How Does GoFundMe Work? (+ GoFundMe Fees & Alternatives)

Deirdre O'Donoghue
Deirdre O'Donoghue  |  June 11, 2019

You have to have money to make money.

And when starting an e-commerce business, your company can’t get off the ground without money, so many people resort to fundraising efforts like crowdfunding.

GoFundMe is one of the most popular fundraising platforms, whether you are an individual, group, or organization. From fundraising for disaster relief to raising money for your e-commerce dog leash company, if you can think it, then you can do it.

The opportunities are endless on GoFundMe, but how does the platform really work?

How does GoFundMe work?

GoFundMe serves as a secure way to collect money for a cause determined by you. Since e-commerce start-ups are on the rise, gaining capital before your product launch will help ensure your company stays afloat.

For example purposes, we are going to pretend that you’re starting a dog leash e-commerce business. Follow along these below steps to get an idea of how GoFundMe works and ways to get started.

 How does GoFundMe work

1. Start your campaign

So you have an idea. You want to make faux-designer dog leashes and you want to sell them online. 

Banks aren’t giving you loans and investors are difficult to convince. You decide that crowdfunding is your best bet for success. 

After analyzing the costs of buying wholesale, and all the other expenses that go into launching a business, you sign-up for GoFundMe and set your fundraising goal at $100,000.

Within your GoFundMe page, you tell your compelling story and add valuable photos and videos to sell your product to the masses.

All of this takes a day to put together, and you’re on your way to starting your dream company.

2. Share with friends

Your next step is sharing with friends. This is where having an online presence is crucial. Post on Facebook, LinkedIn, Instagram, Twitter, YouTube, anywhere that draws people in to donate to your dog leash start-up.

Be sure to make connections with potential stakeholders and buyers. Fostering these connections early-on will pay off in the long run.

Tip: Don’t forget to send emails and text messages! People you know are more likely to donate than strangers.

3. Manage donations

This is perhaps the most useful part of using a fundraising platform. Managing hundreds of donations takes a lot of time, and while you’re trying to get your dog leash start-up off the ground, thanking your donors may be on the bottom of your priority list.

Saying “thank you” should be at the top of your to-do list. Donors are going to be your first customers, and if you snub them by not thanking them, you’re at risk of losing your first customers.

GoFundMe takes care of the heavy lifting and allows you to send automated thank yous to all donors.

The best and last part of managing the donations is being able to withdraw the funds. Some fundraising software platforms don’t allow you to keep the money if you don’t hit your goal. In this case, they return the donations to the donors.

GoFundMe allows you to keep all donations made to your cause. Read more about customer's experiences using GoFundMe to determine if GoFundMe is the right platform for you. 

Browse GoFundMe user reviews →

GoFundMe fees

I’m sure you’re thinking, this sounds wonderful and all, but what’s the catch.

There is no cost to join GoFundMe and start a campaign. This cost to join is called a platform fee among other fundraising software.

However, there is a 2.9% transaction fee, plus a $0.30 fee per donation. These transaction fees are in place because credit card companies and third-party processing companies charge a certain amount per transaction. In order to cover those costs, they have these transaction fees in place.

GoFundMe says that the fees go directly to the payment processor so that information is kept secure.

If that money is going directly to third-party payment processors, then how does GoFundMe make money?

People have the option to leave tips on any donation to help cover the operating expense of GoFundMe. Since GoFundMe is used by so many people, these tips have added up and cover the costs of operating GoFundMe.

GoFundMe Alternatives

There are many alternatives to GoFundMe if it’s not the right fit for you. In fact, these 10 free fundraising software could be the right fit for your e-commerce business initiatives. 

  • Bloomerang 
  • Qgiv
  • Donately
  • Fundraising Report Card 
  • DonorBox
  • Snowball 
  • Fundly 
  • ProcessDonation
  • DONATION LITE
  • Revv

Exploring all of these fundraising software can be time consuming and hard to understand. We broke down the pros and cons with each of the free fundraising software on the market. 

Find the best FREE Fundraising Software for 2019. Show Me Now →

Raise the bar with fundraising

If you’re trying to raise capital for your business venture, then there’s a platform out there that can help. Whether you use GoFundMe or one of the GoFundMe alternatives, be passionate about your cause because that’s what’ll make people believe in your start-up.

Learn more about e-commerce and why you should get your foot in the door while you can.

Deirdre O'Donoghue
Author

Deirdre O'Donoghue

Deirdre O’Donoghue is a Senior Content Marketing Specialist at G2. She brings her passion for research and creativity to her writing. In her free time you can find Deirdre fostering puppies or exploring the Chicago foodie scene.