People often ask, “How do crowdfunding sites make money?” It is a good question with a reasonably simple answer: These sites get a percentage of what is invested in each project. We can help you navigate this process with our free services. But here is more about crowdfunding sites and their fees that are important to know.
Crowdfunding Sites Fees Overview 
Here are the four ways that crowdfunding sites charge fees:
Crowdfunding Sites Success Fees
This is the basic percentage that the site takes from what is donated. The range is from as little as 2% to as much as 10% or more. You often do not pay until you have reached a minimum. If you do not reach that threshold, your project will not go forward, and the money will be returned to the investors. Sometimes, these fees are taken from investors, and you pay them directly. In either case, knowing how this may affect your raise and finances is important. Success fees have the lowest risk since you do not pay them unless you raise a minimum amount. However, you could also pay a substantial amount if you raise a lot.
Crowdfunding Sites Monthly Fees
These are a little less common now, but they are possible. This usually means that on top of the percentage they will take, the site will also charge you a fee to belong and to create and post your pitches. For a crowdfunding site, this means that no matter how many successful pitches there are, they will still make money. This approach has some risk because you pay out of pocket even if your raise does not meet its goal, but it also may not cost you as much as success fees will if you raise a lot.
Ongoing Variable Fees
Most popular and established crowdfunding websites charge a percentage of whatever you raise. Expect to pay 3-5% to the platform on whatever you raise through that particular portal. These fees are painless in some ways, given that you are not paying them out of pocket. Instead, you are paying them out of money that people have donated to your cause.
If the platform is powerful enough, you will not mind paying these crowdfunding fees. The features and setup were worth it to you and helped you raise the money. It’s similar to more traditionally paying an advertising or PR firm. Therefore, be careful in judging things solely on the percentage fees you pay. The difference in a percentage or even two may be worth it for a site that has more features, gives more assistance setting up your pitch, or attracts more potential investors.
Premium Promotion
Sometimes, how crowdfunding sites make money is related to some upsell regarding promotion and placement. If you want to be highlighted on the site’s front page, you have to pay more—or perhaps the site tweets or shares specific areas via social networking. You pay extra for that as well. Premium promotion is how crowdfunding sites make additional money. This is not to say that premium promotion is not worthwhile. The best way to vet the idea of premium promotion services that cost extra is to talk to others who have raised money and used this option. We can help connect you, of course.
It should be noted that many sites that charge success fees provide premium promotion services at certain levels of funds raised without charging extra. In those cases, premium promotion services are a win-win since they are invested in how much you eventually raise.
Crowdfunding Sites Fees Example
We can walk through an example to show how crowdfunding sites make money.
Initial Crowdfunding Site Fees
Let’s start with the possibility that a person wants to raise money to make a movie, and they turn to the crowdfunding site to get money for production. They start with a simple listing, which is free, and they make a compelling pitch. The site takes a percentage as an administrative fee. The person looking for funding is still happy because money is coming in, and the success fees do not seem so steep.
Ongoing Fixed Fees
Then, about a month in, a small administrative monthly fee is taken. Perhaps it is smaller than it could have been since the site made money from the funding that came in. Maybe it is even waived. But in our hypothetical example, a small fee is taken each month. Again, the person looking for funding may not care too much – they know how crowdfunding sites make money and understand that there has to be some payment for using the platform.
Crowdfunding Site Promotion
After a few months, the funding starts to lessen, and the person wants to jump-start their pitch. In this case, they decide to pay for premium promotion of the film idea, hoping to be featured on the site’s front page when prospective funders go to the site. This, of course, costs money since it is one of the secondary ways that crowdfunding sites make money. And then, finally, the person decides that they will take the website up on its offer to help with search engine optimization of their pitch, a value-added service that can be very helpful.
Crowdfunding fees may differ depending on your chosen platform and some aspects of your project. That said, there are some similarities between the crowdfunding fees you might expect to pay no matter your preferred platform (of course, we can help!). Make sure you consider all of the potential crowdfunding fees before deciding which platform to use. And of course, you can choose the free crowdfunding route as well, but that comes with challenges.
Crowdfunding Sites and Extras
There are other crowdfunding fees beyond that initial percentage the crowdfunding sites take off the top. For example, you may have to pay a fee for allowing people to use a credit card to donate. These processing fees range from 2-4% and, of course, can be quite necessary unless you want people to have to send in a check, which would not be convenient.
There may be fees related to setting up your page, or perhaps only if you want more space than is usually given. There may also be some fee for any help you receive, such as help setting up your page, using multimedia, or doing search engine optimization. These are likely to be optional fees that may or may not be worthwhile.
Other Fees That Arise (Including Our Services!)
The above fees assume that you will be using a crowdfunding website and paying the fees associated with that site. But there may also be other costs,m and this is where you might turn to our services. For example, we can help you refine your pitch and get it noticed. We can help you get high-quality multimedia, such as video content for your page. Finally, we can help with search engine optimization (SEO) to get your pitch noticed by those doing web searches.
If your time is better spent on the actual product, service, or purpose that you are pitching, or you do not have this expertise, and doing it yourself will not be effective or will lower the quality of your pitch, we can help!
Of course, many of our services are free, including connecting you to a platform that is a perfect fit and answering many initial questions you have. Contact us anytime to discuss crowdfunding sites and their fees and processes.
