A Look at the Continued Success and Growth of Crowdfunding
Over the past decade, crowdfunding has grown into a multi-billion dollar industry that helps fund everything from businesses and their products to personal endeavors and needs. And despite annual claims from “experts” that the industry is about to collapse, the numbers tell a completely different story.
The Growth of Crowdfunding
The term crowdfunding refers to fundraising initiatives that are predicated on small individual donations – $10, $25, or $100-plus – that, when pooled together, satisfy the fundraiser’s targeted goal.
“This has all become possible in recent years thanks to a proliferation of websites that allow nonprofits, artists, musicians — and yes, businesses — to raise money. This is the social media version of fundraising,” explains Entrepreneur.com. “There are more than 600 crowdfunding platforms around the world, with fundraising reaching billions of dollars annually, according to the research firm Massolution.”
The increase in crowdfunding platforms is partly due to the proliferation of niche sites. While there are a handful of massive, multi-purpose platforms, it’s the individualized platforms that are really thriving.
Take Plumfund, for example. This crowdfunding site specializes in personal crowdfunding for things like baby showers, graduations, funerals, medical hardships, weddings, and more. With more than $350 million raised to date, Plumfund is proof that niche platforms will keep the industry growing.
Why More Growth is Inevitable
Have we reached the peak, or is there still room for crowdfunding to grow? Well, if you study the numbers and really begin to understand the feasibility of crowdfunding, then it becomes clear that growth is inevitable.
Here are a few of the top reasons why this industry will continue to scale well into the future:
- Popularity of Equity Crowdfunding
While crowdfunding is often used for individual purposes, many entrepreneurs and startups are turning to this popular fundraising mechanism to launch products. In fact, one report suggests the crowdfunding industry will actually surpass the entire venture capital industry by the end of this year!
Forbes contributor Chance Barnett agrees that equity crowdfunding will surpass venture capital, but thinks it could take a few more years. “If equity crowdfunding doubles every year like the rest of crowdfunding has, then it could reach $36 billion by 2020 and surpass venture capital as the leading source of startup funding.”
- Improvements in Technology
As technology grows, so will crowdfunding. “Technological innovations are occurring rapidly in alternative finance,” says finance expert David Drake. “When it started, crowdfunding was operating as rewards-based and donation-based fundraising options.” Today, the equity model has made it much more attractive. As a result, many businesses are investing their time and resources into developing technologies that push the crowdfunding industry forward.
- Growth in Asia
For years, crowdfunding has been nothing more than a concept in Asian countries. Experts have long believed that this type of fundraising setup would be perfect for the region and it looks like things have finally taken off. As regulations loosen and the marketplace becomes more familiar with the structure of crowdfunding, growth is inevitable.
In 2014 alone, crowdfunding in Asia grew by 320 percent to $3.4 billion. In the coming years, it could easily surpass $10 billion. In fact, Asian demand for crowdfunding could eventually become greater than any other region in the world.
Crowdfunding is Here to Stay
Any time an industry sees substantial growth in a short period of time, there will be people who will try to claim the “bubble” is about to burst. And when it comes to crowdfunding, there’s been no shortage of negative predictions.
However, if you study the numbers and think for yourself, you’ll see that the industry has yet to peak.