Crowdfunding is no longer just a niche model for startups to turn to when traditional financing falls through. Recent statistics from Massolution, a crowdfunding research firm, suggest crowdfunding will more than double to $34.4 billion in 2015. In its 2015 Crowdfunding Industry report, Massolution suggests this will follow the $16.2 billion raised in 2014, which was a 167 percent increase from the $6.1 billion raised in 2013. With that explosive growth to mainstream status comes new trends that should be at forefront of every entrepreneur’s mind.
Less Funding, More Crowd
Many startups are using crowdfunding for the crowd rather than the funding. A good campaign can be a very effective means of garnering feedback from early adopters to help hone a product before it goes to market.
With rapid growth in money raised comes growth in the number of crowdfunding platforms. In 2012 there were just over 450 crowdfunding sites worldwide. Massolution reports that by 2014 that number jumped to at least 1250. Niche sites are popping up that specialize in fields such as agriculture or healthcare. But it’s still just a few of the big guys, like GoFundMe and Kickstarter, that dominate the market in both number of campaigns and funds raised, in the same way that a few big players dominate the social media landscape.
Talented as startup entrepreneurs are, it turns out the business of pulling together a smooth campaign is a bit of a specialty. From writing sales pitches to producing campaign videos, and even to attracting more investors, professional help can make a difference. Expect to pay a flat fee commensurate with campaign complexity, plus a percentage of funds raised in some cases. Note that there might be legal issues with paying or receiving certain types of transaction based compensation.
The social engagement on crowdfunding platforms is helping drive innovation even at the traditional corporate level, and corporate America is paying attention. Corporate America is using crowdfunding to test consumer appetite for new products. In some cases, larger, more well-known corporations are reportedly conducting crowdfunding campaigns for specific product launches under different or subsidiary names in an attempt to minimize negative impact to their already established brand.
New funding models are appearing, with “funds” that enable investment in categories of projects instead of just a specific campaign. Watch for this trend to take hold and more crowdfunding “fund” options to become available as the industry continues to mature.
Investors must still be accredited to participate in most equity crowdfunding campaigns. Let the professionals at Verifyinvestor.com handle verification of your investors. It’s secure, fast and reliable.