Crowdfunding: Where Will We Go From Here?

CROWDFUNDING: Where Will We Go From Here? Research estimates $5.1 billion has been raised with crowdfunding so far in 2014; double the amount raised in all of 2012. Since the Security and Exchanges Commission (SEC) lifted the ban on general solicitation to allow entrepreneurs to advertise they are looking for investors, and more crowdfunding sites are hitting the scene, equity seems to be the name of the game, but is that the only place it's heading? CROWDFUNDING AT A GLANCE 63% Crowdfunding expanded at an annual compound rate of 63% a year from 2009-2012. Average successful crowdfunding campaign is around $7,000. Average campaign lasts around 9 weeks. 1 For every In 2014, crowdfunding will benefit the global economy with an estimated: $37,702 invested, one new job is created. 270,000+ jobs For every $65+ billion injected into the economy. $1 invested, $6.36 revenue is produced. In the future: $3.2 trillion 2 million in economic value per year. jobs created by 2020. These platforms raised more than $1.5 billion and funded more than 1 million projects US - 344 Germany - 26 UK - 87 Canada - 34 France - 53 Australia - 12 As of April 2012, there were 452 active crowdfunding websites worldwide. Netherlands - 34 India - 10 Very little fraud has been reported. Out of 43,193 different projects funded on Kickstarter®, there has only been 4 reported cases of possible fraud. This represents a 0.01% fraud rate. AUSTRALIAN SMALL SCALE 0% fraud reported in Australia since operations began in 2007. ASSOB OFFERINGS BOARD in the U.K. since operations crowdcube 0% fraud began in 2009. Inspiring Investment EQUITY CROWDFUNDING Platforms now allow for investing in people, not only companies. There's no need for a solid business plan. Investors will now have easier access to smaller private ventures, which can help stimulate the small business market. SAngelList Upstart This may stimulate an increase in crowdfunding from angel investor groups, such as AngelList. Rachel Kim, an MBA whose resume includes Zynga and Google, raised $100,000 from 37 investors. JOBS ACT PAVE JUMPSTART OUR BUSINESS STARTUPS JOBS Act lifts the ban on securities crowdfunding for startups. Companies can now raise up to $1 million a year through crowdfunding without going through the process of registering the securities with the SEC. Zimuzor Ugochukwu raised $5,600 from 4 investors. The investors guidance helped launch her line of wearable digital health products. Companies cannot sell stock or debt on their own, they will have to go through an intermediary website. DONATIONS & REWARDS CROWDFUNDING We can expect to see fast growth on an international level, with more growth visible in under developed countries. We already see it happening with things such as: HOMESTRINGS Zcomaal COME MAKE A DIFFERENCE < BACK HOME Lebanon based crowdfunding featuring a mix of cause and entreprenurial listings. Between 2011 launch and February 2013: $) Website has mobilized $25 million In less than six months of operation, in funds covering 13 African countries for: • Products • Projects • Funds four campaigns have raised over • Bonds • Public-Private $100,000. partnership opportunities Slower growth will be seen in the United States. KICK STARTER Businesses will likely start to use Kickstarter® and similar websites as part of their marketing strategies, to: Attract media attention Approach professional investors Kickstarter® will not participate in equity crowdfunding. Indiegogo® has said they will participate in equity crowdfunding. Kickstarter® may become an acquisition target for another major brand such as: ebay PayPal amazon.com The platform already uses Amazon Payments® as its payment processor. CROWDFUNDING AS A SERVICE Featured campaigns get a lot of pageviews, but that takes traffic away from the campaigner's official website. Plugins, like the one FundRazrTM introduced in December 2013, will continue to grow in popularity. OFundRazr These plugins will allow campaigners to embed their campaigns directly into their own websites. DEBT CROWDFUNDING According to Business 2 Community, debt crowdfunding, or peer-to-peer lending is currently the largest segment of the crowdfunding market. Represents over half of all money invested. Each country has its own laws in regards to how this is done, but in the United States, there are only two peer-to-peer lending platforms for working with non-accredited investors. Prosper® Lending Club® Non-accredited investors have a net worth less than $1 million (including spouse) and have earned less than $200,000 per year ($300,000 with spouse) for the last two years). Social lending is likely to experience major growth in 2014 and beyond, as we continue to see changes in student loans and peer-to-business industry. More Niche Players As more platforms come to the scene and seek to be different from the competition in some way, we'll see more niche crowdfunding websites. Instead of multi-category platforms such as Indiegogo, expect to see specific sites for: Social causes Science and technology Real estate YouTube" plans to add built-in crowdfunding capability. Video creators will be able to put a "virtual tip jar" alongside their videos. The Disappearance of the Platform We may see platforms fall by the wayside in favor of the direct approach. Lockitron Lockitron was turned down by Kickstarter®. Lockitron raised $2,278,891 from 14,704 people in 30 days using its own site. The company created a keyless entry device that will work with any smartphone. Selfstarter Lockitron created their own open source platform, Selfstarter, to help others with crowdfunding campaigns. You control the campaign, so you don't pay commissions to another platform. Sources BusinessProfileso infodev.org, crowdfundbeat.com, inc.com, business2community.com, usnews.com, fool.com, infodev.org, itbusiness.com, investopedia.com, factcoexist.com, lockitron.com, selfstarter.us businessprofiles.com