5 Things to Do Before Launching a Crowdfunding Platform
In today’s fast-paced world, crowdfunding has become a popular alternative to traditional financing methods like bank loans and credit unions. As more projects seek funding through these platforms, it’s crucial to be well-prepared before launching your own.
How to launch
At Crowdsofts, we’ve noticed that many entrepreneurs face similar challenges when starting a crowdfunding platform. To help you navigate these challenges, our team has compiled a list of essential steps to take before you get started.
Here are the key topics we’ll cover in this article:
Defining Your Business Idea
Understanding Licensing and Regulation
Assembling the Right Team
Managing Cash Flow, EMI, and KYC
Choosing the Right IT Solution
These steps are designed to give you a solid foundation as you prepare to launch your crowdfunding platform, ensuring you’re ready to succeed in this competitive market.
1. Define Your Idea
Start by carefully planning your business strategy. Decide on the types of projects you want to fund through your platform. For example, you might focus on P2P (peer-to-peer) loans, where individuals seek financing for personal purposes. Alternatively, you could support P2B (peer-to-business) projects, where businesses approach your platform for funding, offering fixed-interest loans or equity-based investments. Each type of project has its own advantages and considerations for investors.
Remember, you’re not limited to just one type of project. You can always diversify and add new project types as your business grows and gains a successful track record.
In addition to refining your idea, it’s crucial to consider your budget. Running a crowdfunding platform requires significant investment before it becomes profitable. You’ll need funds for company creation, licensing, hiring a team, and building the IT infrastructure, which will need regular updates. Marketing expenses are also essential to make your platform visible and attract both investors and project owners. It’s common to operate at a loss during the first year or two, but careful planning can help you navigate this period.
2. Understand Licensing and Regulation
With a solid business idea and a clear plan in place, the next step is to navigate the legal landscape. Contact a fintech lawyer in the region where you plan to operate. An experienced lawyer specializing in crowdfunding will guide you through the legal requirements and help you prepare the necessary documents for licensing.
Crowdfunding regulations vary widely depending on the region. For example, the European Union has its own crowdfunding license, while in the United States, regulations can differ by state. Licensing can be a costly and time-consuming process, often taking three to six months and costing up to €50,000 in the EU or over $100,000 in the USA. Crowdsofts has established relationships with crowdfunding lawyers, offering our clients reduced rates for legal services.
We were mentioned!
“Crowdfunding is a new and effective tool to finance various projects, avoiding long and exhausting communication with banks. As experience has shown, it is 10 times cheaper to rent the specialized software to launch your crowdfunding platform in less than 2 months” says CEO Tadas Budrikis.
Get in touch
Eager to start your own crowdlending business? Let’s talk about your idea! Contact us for a personal offer on Crowdsofts that is customized to your needs.
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Why is it better to rent a crowdlending platform than to build your own?
We receive this questions quite often and thought we’d tackle it and show some of the advantages of renting out software such as Crowdsofts.
First and foremost is that renting out an advanced crowdfunding platform is cost effective. As you can probably imagine, end-to-end intelligent automation of the entire crowdfunding process can be tricky. Not only in terms of programming, which in itself requires experienced and expensive specialists in certain programming languages, the lending process itself, security specialists, high-end quality specialists that have broad knowledge not just of technical, but financial sector as well. There are also permits and licenses that must be authorized by local institutions in order for the white label P2P lending platform to ever see the light of day. The entire process is not time or cost efficient.
Even if a company has enough time and financial resources to go through and build a crowdfunding software, there are post-development expenses and returns of investment to worry about. Marketing and sales of crowdfunding services are essential to make the investment for building the software worthwhile. Constant development and updates will also be crucial, as it’s necessary to keep improving backend tech even post launch. If you built a crowdfunding software yourself, the development of online crowdfunding business rests on the user-friendliness of the portal, as well as your personal sales and marketing skills.
To outsource a crowdfunding software such as Crowdsofts means focusing solely on sales and marketing. The software will already be developed with excellent features that will help your business thrive. Not only that, the dedicated support will make sure the program is up to date, sees constant improvements and any questions you will have about its use and issues that arrive will be answered in a timely manner. In this scenario, all you will have to provide is a design that Crowdsofts can mount to personalize the look of your software. And that’s it.
Developing a crowdfunding software is a big investment with returns not guaranteed. We would always encourage any eager businessmen and women to focus on their strengths in sales and marketing, rather than endure the arduous process of software development. Crowdsofts is a company that can attest to the difficulty of this even when we do have all the brilliant specialists and know-how we need. Rather, we would help you adapt Crowdsofts to your business needs. Whether it’s personal loans, business loans, collateral loans or any other type of lending business, our customizable white-label crowdfunding software is ready to be molded to any financing processes you want to cover.
With strong client-facing interface and inclusive back-office features, Crowdsofts is the best solution to facilitating crowdfunding in any business sector. To find out how the process of acquiring such a software would go, you can always refer to our How it works page for details, or just contact us to talk in-depth about your needs.
Let Crowdsofts be your trusted fintech partner.