What is Crowdfunding? Types, Benefits & How to Launch (2025 Guide)

Key highlights 

• Understand what is crowdfunding and how it helps raise funds from a large group of people online.
• Learn how platforms like Kickstarter and GoFundMe make it easy to share your story and receive support.
• Explore the four main types of crowdfunding: rewards, donation, equity and debt.
• Discover how crowdfunding works for individuals, nonprofits and small businesses.
• See how Bluehost WooCommerce hosting gives you the tools to build a professional crowdfunding website with secure checkout and marketing integrations.  

Crowdfunding is a way to fund a project, idea or cause by collecting small amounts of money from a large number of people, usually online. It’s how Ryan Grepper raised over $13 million on Kickstarter project in 2014 for a high-tech cooler without any investors. Just an idea, and community members that believes in it. 

That’s the power of knowing what is crowdfunding. 

The global crowdfunding market is expected to grow at a compound annual growth rate (CAGR) of 13.5% between 2025 and 2032, driven by tech innovations and social fundraising platforms. This growth shows that crowdfunding is becoming a mainstream solution for funding and growth. 

So, if you’re sitting on an idea but feel stuck because of money, now is the right time to start crowdfunding. In this guide, we’ll explain crowdfunding examples, types of crowdfunding, how it works and how you can launch your own campaign.  

What is crowdfunding? 

Crowdfunding is a fundraising method that allows individuals, startups and nonprofits to collect small contributions from a large number of people. It is done usually online through a crowdfunding platform, instead of relying on traditional investors or loans. 

Crowdfunding gained popularity after the 2008 financial crisis as small businesses sought non-traditional funding sources. This approach has powered many collective efforts across industries and causes.

To run a successful crowdfunding campaign, you need to capture the attention of backers and convince them your project is worth supporting.  

How does crowdfunding work? 

Crowdfunding works by collecting small amounts of money from many people (usually online) to fund a project or cause. You start by choosing an idea and setting a funding goal and deadline. Crowdfunding connects entrepreneurs with a large pool of potential investors primarily via social media and crowdfunding platforms.

Launch a campaign and begin the investment process on a crowdfunding portal like Kickstarter or GoFundMe. Then, promote your campaign to attract backers. 

If you meet your goal, you receive the funds (minus platform fees) and deliver rewards or updates to your supporters. 

Note: Many crowdfunding platforms charge a fee based on the amount of funds raised, typically ranging from 5% to 12%. For example, Kickstarter charges a 5% platform fee and additional fees apply for payment processing. 

Crowdfunding examples

The global crowdfunding market is projected to grow from $1.83 billion in 2025 to $4.45 billion by 2032. Excluding debt and equity-based models, this funding style has supported countless new business ventures. 

Some crowdfunding examples include: 

• Looktech AI Glasses (2025): This AI-powered smart eyewear campaign raised $1,192,236 with Kickstarter campaign. It gained traction due to its sleek design, AR integration and a strong video pitch highlighting real-life use cases. 
• Cosmere Roleplaying Game (2023): Based on Brandon Sanderson’s Cosmere universe, this tabletop RPG raised $14.7 million from 52,658 backers on Kickstarter. This makes it the highest-funded roleplaying game in Kickstarter history. 
• LA Wildfire Victims (2025): In response to the devastating Los Angeles wildfires, GoFundMe campaigns collectively raised more than $100 million to assist affected families, communities and businesses. This massive outpouring of support underscores the platform’s role in mobilizing aid during crises.  

What are the pros and cons of crowdfunding? 

Crowdfunding offers advantages such as access to capital, market validation, publicity and community building, but also poses risks like not meeting fundraising goals and platform fees. Before launching a campaign, it’s important to weigh the several benefits of crowdfunding against the possible challenges.

Here’s a quick comparison to help you weigh both sides:

Pros of crowdfunding	Cons of crowdfunding
You can raise significant funds that may be difficult to secure through traditional sources like banks or investors.	There’s a high risk of failure; over 358,000 projects have been unsuccessfully funded on Kickstarter.
A successful crowdfunding campaign can demonstrate that there is demand for your product or service and act as proof of concept for other investors and stakeholders.	You’ll likely need to cover upfront costs like marketing, videos and prototypes.
You can retain full ownership without giving up equity or control.	Crowdfunding can sometimes lead to a public exposure of ideas, which could result in competitors copying the concept.
There’s less financial risk; funds are secured upfront and usually refunded if the campaign fails.	The funds raised through debt-based crowdfunding must be paid back with interest, which is a fixed expense regardless of business performance.
You can define your own targets, deadlines and reward structures.	Failure to deliver promised rewards can damage a startup’s reputation and discourage future crowdfunding opportunities.
Crowdfunding campaigns often catch the eye of industry leaders, potential partners and even other funding sources, leading to strategic partnerships.	Managing communications with many potentially disappointed investors and supporters can be a time-consuming task for creators.

Crowdfunding can be a powerful way to bring your ideas to life, but it isn’t without challenges. A successful campaign requires careful planning, compelling storytelling and consistent communication with backers. With the right approach, the rewards can far outweigh the risks. 

What are the types of crowdfunding? 

There are four main types of crowdfunding: donation-based, rewards-based, equity-based and debt-based. Each serves a different purpose whether you’re funding a cause, launching a product, raising capital or seeking a loan. Choosing the right model depends on your project goals and what you offer backers in return.

Here’s a quick breakdown of the four main types: 

Type	How it works	Ideal for	Do you repay?
Rewards-based crowdfunding	Backers contribute to exchange for a product, perk or experience.	Creators, startups, product launches	No
Donation-based crowdfunding	Supporters donate money with no expectation of returns or rewards.	Nonprofit organizations, personal causes	No
Equity-based crowdfunding	Contributors receive shares or equity in your business.	Startups, early-stage companies	No (but they gain equity)
Debt-based (P2P) crowdfunding	You borrow funds from individuals and repay with interest.	Small businesses, individuals needing loans	Yes

All crowdfunding types carry the risk of not reaching funding goals, which can affect the outcomes of the project. Choosing the right one depends on your goal: 

• Want to successfully launch a product? → Try rewards-based crowdfunding. 
• Supporting a cause? → Go with donation-based. 
• Need investors for a startup? → Choose equity-based crowdfunding. 
• Looking for a home equity loan? → Opt for debt-based (P2P) crowdfunding. 

Understanding these differences can help you pick the approach that fits your project and audience best.

Let’s explore different crowdfunding model types. So, you can choose the one that fits your goals from donation-based, equity-based crowdfunding or a peer-to-peer fundraising model. 

1. Rewards-based crowdfunding 

In this type of crowdfunding, individuals contribute to a project in exchange for a service or product. Many crowdfunding projects offer rewards to early backers, such as exclusive product access or experiences, making this a great way to build community engagement. 

For example, an eco-friendly water bottle campaign can structure rewards like this: 

• $10 pledge: Thank you email and a digital booklet on sustainability. 
• $25 pledge: One eco-friendly water bottle. 
• $50 pledge: One water bottle and a branded, reusable carrying bag. 
• $100 pledge: Two water bottles, two bags and the name listed on your website. 
• $250 pledge: Family pack, reusable bags and a virtual production tour. 

2. Donation-based crowdfunding 

Donation-based crowdfunding is when people give money to support a cause with no expectation of getting anything in return. It’s ideal for nonprofits or personal causes like medical expenses, education or community projects. 

Donation-based crowdfunding example include: if you’re raising funds to build a community library, people may contribute because they believe in the project’s impact. They won’t do it for rewards or recognition. 

Donation-based crowdfunding often appeals to backers through emotional storytelling related to social or charitable causes. To build trust, keep supporters updated during and after the donation-based campaign. You can share progress through blog posts and regular updates on your crowdfunding site.

3. Equity-based crowdfunding 

Equity-based crowdfunding allows you to raise money for your new business by offering shares to multiple potential investors online. It’s a great alternative to traditional funding methods like venture capital or bank loans. 

Instead of paying back a loan, you give backers a small stake in your business. These shares are usually unlisted, meaning they aren’t bought or sold on public stock exchanges. 

In the U.S., equity-based crowdfunding is regulated by the Securities and Exchange Commission (SEC) and usually involves both accredited and non-accredited investors. It offers crowdfunding investment opportunities without relying on traditional methods or sources like venture capitalists or bank loans.  

4. Debt-based crowdfunding 

Debt-based crowdfunding is when you borrow money from multiple individuals through a platform and repay it with interest. It’s similar to a loan, but the funds come from regular people instead of a bank. 

This model, also known as peer-to-peer lending, allows individuals to finance projects through an online platform and earn interest rate-based returns. Debt-based crowdfunding is attractive because it allows the borrower to maintain ownership of their company while repaying the loan.

However, you’ll likely need a good credit score to qualify. Because this is a loan, repayment with interest is required just like any other borrowing arrangement. 

Now that you know the four main models, it’s easy to see why many startups get confused between product crowdfunding and equity crowdfunding. Here’s how they differ.

Product crowdfunding vs. equity crowdfunding for startups

Product crowdfunding and equity crowdfunding both help startups raise money, but they work very differently. Product crowdfunding (usually rewards-based) lets you pre-sell your idea to early supporters. Backers receive a product, perk or experience instead of ownership. It’s ideal for startups to validate a new product, build early buzz and turn supporters into first customers. 

Equity crowdfunding, on the other hand, allows people to invest in your company in exchange for shares. Instead of fulfilling rewards, you bring multiple small investors who believe in your long-term vision. This model works best for startups that need significant capital to grow and are comfortable sharing equity. 

Here’s a simple way to decide:

• Choose product crowdfunding if you want early sales, quick funding and community feedback.
• Choose equity crowdfunding if you need long-term investors, larger funding potential and a path to scale your business.

Both models can be powerful for startups. It just depends on whether you want customers or investors at this stage of your growth.

Legal basics of crowdfunding

Equity-based crowdfunding comes with more rules and oversight than donation or rewards-based models. In the United States, the legal framework for crowdfunding is shaped by the JOBS Act, a landmark law enacted on April 5, 2012.

This legislation was designed to make it easier for startups to raise capital while still protecting investors and maintaining transparency across all crowdfunding investments.

How did the JOBS Act change crowdfunding?

Before the JOBS Act, only accredited investors could participate in most online investment opportunities. The expansion of Title III and Title IV opened the doors for everyday people to invest smaller amounts in early-stage companies through regulated crowdfunding platforms.

This shift allowed a much wider pool of small investors to participate in equity crowdfunding with fewer restrictions.

The SEC’s role in investor protection

The Securities and Exchange Commission (SEC) oversees all crowdfunding regulations and ensures that transactions happen through registered intermediaries. They are typically approved crowdfunding portals or broker-dealers.

Their goal is simple: protect investors, reduce fraud and ensure that companies share enough information for people to make informed decisions.

Updated limits and fundraising rules

In 2021, the SEC updated its regulations to support growing businesses. One of the biggest changes was increasing the maximum fundraising limit. Today, companies can raise up to $5 million per year from non-accredited (general public) investors through equity crowdfunding.

This makes it a more accessible alternative to traditional venture capital or bank loans, especially for startups that want to retain control of their business.

Why does regulation matter?

Equity crowdfunding offers massive opportunity, but it also comes with more regulatory complexity than donation-based or rewards-based models.

Founders must follow specific rules, share financial information and work with approved platforms. They protect investors and build trust throughout the fundraising process. 

Which crowdfunding platforms are best? 

Popular crowdfunding platforms include Kickstarter for creative projects, Indiegogo for tech, flexible funding and GoFundMe for personal causes. Patreon suits ongoing content creation. Each platform differs in fees, features and goals, so choose one that aligns with your fundraising strategy.

Here’s how these top platforms compare: 

Platform	Best for	Key features	Fees
Kickstarter	Creative projects, product launches	All-or-nothing funding model; strong community support	5% platform fee; payment processing fees between 3% and 5%
Indiegogo	Tech innovations, flexible funding	Offers both fixed and flexible funding options; InDemand feature for ongoing online fundraising	5% platform fee; payment processing fees approximately 3% + $0.20
GoFundMe	Personal causes, emergencies	No platform fee; donor protection guarantee; fast setup	0% platform fee; transaction fee of 2.9% + $0.30 per donation
Patreon	Creators with ongoing content	Monthly memberships; exclusive content for supporters	5–12% platform fee depending on plan; payment processing fees of 2.9-5% per transaction; 2.5% currency conversion fees

The best platform for your campaign depends on your funding model, audience and long-term goals. Look closely at the fees, features and community before making your pick. 

Let’s explore more details about each crowdfunding platform: 

1. Kickstarter 

Launched in 2009, Kickstarter is one of the most popular crowdfunding platforms for creative projects. It uses an all-or-nothing model. If you don’t meet your funding goal, you don’t get the money from Kickstarter campaign. 

As of 2025, the platform has helped fund over 277,300 projects with backing from nearly 24.1 million people. According to Statista, around 41.98% of launched projects on Kickstarter are successfully funded, highlighting the importance of strong pre-launch promotion. 

Fees: 5% platform fee, plus 3–5% for payment processing.  

2. Indiegogo 

Indiegogo started as a crowdfunding site for independent films but later expanded to all project categories shortly after its launch in 2008. 

Today, Indiegogo has a community of over 9 million backers spanning 235 countries and territories. Its flexible funding model allows campaigners to receive money as it comes in, even if goals aren’t fully met. 

The platform is ideal for tech, innovation and nonprofit projects. Indiegogo supports both fixed and flexible funding, meaning you can keep funds even if you don’t reach your goal. Its InDemand feature lets you continue raising funds after your campaign ends. 

Fees: 5% platform fee and ~3% + $0.20 per transaction for payment processing. 

3. GoFundMe 

GoFundMe is best for personal causes, emergencies and medical fundraising. It doesn’t charge a platform fee and is known for its donor protection guarantee. 

Since its founding in 2010, GoFundMe has raised over $30 billion, making it the largest crowdfunding platform for personal and charitable causes. 

Fees: 0% platform fee, but 2.9% + $0.30 per donation for processing.  

4. Patreon 

The platform works best for creators offering ongoing content like artists, podcasters or YouTubers. Patreon uses a subscription model where fans support creators monthly in exchange for exclusive perks. 

Over 10 million patrons support creators monthly, and the platform has paid out more than $8 billion to creators. 

Fees: 5–12% platform fee depending on plan, 2.9-5% payment processing fees and 2.5% currency conversion fees. 

How to plan and launch a crowdfunding campaign? 

Successful fundraising campaign strategies start with clear goals, the right crowdfunding platform and a strong promotion plan. Here’s how to launch your crowdfunding campaign and achieve fundraising goal: 

1. Define your fundraising goal 

• Set a clear funding target: Determine the exact amount you need and how it will be used. 
• Establish a timeline: Decide your campaign’s duration, keeping it long enough to gain traction but short enough to maintain urgency. 

2. Choose the right platform 

Select a platform that aligns with your project’s nature and audience. For instance: 

• Kickstarter: Ideal for creative projects with tangible outcomes. 
• Indiegogo: Suitable for tech innovations and flexible funding needs. 
• GoFundMe: Best for personal causes and emergencies. 
• Patreon: Designed for creators offering ongoing content. 

3. Identify your target audience 

Utilizing donor-centric language can improve conversion rates in crowdfunding campaigns.

• Understand your backers: Research who is most likely to support your new project. 
• Tailor your message: Craft your campaign to resonate with your intended audience. 

4. Craft a compelling story 

This is a core part of effective fundraising campaign strategies that build emotional connection and trust. 

• Explain the ‘why’: Clearly articulate the purpose and impact of your project. 
• Highlight additional benefits: Show potential backers what they gain by supporting you. 

Also, using humor and simplicity in campaign messaging can create a viral sensation and broaden the audience.

5. Plan your rewards or perks 

If using a rewards-based model: 

• Offer meaningful incentives: Provide perks that are valuable and relevant to your backers. 
• Structure tiers wisely: Ensure each reward level offers increasing value. 

6. Prepare campaign visuals & videos

Engaging visuals and structured campaign pages enhance the attractiveness of crowdfunding projects. Use compelling imagery and short video snippets to increase user engagement and encourage potential donors to contribute money to your cause. 

• Use high-quality images and videos: Visual content can significantly boost engagement. 
• Demonstrate your product or cause: Show prototypes, behind-the-scenes footage or testimonials.

7. Create a promotional strategy 

Crowdfunding for creative projects like films, music and consumer products seeks to validate new ideas or generate market buzz through backer contributions in exchange for non-financial rewards.

• Leverage social media: Use platforms like Facebook, Twitter and Instagram to spread the word. 
• Engage your network: Reach out to friends, family and colleagues for initial support. 
• Consider press outreach: Contact relevant blogs or media outlets to feature your campaign.  

8. Launch and monitor your campaign 

Maintaining transparency and providing education about the product can help overcome skepticism in crowdfunding.

• Build anticipation: Tease your campaign before the official launch. 
• Engage with backers: Respond to comments and messages promptly. 
• Provide updates: Keep supporters informed about progress and milestones. 

Regular updates during the crowdfunding process can significantly increase donations.

9. Post-campaign follow-up & fulfilment

• Fulfill rewards promptly: Deliver on promises to maintain trust. 
• Maintain communication: Keep backers updated on the project’s ongoing developments. 
• Gather feedback: Learn from your experience to improve future campaigns. 

Don’t forget to thank your backers. Expressing appreciation can inspire continued support and strengthen relationships for future collaborative efforts. 

Do I need a crowdfunding site for my campaign? 

Yes, having your own crowdfunding website can take your campaign to the next level. Many crowdfunding platforms like Kickstarter or GoFundMe handle donations. 

A dedicated crowdfunding site builds trust, strengthens your brand and gives you full control over your messaging. This is where Bluehost can help. Bluehost is also officially recommended by WordPress.org, making it one of the most trusted providers for hosting WordPress websites.  

Why is Bluehost WooCommerce hosting ideal for a crowdfunding website? 

A successful crowdfunding website needs smooth payments, reliable performance and a professional storefront. And Bluehost WooCommerce hosting gives you all the tools to make that happen. Our plans include automatic backups, staging environments for safe updates and built-in marketing plugins like Yoast SEO and CreativeMail. These are perfect for crowdfunding campaigns.

We offer powerful hosting infrastructure combined with tools and features tailored for WordPress users whether you’re a beginner or running a growing online business.

Here’s what sets Bluehost WooCommerce hosting apart:

• One-click WordPress & WooCommerce installation: Launch your crowdfunding site instantly without technical setup.
• Free domain name (1st year): Secure a unique and memorable web address for your campaign.
• Free SSL certificate: Protect payment information and build trust with secure checkout pages.
• Optimized speed & performance: Fast loading, built-in caching and CDN support help backers navigate your site smoothly.
• 24/7 hosting support: Get help anytime from teams trained in WordPress and WooCommerce.
• Store-enhancing features:
  • Customized experiences for supporters
  • Bookings & appointments (ideal for offering sessions, consultations or reward-based perks)
  • Gift cards (great for reward tiers)
• Staging environment: Test changes before going live without breaking your site. 
• Marketing integrations: Yoast SEO plugin, email marketing (Creative Mail) and social sharing.
• AI Builder: Easily design and customize your campaign website with guided AI tools.

Ideal for: Creators, nonprofits, startups and anyone who wants full control over their crowdfunding website with secure payments and professional storefront features. 

Ready to launch your crowdfunding website with powerful WooCommerce tools? Get started with Bluehost WooCommerce hosting today.

Crowdfunding best practices for a successful campaign

A successful crowdfunding campaign goes beyond posting your ideas online. It requires clear storytelling, consistent outreach and strong community engagement to inspire people to support your fundraising goal. These best practices can help you raise funds more confidently and build long-term trust with your backers.

1. Tell a meaningful, authentic story

People support campaigns they emotionally connect with. Explain why your idea matters, who benefits from it and how contributions will be used. A clear, transparent story improves market validation and helps backers feel confident that their support is making a real difference.

Simple, honest storytelling consistently performs better than over-polished pitches.

2. Share widely and keep supporters updated

Visibility drives momentum. Share your campaign across social media, email and community groups to reach a broad audience. Once your campaign is live, post regular updates, progress milestones and behind-the-scenes content.

Campaigns that provide consistent updates often secure more repeat engagement because supporters feel included in your journey to secure funding.

3. Thank your backers and build community trust

A genuine thank-you builds long-term relationships. Acknowledging supporters, whether publicly or privately, encourages repeat contributions and helps maintain trust throughout your campaign. 

Small gestures like thank-you notes or milestone shoutouts reinforce a sense of community. This is essential for any successful campaign that depends on people, not just numbers.

Final thoughts 

A well-executed crowdfunding initiative harnesses the power of community support by helping startups, nonprofits and creatives bring bold ideas to life. Even if you’re testing a new product, crowdfunding harnesses community support to offer a low-risk, high-reward path to getting started. 

Success doesn’t just come from having a great idea. It takes thoughtful planning, clear storytelling and the right tools to run a professional campaign that builds trust and inspires action. 

Start your crowdfunding journey with Bluehost WooCommerce hosting, featuring one-click WordPress setup, free domain registration and Yoast SEO to promote your campaign effectively. With built-in marketing tools and reliable performance, Bluehost gives you everything you need to engage backers and grow your audience online. 

Ready to launch your crowdfunding campaign with confidence? Get started with Bluehost WooCommerce hosting today and turn your campaign into a success story.  

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