Westford, USA, June 28, 2022 (GLOBE NEWSWIRE) -- Crowdfunding is one of the modern financing techniques and has been utilized to fund a variety of projects, from small businesses and film productions to medical expenses and disaster relief. Although crowdfunding market has only been around for a few years, it has quickly become one of the most popular methods of fundraising. This allows entrepreneurs to bypass the traditional banking system. Banks have become increasingly reluctant to lend money to small businesses, particularly in the wake of the financial crisis. This has made it difficult for many entrepreneurs to get the funding they need to start or grow their businesses. Crowdfunding provides an alternative source of capital that is not subject to the same restrictions as bank loans.
Today, more than 50% of crowd funding campaigns achieve success while over 78% campaigns successes in getting more fund that set goals. The popularity of crowd funding is growing immensely. During 2012–2025, global crowdfunding market generated over $34.4 billion and industry experts are expecting the number would reach around $300 billion by 2025.
Donation-based Crowd Funding Accounting for 70% of Campaigns
Currently, two methods of crowdfunding are highly popular among in the global crowdfunding market, namely donation-based crowdfunding and equity crowdfunding. Donation-based crowdfunding is the most popular type of crowdfunding, accounting for 71% of all campaigns on the leading platforms. This type of campaign relies on donations from supporters with no expectation of financial return. The average donation amount is $88, but can vary greatly depending on the project and platform. The most successful donation-based campaigns have an average raised amount of $9,000.
On the other hand, equity crowdfunding market is a newer way to raise money that allows investors to receive a portion of ownership in the company or project in exchange for their investment. This type of campaign makes up 24% of all crowdfunding campaigns. The average investment amount is $1,000, but can range from just a few dollars to tens or even hundreds of thousands. The most successful equity crowdfunded projects have raised an average of $5 million.
The average success rate for donation-based crowdfunding campaigns is much higher than for equity-based crowdfunding campaigns. One platform reports a success rate of 76%, while another reports a success rate of 85%. This may be due to the fact that donation-based campaigns tend to have lower financial goals than equity-based ones. Overall, it seems that the success rate for both types in the global crowdfunding market is relatively high, though there is some variation depending on the platform and the type of campaign being funded. Equity-based crowdfunding tends to have a lower success rate than donation-based crowdfunding, but the average amount raised is usually higher in equity-based crowd funding.
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Top 4 Platforms are Holding Prominence over the Crowdfunding Market
The number of crowdfunding platforms available across the globe and their number has been increasing in recent years. This is due to a number of factors, including the increasing popularity of crowdfunding as a method of financing new businesses and projects, and the increasing availability of online tools and services that make it easy to launch and manage a crowdfunding campaign. As per latest report published by Skyquest Technology Consulting on crowdfunding market, the four most prominent crowdfunding platforms are holding a significant market share. They are Kickstarter, GoFundMe, Indiegogo, and CircleUp. Apart from this, there are other popular platforms like Patreon, Ketto, Fundrazr, Fundly, and Firstgiving, among others. In terms of total funds raised, Kickstarter is holding the largest market share and leading the pack with over $6 billion raised since its inception in 2009. So far, the platform has funded over 222,557 projects.
GoFundMe is the second largest platform in the global crowdfunding market with over $5 billion in pledges and contributions. It has funded over 50,000 projects since it was founded in 2010 from over 50 million people. GoFundMe is a flexibly funded platform, meaning that project creators can keep all of the money they raise even if they do not reach their funding goals. It is followed by Seedrs ($2.3 billion), Indiegogo ($1 billion), and CircleUp ($253 million).
Equity-based Crowdfunding is Becoming Popular Among Start-ups
As the world of finance has evolved, so too has the way in which start-ups raise money. In recent years, equity-based crowdfunding market has become an increasingly popular option for many early-stage companies. This type of funding allows businesses to sell equity stakes in their company to a large pool of investors in exchange for capital. There are a number of reasons why this model of funding has become so popular. First and foremost, it provides businesses with access to a much larger pool of potential investors than traditional methods. Secondly, it is a relatively quick and easy way to raise capital. And lastly, it can be done with minimal dilution to the company's ownership structure.
There are some interesting trends that can be gleaned from the SEC data in the global crowdfunding market. For example, it appears that most equity-based crowdfunding offerings are made by relatively young companies; over 60% of companies making an offering were less than five years old at the time of their offering. Additionally, a significant majority of these companies were seeking to raise less than $1 million through their crowdfunding campaign.
Interestingly, it also appears that a significant number of these young companies are located in just a handful of states in the US; over 40% of all equity-based crowdfunding offerings in 2019 were made by companies based in California, New York, or Massachusetts. This trend could potentially be explained by the fact that these states have historically been more supportive of entrepreneurship and have thus attracted more early-stage startups. It became popular after then president Barack Obama signed Jump-Start Our Business Start-Ups bill in 2012 and opened gate for equity crowdfunding for general public to invest.
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But, Ban on Equity Crowdfunding Hampering Crowdfunding Market Growth
Equity-crowdfunding is banned in several countries like India, China, and several other countries in Europe. As a result, the crowdfunding market has not achieved its potential to generate market revenue. The reason for this is because it involves the sale of securities, and in many countries, only registered broker-dealers are allowed to sell securities. To comply with the law, platforms that offer equity crowdfunding must register with the Securities and Exchange Commission (SEC) as a broker-dealer. However, this registration process is very costly and time-consuming, so most platforms choose to operate illegally in countries where equity crowdfunding is not yet regulated.
The good news is that several countries across the global crowdfunding market are currently in the process of changing their laws to allow for equity crowdfunding. The United Kingdom was one of the first countries to do so, and they have had great success with it. In just over two years, UK companies have raised more than £600 million through equity crowdfunding. France and Germany are also considering changing their laws, and it is expected that other countries will follow suit in the near future.
Crypto Crowdfunding is Emerging
Crowdfunding through cryptocurrency markets is a relatively new phenomenon. There is no definitive answer to the question what is the amount of money raised through crowdfunding in cryptocurrency market. However, it is safe to say that a considerable amount of money is raised through this method each year. While some cryptocurrency projects may only raise a few thousand dollars through crowdfunding, others have been able to raise millions. For example, Ethereum's ICO (initial coin offering) in 2014 generated over $18 million worth of ether tokens. So, while the exact figure remains unknown, it is clear that a good deal of money can be raised through crowdfunding in cryptocurrency market.
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