News and Tips
Global crowdfunding grew to $16.2 billion in 2014, up from $6.1 billion in 2013. In 2015, the industry is set to more than double once again, on its way to raising $34.4 billion, according to Massolution’s 2015 Crowdfunding Industry Report. This exceeds the total amount of venture capital financing, which is usually about $30 billion, according to Forbes.
While rewards-based and equity crowdfunding get most of the headlines, it’s debt crowdfunding that is largest, at $11.08 billion. It is especially strong in China and throughout Asia.
Regionally, North America still leads the pack with $9.46 billion, and grew 145% in 2014. But Asia, at $3.4 billion, has slipped past Europe, $3.26 billion.
Business and entrepreneurship remained as the most popular crowdfunding category, collecting $6.7 billion in 2014, which represents 41.3% of total crowdfunding volume. Social causes ($3.06 billion), films and performing arts ($1.97 billion), real estate ($1.01 billion), and music and recording arts ($736 million) rounded out the top five categories.
Debt Crowdfunding has grown so quickly in North America because hedge funds and other large enterprises have entered the market. In fact the field is now called “marketplace lending” because “peer-to-peer lending” is no longer an accurate description.
Massolution collected information on 1250 active crowdfunding platforms (CFPs) across the world, including data submitted by 463 CFPs to the Crowdfunding Industry Survey, before undertaking significant further research and analysis in order to reach its results.
According to Eze Vidra, head of Google Campus (Google’s startup space in London) crowdfunding is the “democratization of innovation.” The Huffington Post has seized on this point to guide Boomers who think that it is only for kids making movies.
The Ewing Marion Kauffman Foundation’s annual Entrepreneurial Activity Index report for 2013 reported that 55-64 year olds make up 23.4% of new entrepreneurs in 2012, up from 14.3% in 1996. This could reverse, however, if the older generation ignores the potential of crowdfunding.
Women own over 25% of US small businesses, and are starting businesses at twice the rate of men. But only 5% of bank loans are made to women-owned businesses. There are lots of reasons, but gender bias may be one. Also, women’s businesses tend not to be the tech-heavy startups that attract angel and venture capital.
There is good news on the crowdfunding front: 69.5% of women’s campaigns got funded vs. 61.4% of men’s, in the April 2009-March 2012 period. That is in part because women set lower dollar goals. But it is also because women contributors back women’s campaigns.
That is natural since women-owned businesses often solve women’s problems and focus on women as customers, as I’ve seen in mentoring at Bad Girl Ventures, the local startup assistance program for women entrepreneurs. Social media is a powerful driver for female crowdfunding, since women dominate those platforms.
So while crowdfunding is no panacea for women founders, it definitely helps level the gender gap.
It’s important to understand the difference between the three — whether you’re an entrepreneur looking for money or a donor/investor looking for a home for your money via crowdfunding. The different crowdfunding models have certain peculiarities.
Many people consider donation crowdfunding to be a sub-set of rewards-based crowdfunding, or vice versa. Queen City Crowdfunding posts both of those types, but not equity-crowdfunding campaigns.
Ryan Grepper, founder and CEO of the firm, launched the first campaign in February. That was a big mistake- nobody’s interested in a cooler in February. He launched the second, successful, campaign in August.
He also contacted the backers from the first campaign and enlisted them to spread the word about the cooler. This worked wonders.
Finally, on the Kickstarter video, the final frame asks the viewer to ‘Share This With a Friend.”
Those simple changes, together with a strong social media campaign, made the difference. Ryan already had an appealing product. His second-chance strategy generated enough exposure that the national tech press started writing about the cooler, and that attracted an international audience. And since people like to go with a winner, once the momentum started it kept going until it raised $13,225,286, or 26570% of its goal!