you won’t have to spend extra money on office rent, hardware and software, or developer recruitment. Drop us a line and let’s discuss what it will take to create the next crowdfunding unicorn.