By Daniel Rowles, lead trainer at Target Internet and author of Digital Branding (Kogan Page). Last updated: November 2026.
Crowd source funding, usually called crowdfunding, is raising money for a project or business from a large number of people, typically through an online platform. Backers receive a reward, shares, interest on a loan or nothing at all if they are donating. Success depends far more on audience building and marketing than on the platform you choose.
What is crowd source funding?
Crowd source funding replaces one large cheque from a bank or investor with many small contributions from the public. The person or business raising money creates a campaign page on a platform such as Kickstarter, Indiegogo or Crowdcube, explains the project, sets a target and promotes the page to their audience.
For marketers the important point is that a crowdfunding campaign is a marketing campaign with a deadline. The page is a sales page, the video is an advert, and the backers are your first customers. That is why so much of the advice that follows is about preparation, messaging and communication rather than finance.
What are the four types of crowd source funding?
Most guides once listed three types of crowdfunding. Today it is more useful to think in four, because debt crowdfunding has become a distinct, regulated market:
- Reward crowdfunding: backers pledge money in return for a product, perk or experience, often with different reward tiers at different pledge levels. This is the Kickstarter and Indiegogo model.
- Donation crowdfunding: people give to a cause or a person and expect nothing back. GoFundMe and JustGiving are the familiar examples.
- Equity crowdfunding: investors buy shares in a business. In the UK, Crowdcube and Republic Europe are the best-known platforms.
- Debt crowdfunding: lenders are repaid with interest, through peer-to-peer lending or community bond offers.
Is crowdfunding regulated in the UK?
Only some of it. The Financial Conduct Authority (FCA) regulates investment-based crowdfunding and loan-based crowdfunding (peer-to-peer lending), because backers are making an investment and can lose money. Donation-based and reward-based crowdfunding are outside FCA regulation.
In practice that means equity and debt campaigns come with investor warnings, appropriateness checks and platform due diligence, and they take longer to set up. Reward campaigns are much quicker to launch, but the protection for backers rests on the platform's own rules and your reputation. Promising a reward is a commitment to your customers, so plan as if you will be held to it. This article is not financial or legal advice: if you are considering equity or debt crowdfunding, speak to the platform and a qualified adviser first.
How does crowd source funding work on Kickstarter and Indiegogo?
Kickstarter, the largest reward platform, uses an all-or-nothing model. Backers are only charged if the campaign reaches its funding goal by the deadline. If it falls short, no money changes hands.
When a project is funded, Kickstarter takes a 5% platform fee. Its payment processor, Stripe, charges roughly 3 to 5%, according to Kickstarter's help centre. Budget for 8 to 10% of the total going on fees before you set your goal.
The scale is significant. Kickstarter has collected more than $8.5 billion in pledges since 2009, but only around four in ten projects reach their goal, according to Search Logistics. 2024 was its biggest year to date, with creators raising $706 million. Two older campaigns still show what is possible: the Pebble Time smartwatch raised more than $20 million and the Exploding Kittens card game raised more than $8 million.
Indiegogo has changed hands. In July 2025 it was acquired by Gamefound, a crowdfunding platform built for tabletop games, which said Indiegogo would move to the same flat 5% fee and that the two sites would continue as separate brands. Indiegogo has historically offered flexible funding as well as all-or-nothing campaigns, so check the current options on the platform before you plan around them.
How do you choose the right crowdfunding platform?
Choose the type of crowdfunding first and the platform second. A few questions narrow the choice quickly:
- What are you offering backers? A product or perk points to a reward platform, shares to an equity platform and a cause to a donation platform.
- Where is your audience already? Some platforms have strong communities in particular categories, such as tabletop games, design or technology, which can bring backers you would not reach on your own.
- Which funding model suits you? All-or-nothing creates urgency and protects you from being underfunded, while flexible funding lets you keep what you raise but can leave you short of what you need to deliver.
- What will it cost? Compare platform fees, payment processing, and any charges for promotion or pledge management after the campaign.
Whichever platform you pick, it will not bring the crowd for you. Platform discovery helps campaigns that are already gaining momentum, which is why early backers from your own audience matter so much.
What makes a crowdfunding campaign succeed?
In episode 155 of the Digital Marketing Podcast, we spoke to crowdfunding specialist Heather Delaney of Dynamo Communications about what separates funded campaigns from failed ones. Her advice is still sound, and it lines up with what the platforms themselves now recommend.
Treat the campaign page as a messaging document
Heather put it simply: "A crowdfunding page is a large messaging document for your campaign. It should be crafted to target different pledge levels." Each reward tier speaks to a different type of backer, from the supporter who pledges a small amount to the enthusiast who wants the premium version. Write the page so each of them can find their reason to back you.
Keep the campaign video short and focused
The video is often the first and only thing a visitor watches. Heather's view was that the video is one of the most important parts of the page, and that around a minute and a half to two minutes is the sweet spot. Show the product, the problem it solves and the people behind it. Our guide to optimising your video content covers the basics.
Start your marketing well before launch
Most campaigns are won or lost before launch day. Heather recommended preparing PR and marketing around six to eight weeks ahead, and before that putting out ad spend and email marketing to test your audience, so you know where your potential customers are and can push budget towards them. She also stressed building production, manufacturing and shipping costs into your plan, and noted that many platforms let you limit shipping by geography to keep costs down.
A list of people who have already said they are interested is the most valuable asset you can bring to launch day. Early pledges create momentum, and momentum attracts the platform's own audience. Setting up a sign-up page and an automated email sequence weeks in advance gives you that list.
Copy and paste prompt: "I am planning a reward crowdfunding campaign for [product] aimed at [audience]. My funding goal is [amount] and launch is [number] weeks away. Create a week-by-week pre-launch plan covering audience testing with paid social, an email sign-up page, PR outreach, campaign video production and a launch-day email sequence. Flag the three biggest risks for a campaign like this."
Manage expectations honestly
Delays are common, especially for physical products. Heather's advice was to under-promise and over-deliver, and to be open, honest and keep people updated. Regular, candid updates during and after the campaign protect your reputation even when things slip.
Prepare for life after the campaign
When the campaign closes, the platform stops being your shop window. Heather's point was that your website needs to be able to take sales or pre-orders before the campaign finishes, so you have a central hub to communicate with your new customer base. Plan that switchover early so the momentum you built does not disappear the day funding ends.
Running a crowdfunding campaign draws on almost every digital marketing skill: copywriting, video, paid social, email, PR and analytics. The Target Internet platform includes interactive courses across each of these, skills benchmarking to show where your gaps are, accredited certification, over 400 episodes of the Digital Marketing Podcast, and monthly live masterclasses.
What are the pros and cons of crowdfunding for a business?
Crowdfunding is not just a way to raise money. For many businesses the biggest benefits are about validation and marketing:
- Market validation: if people will not pre-order your product, you have learned something important before spending on manufacturing.
- A community of early customers: backers often become your most vocal advocates.
- Retained control: reward and donation campaigns raise money without giving away shares.
- Public failure risk: an unfunded campaign is visible to everyone, including future investors.
- Hidden costs: fees, video production, advertising, fulfilment and shipping can take a large share of the total raised.
- Idea exposure: publishing your product before it ships gives competitors a head start.
Crowd source funding also works for established organisations. Large brands have used reward platforms to test demand for new product lines in a market before committing to a full launch, treating the pledges as a pre-order signal rather than a source of capital.
Weigh these against your alternatives. A campaign that raises a modest sum but proves demand can make a later bank loan or investment round much easier.
If you are ready to take a structured approach to building your digital marketing skills, explore Target Internet membership options and discover how the platform's interactive courses, benchmarking tools, podcast, accredited certification and live masterclasses can help you plan and market your next launch.
Frequently asked questions
What is crowd source funding in simple terms?
It is raising money for a project or business from many people, each contributing a relatively small amount, usually through an online platform. Backers may get a reward, shares, interest or nothing if they are donating.
How does crowd source funding work?
You create a campaign page on a platform, set a funding target and deadline, and promote the page. On all-or-nothing platforms such as Kickstarter, backers are only charged if you reach your target. The platform then pays out the funds minus its fees.
How much does Kickstarter charge?
Kickstarter charges a 5% platform fee on successfully funded projects, and Stripe charges roughly 3 to 5% for payment processing. If a project does not reach its goal, no fees are charged.
Do you have to pay back crowdfunding?
Not for reward or donation crowdfunding, although you must deliver any rewards you promised. Debt crowdfunding must be repaid with interest, and equity crowdfunding gives investors a share of your business.
What is the difference between crowdfunding and crowdsourcing?
Crowdfunding raises money from the crowd. Crowdsourcing asks the crowd for ideas, content or work, such as product suggestions or user-generated content. The terms are often mixed up, and crowd source funding is a common way of describing crowdfunding.
About the author
Daniel Rowles is lead trainer at Target Internet and the author of Digital Branding (Kogan Page). He co-hosts The Digital Marketing Podcast and delivers digital marketing and AI training for organisations around the world, including digital transformation and future skills. You can find out more on his Target Internet profile.
Bibliography
1. Financial Conduct Authority (n.d.). The Financial Conduct Authority outlines how it will regulate crowdfunding. https://www.fca.org.uk/news/the-financial-conduct-authority-outlines-how-it-will-regulate-crowdfunding
2. Kickstarter (n.d.). What is Kickstarter? https://help.kickstarter.com/en-us/articles/16236556-what-is-kickstarter
3. Search Logistics (n.d.). Kickstarter stats and facts. https://searchlogistics.com/learn/statistics/kickstarter-stats-facts
4. Tubefilter (2025). 2024 was Kickstarter's biggest year yet. https://www.tubefilter.com/?p=185162
5. Kickstarter (n.d.). Pebble Time project page. https://www.kickstarter.com/projects/597507018/pebble-time-awesome-smartwatch-no-compromises
6. Kickstarter (n.d.). Exploding Kittens project page. https://www.kickstarter.com/projects/elanlee/exploding-kittens
7. Indiegogo (2025). Indiegogo's acquisition by Gamefound. https://support.indiegogo.com/hc/en-us/articles/39600950083988-Indiegogo-s-Acquisition-by-Gamefound
8. Target Internet (2017). Digital Marketing Podcast episode 155: Beginners guide to crowdfunding. https://targetinternet.com/resources/digital-marketing-podcast-episode-155-beginners-guide-to-crowdfunding/