Crowdfunding to Double
The crowdfunding industry is booming. More than 1,250 online platforms worldwide raising $16.2 billion last year, up 167% from 2013, according to crowdfunding research firm Massolution. And global crowdfunding is projected to reach $33-34 billion in 2015, with $6 billion of that in the US, double that of last year.
The benefits to companies go beyond the actual funds raised through the revenues that are crowd funded; there is a marketing benefit that translates into sales. Crowdfunded companies (via rewards, equity or debt) increased quarterly revenues by an average of 24% post crowdfunding; and equity-based crowdfunding companies increased revenue by 351%. Companies with a prototype can take advantage of crowdfunding to find out about the market response; providing entrepreneurs with an opportunity to test out and develop a customer base early on. This makes for a very different conversation with angle investors.
Crowdfunding also create jobs: 39% of companies hired an average of 2.2 new employees per company after crowdfunding; and an additional 48% of companies said they intended to use crowdfunding proceeds to hire new staff, according to research published by the Crowdfund Capital Advisors. And the ROI for small companies is great, for every hour invested in a successful crowdfunding campaign the return averaged $813.
China has seized the crowd by the horns. There are now over 200 debt and 40 equity crowdfunding platforms in the country. Crowdfunding and early stage finance are a big part of China’s internet-plus strategy. The Chinese are working on rules to govern crowdfunding, and it fits with their broader agenda to harness the internet to spur growth, and encourage innovation and entrepreneurship across industries.
Investsumers are embracing the numerous debt crowdfunding opportunities across tech and entertainment industries, among the leading sectors. Raising debt via friends, family, and other close networks is an incredibly scalable method of funding via the internet without ever going public. And with bank deposit earnings being extremely low, the 7-10% yield on debt based products globally is very attractive.