Crowdfunding a Business: Everything You Need to Know to Get Started

Two Types of Crowdfunding

The first thing to settle when you’re figuring out how to crowdfund a business is which model you’ll use. Crowdfunding comes in four flavors, but two do most of the work when you’re raising capital.

Rewards-based crowdfunding. Backers pledge money in exchange for a product, a perk, or an experience. They don’t get a share of your company. This is the dominant model on Kickstarter and Indiegogo, and it fits tangible consumer products like hardware, games, and wellness goods. No ownership changes hands, and there’s no securities filing. The catch is fulfillment. You owe backers the thing you promised.

Equity crowdfunding. Backers become investors. They receive securities, whether a stock stake, a SAFE, a convertible note, or a revenue-share instrument, in exchange for their money. In the US this runs under the SEC’s Regulation Crowdfunding, or Reg CF, which took effect in 2016 and let non-accredited members of the public invest in private companies for the first time. Equity crowdfunding suits software, B2B, and capital-intensive businesses that can’t hand a backer a physical reward.

Two more models are worth naming for context. Donation-based crowdfunding, the GoFundMe model, is where contributors give with nothing expected in return, common for causes and community projects. Debt-based crowdfunding, also called peer-to-peer lending, is where backers lend money that gets repaid with interest.

The equity market is real, not fringe. From May 2016 through the end of 2024, roughly 7,000 issuers launched about 8,500 Reg CF offerings, raising around $1.3 billion in reported proceeds, according to the SEC’s Analysis of Crowdfunding.

Step 1: Start with a good idea

Crowdfunding rewards ideas that are easy to explain and easy to root for. The strongest campaigns solve a clear problem, show a working prototype or demo, and give the crowd a reason to care beyond the product itself. Because rewards platforms run all-or-nothing, validation before launch isn’t optional. A campaign that stalls at 20% funded on Kickstarter collects nothing.

A few validation moves worth making before you go live:

• Build a pre-launch email list. Gauge real intent before you spend a dollar on the campaign page. Interest you can measure beats interest you assume.
• Check your fulfillment math. Confirm you can actually produce and ship at the price you’re promising. Fulfillment math, not vibes.
• For equity, confirm you’re investable. A real market, a credible plan, and financials you can stand behind. Backers who buy securities are underwriting a business, not a story.

Here’s the quiet part. An idea people trust is usually backed by numbers people can trust. Founders who show up with a clean set of books, a realistic budget, and defensible unit economics convert better than founders selling a story alone. That groundwork is exactly what outsourced accounting services exist to build, well before a single dollar is pledged. It’s the same discipline that separates a fundable idea from a hopeful one.

Step 2: Choose between rewards or equity crowdfunding

This is the fork in the road, and the rules on each path are very different.

Rewards crowdfunding. No investors, no equity given up, no securities regulator involved. You keep 100% ownership of your business. The trade-offs are a delivery obligation to every backer and a tax bill, because the money you raise is generally treated as taxable income. More on that below.

Equity crowdfunding under Reg CF. You sell securities to the public, which means the SEC sets the terms. The current numbers matter here, because many older guides still quote outdated figures.

• A $5 million cap. A company can raise up to $5 million through Reg CF in any rolling 12-month period. That ceiling rose from about $1.07 million in 2021, so ignore any guide still citing the old number.
• A registered intermediary. Every Reg CF raise runs through an SEC-registered funding portal or broker-dealer. You can’t run one off your own website.
• A Form C filing. You file Form C with the SEC before the offering, disclosing the business, the terms, and your financials.
• Investor limits. Non-accredited investors are capped based on their income and net worth. Accredited investors have no cap.
• Financial-statement tiers. Raise $124,000 or less and you can self-certify. Raise between $124,000 and $618,000 and a CPA has to review your statements. Raise more than $618,000 and you need audited financials. All of it must be prepared under US GAAP.

That last point is where a lot of first-time founders stall. A CPA-reviewed or audited GAAP statement isn’t something you assemble the week before launch. This is the gap indinero was built for, the space between a spreadsheet and financials a regulator and investors will actually accept. If equity is your path, read up on what equity really means on your books before you file.

Step 3: Create a concise pitch

A crowdfunding pitch has to answer three questions fast. What is it. Why does it matter. Why you. The page format is fairly standard across platforms: a short video, a clear headline, a problem-and-solution narrative, proof in the form of a prototype, traction, or team, a tiered menu of rewards or investment terms, and a transparent budget.

A few things that reliably move the needle:

• Lead with a short video. A pitch video lifts conversion. Keep it tight and show the product actually working, not a mood board.
• Break the goal into visible budget categories. When backers can see where the money goes, transparency reads as competence.
• For equity, treat the pitch as an investor deck. Backers are underwriting a business, so market size, business model, use of funds, and financials belong front and center.

There’s a phrase that shows up on every campaign page: use of funds. Treat it as a line item, not a slogan. Founders who can show a credible, itemized budget, and then report against it once the money lands, build the kind of trust that turns a first-time backer into a repeat investor. That reporting discipline isn’t marketing. It’s an accounting function, and it’s the part of the pitch that keeps paying off long after the campaign closes.

Step 4: Select your platform

The right platform follows from your model. Here’s how the major options break down, with current fees and funding rules.

Rewards platforms:

• Kickstarter. All-or-nothing only. If you miss your goal, no pledges are collected and you pay nothing. On a funded campaign, Kickstarter charges a 5% platform fee plus payment processing of roughly 3% to 5% per pledge, per its official fees page. Kickstarter reports billions of dollars pledged across its history, with a project success rate in the low-to-mid 40% range.
• Indiegogo. Also a 5% platform fee plus payment processing. One update worth flagging: Indiegogo moved to all-or-nothing funding, so the old flexible, keep-what-you-raise option that many 2016-era guides describe is no longer the default.

Equity platforms (Reg CF portals):

• Wefunder. Charges the issuer roughly 7.5% of the amount raised, collected only on a successful raise.
• StartEngine. Charges founders around 7% of funds raised plus a small equity component, collected on success.
• Republic. Charges roughly 6% in cash plus a 2% equity component of the amount raised, collected only if the raise hits its target.

Donation platform:

• GoFundMe. For US personal fundraisers there’s no platform fee. GoFundMe runs on optional donor tips, and each donation carries payment processing of about 2.9% plus $0.30, per its pricing and fees page. This fits causes more than capitalizing a for-profit, but it’s worth naming.

The structural distinction to understand is all-or-nothing versus keep-what-you-raise. All-or-nothing, now the norm on both Kickstarter and Indiegogo, means you collect nothing unless you hit your goal. Set the bar too high and you walk away empty-handed. Set it honestly.

Step 5: Determine costs and set your goal

Set your funding goal to the amount you actually need to keep, then work backward through every cost. The sticker number and the take-home number are never the same.

Build these into your goal:

• Platform fee. Roughly 5% on rewards platforms, 6% to 7.5% on equity portals, often plus an equity component.
• Payment processing. Roughly 3% plus about $0.30 per transaction on most platforms.
• Fulfillment. For rewards campaigns, the cost to make, package, and ship every reward. This is where under-planned campaigns lose money even after they win.
• Marketing. Successful campaigns reinvest real money into ads and outreach. Budget for it up front.
• Taxes. The one founders forget.

On taxes, the IRS position is direct. Money raised through crowdfunding is generally taxable income unless it qualifies as a genuine gift, and a business raise rarely does. Rewards proceeds are generally taxable, because a backer receives a product in exchange, which makes the pledge a pre-sale. Equity proceeds are generally not taxed on receipt, because they’re capital contributed for securities. The IRS spells out both cases in its guidance on money received through crowdfunding.

Two more details catch people off guard. A Form 1099-K can now be issued once payouts to you pass $600, down from the old $20,000 threshold, so the IRS sees the money either way. And you should keep complete records of the raise and how you spent it for at least three years. A $100,000 rewards campaign never nets $100,000, and a tax and accounting partner keeps the number you keep close to the number you planned. For a fuller picture of how a raise interacts with your return, see our guide to business startup costs and their tax treatment.

Step 6: Add the finishing touches

Before you launch, the small details separate funded from stalled. Run through this checklist.

1. Tighten the video and hero image. These drive first impressions and conversion more than any other element on the page.
2. Price your reward tiers. Include an accessible entry tier and a headline tier, and confirm every tier is fulfillable at a margin that survives fees and shipping.
3. Line up a launch-day push. Early momentum matters. Warm up your email list and community so day one moves the needle, which both the crowd and the platform algorithms reward.
4. Plan post-campaign updates. Backers who feel informed become repeat backers and word-of-mouth. Set a cadence and keep it.
5. Get your financial house in order. For equity, that means GAAP financials at the tier your raise requires. For rewards, that means a system to track incoming pledges as revenue and set aside for taxes and fulfillment.

The finishing touch nobody photographs is the back office. Clean books, a tax plan for the proceeds, and a way to report use of funds back to the people who believed in you early. It’s the least glamorous part of a raise and one of the most decisive. Bad numbers tend to surface at the worst possible moment, which is exactly what our rundown of accounting problems that can sink a funding round walks through.

By the crowd, for the crowd

Crowdfunding represents a real shift in where capital comes from. Money that once flowed only through banks and accredited investors now flows from customers and community. Reg CF opened private-company investing to the general public, and rewards platforms turned early customers into a company’s first true believers. That’s a genuine change in who gets to fund the next good idea.

But the through-line of this whole guide holds. Crowdfunding is a capital strategy, not free money. The founders who do it well treat it like the financing event it is. They validate demand, pick the right model, set an honest goal that survives fees and taxes, and keep books clean enough that backers, investors, and the IRS all trust the numbers.

That last part is where indinero comes in. We handle the financial side of a raise, from tracking campaign funds as they land, to the tax treatment of the proceeds, to the GAAP financials an equity round requires. If crowdfunding is one piece of a bigger plan, it’s worth weighing against other business financing options and the friends and family round many founders run first. And when you’re ready to build the finance function behind the raise, our fractional CFO services can help you plan the whole capital path.

Run the campaign. We’ll keep the numbers investors expect. Reach out for a free consultation, and we’d love to learn about your business.

Frequently asked questions

Still weighing whether crowdfunding fits your business, or how the money gets taxed once it lands? These are the questions founders ask us most before they launch a campaign.

Is money raised through crowdfunding taxable?

Money raised through crowdfunding is generally taxable income, according to the IRS, unless it qualifies as a genuine gift. A business raise rarely qualifies. Rewards proceeds are taxable because backers receive a product, which makes the pledge a pre-sale. Equity proceeds usually aren’t taxed on receipt, since they’re capital contributed for securities. Indinero handles the tax treatment of your raise, so the amount you keep stays close to the amount you planned.

How much can a business raise through equity crowdfunding?

A business can raise up to $5 million through equity crowdfunding in any rolling 12-month period under the SEC’s Regulation Crowdfunding, or Reg CF. That ceiling rose from about $1.07 million in 2021, so older guides citing the lower figure are outdated. Every Reg CF raise runs through an SEC-registered funding portal and requires a Form C filing before the offering. Indinero can prepare the GAAP financials a Reg CF raise requires at your dollar tier.

Do you have to pay back money raised through crowdfunding?

You don’t repay money raised through rewards or equity crowdfunding, unlike a loan, but each model carries its own obligation. Rewards backers expect the product or perk you promised, so fulfillment is your debt. Equity backers receive securities, meaning you give up a share of ownership rather than repay cash. Debt-based crowdfunding is the exception, since those backers lend money repaid with interest. Indinero tracks campaign funds and the obligations tied to them so nothing gets missed.

How much do crowdfunding platforms charge in fees?

Crowdfunding platforms typically charge a 5% platform fee on rewards sites like Kickstarter and Indiegogo, plus payment processing of roughly 3% to 5% per pledge. Equity portals cost more. Wefunder charges around 7.5%, StartEngine about 7% plus a small equity component, and Republic roughly 6% cash plus 2% equity, all collected only on a successful raise. A $100,000 campaign never nets $100,000, and indinero helps you set a goal that survives fees and taxes.

What financial statements do you need for a Reg CF equity raise?

Financial statements for a Reg CF equity raise scale with how much you raise, all prepared under US GAAP. Raise $124,000 or less and you can self-certify. Between $124,000 and $618,000, a CPA has to review your statements. Above $618,000, you need audited financials. A CPA-reviewed or audited GAAP statement isn’t something you assemble the week before launch, which is exactly the gap indinero was built to close for founders heading into an equity raise.

Will you receive a 1099-K for crowdfunding proceeds?

You may receive a Form 1099-K for crowdfunding proceeds once payouts to you pass $600, down from the old $20,000 threshold. That means the IRS sees the money whether or not you report it, so accurate records matter. Keep complete documentation of the raise and how you spent it for at least three years. Indinero keeps those records clean and reconciles campaign funds to your books, so the reporting holds up if the IRS asks.