The $5.1 Billion Future Of Crowdfunding Is More Than Kickstarter

The concept of offering a few bucks to help out a project might have started to help your friend’s new album, but new numbers show it’s growing rapidly–and turning into a legitimate form of investment.

Crowdfunding is booming. More than 1 million campaigns across 308 platforms raised $2.7 billion last year, an increase of 81% on 2011. And that volume is set to almost double in 2013, to $5.1 billion, according to a new report.

But, if you thought the future of crowdfunding was all about dinky video game pitches, and cheerful perks on Kickstarter, you’d be missing something. Going forward, crowdfunding is likely to take on many forms, be more geographically-diverse, and, for better and worse, look more like big-time investing.

Massolution, which specializes in crowdfunding research, says volumes in North America grew 105% last year, to $1.6 billion, and in Europe by 65%, to $945 million. And that together, the two regions account for 95% of all transactions. Overall, 85% of that volume was straight donations, or donations in return for perks (the Kickstarter model).

Up to now, the biggest category of campaigns has been “social causes.” But Massolution expects to see entrepreneurs and business take up a bigger share in 2013. At the same time, it also sees more lending, equity (where funders get a share of the business) and royalty (where revenue is shared) crowdfunding. In 2013, it forecasts crowdfunded lending to reach $2.1 billion, and equity-based to hit $166 million.

“Crowdfunding first gained popularity as a way to fund creative, philanthropic and social endeavors. This popularity prevails, but crowdfunding’s application for entrepreneurial ventures has gained traction as well, especially crowdfunding models with financial return,” the report says.

The proliferation of platforms is also likely to encourage more niche players, as platforms seek differentiation. Massolution says it knows of 250 sites in the works, and, of those, it says 40 are aimed at particular activities. Instead of multi-category platforms like Indiegogo, it expects to see specific sites for social causes, science and technology, and real estate.

It also sees some companies ditching platforms altogether, in favor of “direct” models. The report discusses one company that raised $2,278,891 from its own site in 30 days. It has since developed, an open-source “direct crowdfunding” package that “frees entrepreneurs from paying the commission required by most platforms.”

Massolution also sees crowdfunding opportunities for development banks and NGOs (perhaps to fund micro-finance), more community-level fundraising (“locavesting”), more “hybrid platforms” (mixing up donations, rewards, lending, equity, and royalties), and more enterprise-crowdfunding, where the point isn’t necessarily to find money, but to assess product demand, and reduce market research costs. So-called “live crowdsourcing”–fundraising linked to an event–is another trending idea, it says.

In other words, the humble rewards model that’s popularized crowdfunding isn’t going to be the only game in town. We’ll still have cute ideas on Kickstarter. But there’ll be a lot else besides.

Source: Co.Exsist – Ben Schiller


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