By Ed McLaughlin and Wyn Lydecker
Crowdfunding has gone mainstream! Crowdfunding platforms across the world raised $16.2bn in 2014 – a growth of 167% vs. 2013. In the past, crowdfunding as a means of financing a business was a novelty, a rare exception to the traditional methods of bank loans, credit cards, asset selloffs, venture capital and borrowing money.
Since its inception in the 1990s, the crowdfunding industry has seen significant growth, driven by technology advancements, growth of online channels and the ever-increasing consumer dissatisfaction with the traditional providers, especially in the wake of the banking crisis. Today, announcing a crowdfunding campaign is just as common as any of these other options, if not more so. Ever since Title II of the JOBS Act was approved on September 23, 2013, equity crowdfunding has added to the sources of capital available for entrepreneurs, although equity crowdfunding must be made by accredited investors. Crowdfunding of all types is also making the fund-raising playing field more level for women.
In the Crowdfunding Industry Report by Massolution, a crowdsourcing organization, 1,250 sites globally were analyzed. It was predicted that this this number will increase by a further 112% over the course of this year, to reach $34.4bn in 2015.
The recent proliferation of crowdfunding platforms continues as new sites are launched for particular causes, specialist interests and regional projects. However, in terms of the big players in lending and equity models, there is more likely to be some consolidation, and as this sector develops there will be winners and losers.
According to a Bluerock Consulting Ltd Whitepaper, the winners are likely to be those platforms that have managed to differentiate themselves by:
- Developing a track record of performance in terms of returns, bad debt and fraud detection
- Attracting quality, headline projects that prove to be successful
- Encouraging high-profile lenders and business ‘angels’ to become advocates
- Delivering value-added services that go beyond acting as an intermediary – for example, community building and social media integration.
Ed McLaughlin is currently co-writing the book, The Purpose Is Profit: The Truth about Starting and Building Your Own Business, with Wyn Lydecker and Paul McLaughlin.
Copyright © 2015 by Ed McLaughlin All rights reserved.