Well, let’s start with the good news: Crowd funding is a once in a lifetime opportunity for just about anyone to raise money he or she needs to finance a business, an event, music, films or any other idea. The industry has grown from $2.7 billion in 2012 to $34.5 billion in 2015 and is expected to grow to $96 billion by 2025.
Its rapid growth is helping hundreds of thousands of people and entrepreneurs to pay off bills or realize their dreams—and help many crowd funding portals to pockets hundreds of millions of dollars in transaction fees.
In fact, there will be more than 2,000 crowd funding sites to choose from by 2016—and the industry will soon surpass venture capital and angel investing as the #1 form of funding for small businesses allowing more than 250 million Americans to participate and invest for the first time under new equity crowd funding laws.
CROWD FUNDING IS RE-WRITING THE RULES:
Since the founding of the Federal Reserve Bank in 1913, a handful of private banks have controlled the money supply. The creation of the Securities & Exchange Commission (SEC) in 1934 ensured that banks maintained their control over the people by making it illegal for individuals to market private share offerings to potential investors via websites, social media, print & television ads.
CROWD FUNDING IS DISRUPTING THIS CONTROL:
New domestic & international crowd funding laws now allows anyone to raise money to finance their projects or business in return for equity, rewards or personal satisfaction and keep a greater share of the money raised. A great article was published recently by Forbes Magazine regarding the impact of crowd funding on the venture capital and the angel investment market—that will allow an entirely new class of investors totaling more than 250 million Americans, under Title III and Title IV of the JOBS Act to participate and invest for the first time under new equity crowd funding laws.[i]
NUMBER OF CROWD FUNDING PLATFORMS WORLDWIDE IN 2012, BY COUNTRY
According to Statista[ii] as of 2012 there were 191 crowd funding platforms in the United States up 60% from 2011 increasing the funding volume to $2.8 billion. By 2016, the crowd funding market is expected to grow to $34.5 billion says Massolution putting the industry on track to generate more investment volume than venture capital.[iii]
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FUTURE CROWD FUNDING OPPORTUNITIES FOR ENTREPRENEURS:
The growth in crowd funding presents unprecedented opportunities for entrepreneurs willing to set-up their own crowd funding platform. In fact, according to Forbes Magazine, the World Bank estimates that crowd funding will reach $90 billion by 2020. If the industry "trend of doubling year over year continues", the crowd funding market will see volumes of $90 billion by 2017.[iv]
CROWD FUNDING VOLUME BY REGION / CATEGORY:[v] [vi]
THE BAD NEWS:
Most crowd funding platforms are creating opportunities for a few entrepreneurs and massive fees for crowd funding portals at the expense of people whom are offered nothing in return, or meaningless rewards, untested products and most NEVER share in the success of the businesses they help to finance.
Specifically, there are several areas of concern:
- Rewards-based crowd funders offer backers meaningless rewards of pre-orders of untested products in return for financial support;
- Rewards-based crowd funders do not offer crowd funders a share of their future sales in return for their referrals as traditional affiliate marketing systems do;
- Crowd funders hide behind the Securities regulations and use it as a reason for denying backers a share in their future success (you don’t have to give up equity in your business to reward a person for helping you—sales commissions or bonuses are just as good, if not better);
- Most crowd funders lack influence and, or personal network to succeed;
- Crowd funding portals brand crowd funding as a silver bullet that can be embraced by anyone to raise financing, when the truth is it is really hard-work;
- Crowd funding portals are using you to grow their brand(s);
- Crowd funding is based on trust; therefore, it’s ideal for fraud.
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If you would like to learn more about Crowd Funding and how it can be used to grow your business we encourage you to review the following articles and ebooks:
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REFERENCES:
[i] Forbes Magazine, http://www.forbes.com/sites/chancebarnett/2015/06/09/trends-show-crowd funding-to-surpass-vc-in-2016/2/#64146a9a76da
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[ii]Statista Survey, http://www.statista.com/statistics/251573/number-of-crowd funding-platforms-worldwide-by-country/
[iii]Massolution Crowd Funding Report, http://www.crowdsourcing.org/editorial/global-crowd funding-market-to-reach-344b-in-2015-predicts-massolutions-2015cf-industry-report/45376
[iv] Forbes Magazine, http://www.forbes.com/sites/chancebarnett/2015/06/09/trends-show-crowdfunding-to-surpass-vc-in-2016/2/#64146a9a76da
[v] Massolution Crowdfunding Industry Report, Exerpts published on Crowdsourcing.org, http://www.crowdsourcing.org/editorial/global-crowdfunding-market-to-reach-344b-in-2015-predicts-massolutions-2015cf-industry-report/45376
[vi] Massolution Crowdfunding Industry Report, Exerpts published on Crowdsourcing.org, http://www.crowdsourcing.org/editorial/global-crowdfunding-market-to-reach-344b-in-2015-predicts-massolutions-2015cf-industry-report/45376
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