For the last four years I have consumed a daily diet of all things Crowdfunding. I knew when I first became interested that CrowdFunding would be big. I did not however realise at the time how huge it would actually become. In 2014 it became a $16 billion industry. By 2020, estimates have put crowdfunding at more than $100 billion worldwide.
CrowdFunding is here to stay. It is changing the way we access and invest capital online. It is providing opportunities we never thought of before. Just as we have seen a role for social media we will also see a role for crowdfunding as a means to test a markets response to a product, service or idea.
We have begun to see there is more to Crowdfunding than the money. Market validation is the biggest take away for anyone going crowdfunding. It definitely comes at the top of the benefit list. Crowdfunding as a marketing strategy comes second. Thirdly it is also an opportunity to grow the size of your crowd. All three of these factors are, in my opinion, more important than the money. How brilliant is that?
I remember talking to Venture Capitalists 4 years ago. They were worried about supporting businesses who had done an early round of CrowdFunding. They did not want the hassle of dealing with lots and lots on investors. It was just too messy for them. Now of course they have come full circle. Many of them are now saying they will not be interested in funding a venture until the project creator has gone off and done a crowdfunding campaign. Venture Capitalists want them to test their concept on the market, gain some brand awareness and secure some crowd support before coming to them.
In the gold rush days of the 1800’s it was the person who sold the spade that often made more money that those who staked and worked a claim. Today you are seeing similar developments in the world of Crowdfunding.
Thousands, yes thousands, of crowdfunding platform have sprung up around the world in the least four years with more coming online everyday. And that is just crowdfunding platforms!
A whole new industry of support services have sprung up around these new websites too. Everyday I am bookmarking or tweeting a new website detailing their latest offerings. How many of us were prepared for this type of phenomenal growth?
CrowdFunding has not only been good for project creators but great for investors as well. This new form of ‘democratic’ finance is seeing unparalleled interest not only from individuals looking for a better return but from large companies looking for new innovations to help grow or invest in themselves.
Making sense of all this activity on the crowdfunding front is quite a challenge for anyone interested in this space. Where to start is even a greater challenge.
Although most people still do not know what CrowdFunding is all about many have participated in CrowdFunding without even realising it. Julia Glover, Chair of the UK CrowdFunding Association has said that over 9 million people in the UK have participated in CrowdFunding, supporting over 650 000 projects.
When I do workshops on CrowdFunding it becomes obvious, on further questioning, that many see Crowdfunding through recognised brand names and not via the term Crowdfunding itself. Talk about Kickstarter or Just Giving and there is instant recognition. It then becomes obvious that understanding the CrowdFunding landscape is essential to anyone wanting to raise funds or invest.
Since there are now thousands of CrowdFunding platforms around the world where would a project creator or investor start in choosing which one is right for them? To help those wishing for greater clarity you now have websites that bring details of all these platforms together in one place.
These platforms typically place crowdfunding websites into four different categories, donations, rewards, equity and debt. There are other models of crowdfunding but breaking websites down into these four is a great place to start.
Narrowing down which crowdfunding model is best suited to your project or investment is crucial for success. This in turn will also reduce the time you spend researching the best platform. Essentially each CrowdFunding platform operates differently, with their own rules, regulations and criteria guidelines.
There are CrowdFunding platforms that will help you with this initial step. Several directories now exist where you can sort websites according to the different CrowdFunding models. This saves a huge amount of time especially if you know which type of CrowdFunding model you feel best fits in with what you want to achieve. These directories go on to provide more information about fee structure, location in terms of in which countries they operate, whether they offer more than one type of crowdfunding model, criteria guidelines in term of what they will accept and much more.
For most, our understanding of crowdfunding is skewed by news reports we read and hear detailing, in the main, sensational accounts of successful campaigns raising millions for project creators. More and more stories are surfacing everyday outlining both successes and failures.
News websites on Crowdfunding seem to be plentiful. The most serious seem to include CrowdFund Insider and the various versions of CrowdFund Beat. These offer some in-depth coverage and ongoing insight into the trends of the day. There are also some journalists that focus some great pieces on larger websites such as Forbes, Huffington Post, Mashable and others.
Other websites will offer information on bootcamps, conferences, workshops, seminars and talks covering various aspects of CrowdFunding. One thing I have noticed is the proliferation of conferences and workshops around investing in real estate. Property is a good fit for crowdfunding and the real estate industry has caught on.
Books on crowdfunding have mushroomed over the last 4 years. When I first looked on Amazon there were few serious publications but today there is a whole raft covering topics from how to fund your next film to how to be successful on Kickstarter. I have come across one offline crowdfunding magazine dedicated to the topic published in Singapore. There is one magazine app for mobile devices in the app stores with several page turners and third party curated content on other websites.
The Crowdfunding scene seems to be awash with CrowdFunding consultants offering their experience and skills to project creators. This is a trend that will continue to grow. My feeling is that just as new jobs were created for social media specialists over the last ten years there will also be a huge growth (and need) for crowdfunding experts. Besides the money, CrowdFunding is a fantastic marketing strategy in its own right. More and more startups and businesses will be using CrowdFunding to build their brand and increase their support base.
Online CrowdFunding courses have, in the last 12 months, sprung up from nowhere. Have a look on Udemy which is a huge website offering online courses of all descriptions and you will find multiple courses offering you the chance to equip yourself with the necessary skills to run a successful campaign. Most are focussed on rewards based campaigns. I predict that there will come a time, at some point in the future, where we will begin to see courses aimed at those who wish to understand how to invest in CrowdFunding opportunities.
White label Crowdfunding solutions have taken centre stage. You can now setup your own CrowdFunding presence without having to use an existing CrowdFunding platform. You can have one built specially for your own purposes such as one for your own community or branch out into your own vertical niche market. These can be highly bespoke options and tailored to your own specifications.
There are now WordPress plugins and themes that can turn your website into a fully functional CrowdFunding platform at very low cost. In addition, well known crowdfunding platforms, are also allowing you to embed your campaign back into your website.
Analysing your campaign progress has become a lot easier in the last 12 months. Besides Google Analytics, Facebook and Youtube insights and a raft of other tools used by social media experts to analyse your crowds behaviour, there are now new crowdfunding websites offering in depth information on investor behaviour as well. Would you not want to work out how much your crowd is likely to give to your campaign based on information from thousands of other crowdfunding campaigns?
By way of another example you can add in information on the size of your crowd and get an idea of how much you are likely to raise for your own campaign based on your existing crowd. This information is valuable in helping you set an achievable target or assist you in deciding if you need to continue building your crowd first before launching.
One software program can now predict, once your campaign is up and running, whether you are likely to reach your target. How cool is that?
CrowdFunding websites themselves now compile lots of educational material on how crowdfunding on their platforms work. This is very helpful only after you have worked out what type of CrowdFunding model you will go for and what platform best serves your purpose.
More work needs to be done, however, when looking at CrowdFunding education as a whole. The platforms themselves have great guidance, however, this information is normally aimed at their own service or product. After doing more than 40 workshops and talks on CrowdFunding in the past 18 months it occurs to me that the term CrowdFunding is not fully understood by most people yet. There is more room for additional education on the topic of Crowdfunding and this will no doubt not be long in coming.
Most people get to hear about CrowdFunding via press articles, normally sensational stories covering successes or failures in the rewards CrowdFunding space. At a recent meeting of bankers, accountants and the legal profession I spoke to 8 people over an two hour period. Two of the eight said they knew what CrowdFunding was all about but on further discussion their understanding was very superficial. The very people who should be advising businesses and startups how to access and manage funding opportunities had little or no understanding of the power and potential of CrowdFunding.
If eight out of ten people still do not know what Crowdfunding is about then this is one area that requires urgent attention. CrowdFunding is not going away, on the contrary it is growing dramatically. I predict that funding and marketing agencies will before long have CrowdFunding experts on the payroll. There are lots of future opportunities for educational projects to bring about greater awareness on the best use of crowdfunding.
Regulation will become more and more of a feature in the CrowdFunding landscape. In most countries Equity and Debt (Peer to Peer) based CrowdFunding are regulated and Rewards and Donation based CrowdFunding tend not to be. In the UK, for example, light touch regulation by the Financial Conducts Authority (FCA) has allowed Equity and Debt based CrowdFunding to flourish. The UK now lead the world in Equity CrowdFunding growth for unaccredited investors with the USA (three years after the JOBS Act) only now allowing for implementation. Additional European Union regulations will no doubt also effect how CrowdFunding moves forward.
Another factor that will effect future regulation will centre around the analysis of (yet to come) high profile CrowdFunding failures and fraud practices. These will no doubt attract a lot of press and place pressure on regulators to act further.
CrowdFunding Associations have now appeared in countries where activity is growing. In essence CrowdFunding interests should now receive support from these various lobby groups. It seems to me that the UK needs to become more active in the direction that CrowdFunding is taking within the European Union in order to protect the growth of this new form of alternative finance. It is also heartening to see growth occurring particularly in New Zealand, Australia and Singapore on the Crowdfunding front.
Delivering on your promises, on time, after a successful campaign, can be quite a challenge for project creators. Fulfilment services supporting projects before, during and after campaigns have sprung up all over the place. New websites now offer after campaign sales services where a successful project can continue to sell their product once the campaign has closed. Large rewards based CrowdFunding platforms have caught on and are now integrating this service into their offering, post campaign.
Several businesses have now positioned themselves as experts in analysing the state of CrowdFunding around the world. These reports offer in-depth insight into what is happening. Some reports come for free and others come with a hefty price tag. Depending on what you want to know some of this information will no doubt guide those who either want to get into CrowdFunding or regulate it.
There are quite a number of forums on CrowdFunding which can be found in many different places. LinkedIn has many groups especially for those working in supporting crowdfunders, so has FaceBook, Google+ and CrowdFunding platforms themselves.
Marketing companies, together with Business Angels, Venture Capitalists, Financial Advisors and believe it or not High Street Banks are beginning to realise that they need to become more involved. Large companies and Hedge Funds are also now trying to identify investment opportunities coming up through the Crowdfunding pipeline.
Funds are being raised right now via CrowdFunding platforms to create or top up investment funds which in turn look for promising start-ups to support. Start-up accelerators also see the value in CrowdFunding.
To keep up to date with CrowdFunding I notice that quite a number of podcasts have been launched around the topic but few have stayed the course. Mostly these podcast episodes centre around interviewing project creators where you can get an insight into how things were done.
I see that CrowdFunding scams are getting more attention with some using the term scampaigns to describe what is going on. Several lists on the internet have been setup to cover what people perceive to be scams being run through CrowdFunding platforms.
CrowdFunding campaigns undergo a process of due diligence conducted by the crowd where they decide if a project is worth their time and money. This in my mind is the main reason why Crowdfunding has become so successful. This then also requires that the project creator be comfortable with putting their personal profile out there for the world to see. Careful curation of your online presence is therefore crucial to the success of your crowdfunding campaign. There is nothing like having your reputation put on display for scrutiny by the crowd.
Potential investors will also want to check you out online. If Venture Capitalist and Business Angels place a lot of emphasis on the skills and capabilities of projects leaders the same holds true for CrowdFunding. Investors want to believe in the person behind the project and many projects do not gain traction because the individual driving the campaign has not taken time to curate their (and their team) online profiles adequately. Most CrowdFunding websites will also leave your CrowdFunding campaign online for future scrutiny whether you succeed of fail. This means your track record will always be out there, online, for people to see.
CrowdFunding is here to stay. It is not going away whether it is regulated or not. There is even an annual World CrowdFunding Day for us to celebrate. We need to get used to where this is all going and become active in supporting its growth. CrowdFunding is not going to replace any other form of finance out there. It will however represent a new way of unlocking funds to support the future growth of any project or idea. This ultimately will be a good thing.
We have already witnessed more than $16 billion raised via CrowdFunding platforms during 2014 alone. Where, I wonder, will it be in five years from now?