Although the idea of crowdfunding has been around for centuries, the first profitable online campaign took place in 1997. Online donations from fans helped a British rock band pay for a reunion tour. Crowdfunding has evolved into a multimillion dollar sector in less than 20 years, benefiting individuals, NGOs, businesses, and now startups. According to a World Bank report, global investments made through crowdsourcing are expected to total $93 billion by 2025. Let’s examine how crowdsourcing might develop to achieve that goal.
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Investing in Startups
The early focus has been on reward-based platforms like Indiegogo, Kickstarter & GadgetAny. Equity-based crowdfunding is the upcoming major wave, starting this year. Previously, only the rich could afford to own startup shares. Due to these new rules, companies are searching for individuals who are interested in supporting both their vision or dream as well as the firm as investors.
Crowdfunding offers businesses a distinct (and, for many businesses, superior) option to venture capital or angel investors for obtaining funds. The new investment class, a larger group made up of middle-class Americans, will control the investment and consequently the decision-making power. The worlds of financing, crowdsourcing, and startups have completely changed.
Educating the Investors
There will be a larger requirement for education as a result of these modifications to the investing and crowdfunding rules. To attract the new class of investors’ money, crowdfunding platforms, thought leaders, and businesses searching for investments will find it worthwhile to educate them on equity, fundraising, investing, and current trends in crowdfunding. To meet these needs, websites like Shareholder Academy have appeared online.
“In the end, education is key and we look forward to the success of Shareholder Academy to help grow all verticals within crowd finance,” Fishfeld said.
Rise of Niche Platforms
Even though the first crowdfunding portal, ArtistShare, launched in 2000, it’s likely that in the coming years we’ll see a return to such specialized platforms. Platforms will find value in focusing their emphasis and attracting a particular crowd because there are so many possibilities for crowdfunding. To better serve their backers and stand out, specialized fields such as gaming, education, music, nonprofits and charitable organizations, research, and local initiatives are developing their own platforms.
“We see the rise of niche platforms, and with it, aggregation tools, like Property.com, and centralized marketplaces for liquidity, like CFX,” said Jordan Fishfeld, CEO of PeerRealty. “We’ll see a rise in investment grade products, like real estate, oil exploration, mining, viatical settlements, those assets that really were left for institutions finally finding their way to main street.”
Some Top Crowdfunding Platforms & Their Niches
FundRazr
This platform enables people, NGOs, and businesses to raise money online for causes that are important to them. You can choose from all-or-nothing or keep-it-all fundraisers, delaying access to your donations until you’ve met your funding goal.
Fundly
Digital fundraisers for a variety of causes, such as fraternities and communities, the military, and politics, can be created by both individuals and charity organizations using Fundly.
Kickstarter
Designers, artists, craftsmen, musicians, and other creatives of all levels can use Kickstarter. It takes pride in being the only site wholly dedicated to fostering a sense of community around artistic endeavors.
Indiegogo
Indiegogo is a crowdfunding platform that allows people to raise funds for creative projects. This includes everything from making art, music, and books to inventing new technologies and starting businesses.
GadgetAny
GadgetAny is a crowdfunding community of more than 100,000 backers. Most startups are using Gadgetany to launch their tech related projects. This platform is specifically designed for tech related projects and works on a reward based model.
Technology in Crowdfunding
It’s critical for crowdfunders to reach the appropriate audiences because there are so many projects looking for financing and so many backers looking for projects. In order to better serve the requirements of people posting projects, many platforms are now implementing a data-driven approach into their systems to meet the requirements of those posting projects. Additionally, some websites provide influencer search capabilities to find the well-known early adopters who will introduce campaigns to a wealth of potential backers. Sites like Crowdfunder and StartEngine are specifically designed for equity crowdfunding.
Crowdfunding’s expansion and benefits are also being recognized by marketing firms. Nowadays, entire teams and digital marketing firms are dedicated to assisting clients in using crowdfunding efficiently by publicizing their campaign, focusing on donors, and continuing with media coverage after the project has been funded.
“Crowdfunding investments won’t replace expertly managed investments funds any time soon,” said Daniel Pianko, Managing Partner of University Ventures, which has approximately $300 million under management. “But it will be an exciting part of a new investing dynamic. Going forward, entrepreneurs will have to consider whether going to crowd markets first or instead of private investors and investors will have to figure out what early crowdfunding success means for a potential company. And what’s most interesting is when professional investors start leading’ funding initiatives rather than raise their own small funds.”
