Crowdfunding - Raising Billions

Anjli Jain Jan 25, 2018

Crowdfunding, a fancy name for something which we all may have been a part of at one time or another. It may surprise you but crowdfunding can go back to as long as to the 17th century, all of it contributing to the recent surge in today’s modern crowdfunding activities.

In simple terms, crowdfunding is a form of alternative finance, a practice or method to raise a desired sum of money from a large group of people via the internet, utilizing the social media version of fundraising. This model is typically internet-mediated registries, helping businesses, artists, musicians, entrepreneurs and many others to raise a large amount of money by persuading individuals to donate in their projects, products or services.

Global Impact

The concept of crowdfunding is an innovative method of finance which inspires many ventures and startups seeking a seed-stage investment to validate their products and services in the market and to gain exposure.

The 20th century has seen many changes from the peer-to-peer lending marketplace in the U.S., witnessing an increase in online donations and contributions in exchange for rewards and perks, with North America and Europe leading to becoming the dominant home for crowdfunding portals.

Equity crowdfunding has also become legal in countries like United Kingdom, France, Austria, Germany, Netherlands, Australia, Hong Kong and the U.S. with President Obama legalizing the equity crowdfunding by signing the JOBS Act into law. To add, crowdfunding has been blossoming on the public stage, backing up major social causes and startups and many other causes and activities as seen below:

Image Credit: Massolution

Billion Dollar Expectations

Crowdfunding campaigns are more successful today as compared to the normal investment methods and have witnessed funds flowing in billions of dollars for crucial projects. Pledgers have been seen to donate anything between $1 to $10,000 for a project cycle, and with the new revolution of equity crowdfunding gaining momentum, it is attracting new investing class to finance start-ups by purchasing ownership stakes, backed by Title III and Title IV of the JOBS Act.

Apart from the benefits that new businesses and projects reap through crowdfunding campaigns, there are many other incidents and cases that have been supported by the crowdfunding industry leveraging to bring together many helping hands in support of human plight. This growth in the crowdfunding industry is fueled by the generosity of ordinary people to help the others out there, by raising funds online to support each other when a natural disaster strikes. For example, there were more than 850 campaigns launched during the first week of Hurricane Harvey, raising $4.5 million to support and care for rescued pets and rebuilding of homes.

More and more people are turning to crowdfunding where they can share their personal plights to raise small or large funds from donors online, growing into a multi-billion-dollar charity industry. With an approximate 600 crowdfunding platforms all over the world, a survey showed that crowdfunding raised an estimated fund of $530 million in 2009, $1.5 billion in 2011, $2.7 billion by 2012 to $6.1 billion by the end of 2013, with more than $1.6 billion from North America and $950 million coming in from Europe. 2014 saw companies and individuals raise nearly $16.2 billion through crowdfunding, which was 167% more from the what was raised in 2013.

The Crowdfunding statistics for 2017 reports a global amount raised for $34 billion, broken into $25 billion through peer-to-peer lending, $5.5 billion through reward and donation and $2.5 billion through equity crowdfunding. The projection of the crowdfunding industry is expected to grow over $300 billion by 2025.

The Bottom Line Is

It is like a whole new world of investment. With online crowdfunding platforms, entrepreneurs and small businesses can seek funding for various inventions and projects from unaccredited investors. This new fundraising model helps several startups and entrepreneurs to find the capital they need to spread their wings and take-off, with the support of thousands of donors’ who are ready to fund in the company they believe in.

Although most of the reasons for crowdfunding campaigns are focused around education, medical causes, animal welfare, human welfare, attracting millions of individual donors to come and donate to these causes. However, crowdfunding can also be used for anything from investing in a startup to launching a business, to real-estate or showcase an individual’s artistic vision. It doesn’t really matter which industry you are from or what you are selling. What really matters is that there should be enough people and backers out there to support your product, cause, and the vision.