Crowdfunding, once used by those who couldn’t get traditional financing, is going mainstream. The Crowdfunding industry is growing at an unparalleled rate and influencing enterprise innovation, changing the role of financial institutions, and impacting government policies. That explosive growth has led to entrepreneurs and startup execs racing to keep up with the changes. Today we will look at what the future holds for Crowdfunding.
Crowdfunding market will grow immensely
According to Global Crowdfunding Market 2016-2020 Report, crowdfunding market is expected to grow at CAGR (Compound Annual Growth Rate) of 26.87% during the period 2016-2020.
Just six years ago crowdfunding reported $880 million in 2010, showing a relatively small market with minimal growth potential. In 2013, the industry reported $6.1 billion and expanded by 167% to reach $16.2 billion in 2014. According to crowdfunding research firm Massolution, the industry raised more than double and reached to $34.4 billion in 2015. If this trend of doubling continues, we’ll see $90 billion by 2017.
Increase in number of crowdfunding platforms
Globally, there were over 700 crowdfunding platforms in 2012. Of this number, bout 191 platforms were established in the US that year. As of December 2014, the crowdfunding industry had over 1250 platforms through which issuers and investors interacted. If this trend continues, the world will boast of over 2000 crowdfunding platforms by the end of this year.
Crowdfunding to Surpass Venture Capital
By the end of 2016 the crowdfunding industry expected to account for more funding than VC, according to a report by Massolution. With an estimated value of 34 billion in 2015, the industry has come a long way since 2010 when its value was $880 million.
In comparison, the venture capital industry invests an average of about $30 billion each year. In the meantime, the market value of crowdfunding industry is doubling every year, and is spread across many types of funding models such as rewards, equity, donation, and debt. If the crowdfunding growth continues, the industry will overtake venture capital.
New funding models will emerge
The five most common crowdfunding models out there are donation-based crowdfunding, reward-based crowdfunding, pre-sales based crowdfunding, lending-based crowdfunding and investment-based crowdfunding. Nowadays, new crowdfunding “funds” are coming up to provide investors the opportunity to back classes of projects instead of homing in on particular campaigns. For instance, Crowdcube, a U.K.-based platform partnered with Braveheart Investment Group to make a fund that enables investors to put funds into their areas of interest. The Crowdcube Venture Fund, which Braveheart claims is the first of its kind, allows investors to create a portfolio of investments by co-investing in certain ventures that have successfully funded on Crowdcube.
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