By RYAN SCHELLHORN, CrowdFundBeat Guest Editor,
July 1, 2015– The past twelve months was a year of growth for the crowdfunding industry, where many record-setting and equity-based crowdfunding campaigns took place. In fact, according to a report by CNBC, crowdfunded projects have conducted fundraising totaling to $662 million in the first quarter of 2015.
The fund-raising mechanism behind the crowdfunding frenzy wasapproved last year. The businesses within this sphere engage in a range of operations and span a plethora of industries, most prominently in the food and beverage, biotechnology, software, health and fitness, music, and real estate industries.
Food & Beverage
One of the successful companies within the food and beverage industry is craft brewer Renaissance, one of the first companies to raise money through equity crowdfunding in August of this year. Conor Roberts, a public relations executive that invested $2,000 in Renaissance, explains that “Building up of a sense of community around the business is something those companies can do quite well.”
Renaissance has become a poster-boy for the beverage industry’s movement toward equity crowdfunding. Evidently, this method of capital raising allows for companies like Renaissance to develop communities around their company. Taking a stake in the funding of the business both deliberately and inadvertently spreads word about the business, and the shareholders of the company garner more supporters of the company. This in turn creates a positive feedback loop as more and more people become not only personally but also financially invested in the company.
Health & Fitness
The health and fitness industry has also seen elevated involvement in the crowdfunding mushrooming. Seedrs, is a London-based crowdfunding platform focusing on businesses in the health, sport, and wearable technology spaces.
Music & Entertainment
The music industry is another prominent player within the equity crowdfunding space. Quincy Jones, a veteran of the music production industry, is the latest celebrity to turn to the merging crowdfunding platform. Jones, along with other executives of his New York-based company called Playground Sessions, has raised $810,000 so far for the company through the crowdfunding. Playground Sessions teaches piano to students through a virtual medium. Neil Young is another musician that has entered the crowdfunding realm but working to raise money on a music campaign.
The biotechnology industry is another sector that has seen a growth in capital raising from crowdfunding platforms. The standard route for biotechnology companies and other life sciences businesses striving for growth conventionally involved contacting venture capital firms. But the new SEC rules under the JOBS Act now allows startups to receive investments from large pools of investors, any many tech companies have cashed in on the looser regulations. For example, a Welsh biotech company founded by a Nobel laureate has claimed a UK record for crowdfunding in the life sciences sector after raising almost 700,000 pounds. This crowdfunding platform has essentially allowed the company to provide a new model for financing medical research. In addition, Health Tech Hatch and Medstartr have gotten some attention for their efforts to use crowdfunding for health technologies.
Crowdfunding has also seen massive success in the software industry, with many explosive SaaS products taking off like wildfire. For example, Oculus Rift and the Pebble Watch are all byproducts of the crowdfunding movement.
Groundbreaker is a software product that also represents crowdfunding growth in the real estate industry. Groundbreaker is a real estate crowdfunding platform provider and has announced that they are transitioning their white label service to a full SaaS(software as a service) product. Crowdfunding for real estate is quickly growing into its own, as some industry watchers expect the industry to boom over the 12 to 24 months. The industry captures a perfect marriage, coupling the efficiencies of technology with a tangible asset. Accredited investors may today invest in high quality real estate anywhere around the country.
Crowdfunding has emerged as an effective alternative to venture capital as a way of gaining financing and jumpstarting businesses. In essence, equity crowdfunding democratizes ownership and investment in projects. Many celebrities have already taken action to show their support of the growth in crowdfunding platforms. In fact, Andy Murray joined the Seedrs Advisory Board, representing the first partnership where a public figure teamed up with an equity crowdfunding platform, heralding a significant milestone in the development of the equity crowdfunding industry.
Evidently, this newfound crowdfunding platform has helped stimulate the growth of business across a breadth of industries such as food and beverage, biotechnology, software, health and fitness, music, and real estate.