July 23, 2015
Last month, I was moderating a panel in which there were speakers from Indiegogo, Yelp and Hotels Tonight. I had a great discussion before, during and after the session with the Indiegogo person about crowdfunding. Crowdfunding is the uber concept of raising capital rather than seeking loans from banks. These platforms could be seen as intermediaries between donors and beneficiaries. In 2014, the total crowdfunded amount was estimated to be around $16 billion. The trend is expected to continue and the amount of money raised is going to surpass the traditional fundraising (through venture capital, etc.) by 2016, which accounts to approximately $30 billion each year today.
The concept of crowdfunding gained momentum in 2012 after the implementation of JOBS Act in US. It is a law intended to encourage funding of United States’ small businesses by easing various securities regulations. Crowdfunding can be categorized under three main categories according to Forbes:
The most active categories for the crowdfunding industry in 2014 were business & entrepreneurship (41.3%) followed by social causes (18.9%) and films & performing arts (12.13%).
Source: Massolution 2015 Crowdfunding Industry Report
According to The World Bank estimates, the crowdfunding would reach $90 billion by 2020. The implementation of Title II of the JOBS Act has opened new doors for equity crowdfunding which is estimated to reach the value of $2.5 billion by 2015.
However, the equity crowdfunding market is limited to accredited investors only and hence, it holds massive future opportunities and growth probabilities. Investors are waiting for the implementation of Title III and IV of JOBS act which is expected to give new opportunities to the entrepreneurs as well as to investors.
We have listed some of the major drivers for the success of the crowdfunding industry:
It will be exciting to see how future trends will shape up the crowdfunding market and what benefits it holds for young entrepreneurs.