Well, it’s been quite a year already for the crowdfunding industry. With the JOBS Act becoming law, the tech industry (and the economy at large) are headed for some big changes. Namely, the legalization of crowdfunding in startups for non-accredited investors has come to pass. Yes, now even your mom can invest in your startup. While many of the consequences (positive or negative) of the legalization will play out over the next few years, the most well-known crowdfunding platform has been busy racking up a blockbuster season. If it weren’t there already, Kickstarter hit the tipping point in February, as it saw a number of record-breaking projects and landed squarely in mainstream consciousness thanks to a slew of media coverage.
Yet, as crowdfunding prepares for its stampede, many have been asking just how active the industry has been to this point, collectively, especially as it may indicate what’s in store. Luckily, Massolution, a research firm that specializes in crowdsourcing and crowdfunding, is today providing an answer with the first-ever Crowdfunding Industry Report. Having compiled data from more than 170 crowdfunding platforms (about 38 percent of the total number of platforms), Massolution found that, collectively, these portals raised $1.5 billion and successfully funded more than 1 million campaigns in 2011.
It also seems that North America is the geography that is most cuckoo for crowdfunding, representing the largest market for fundraising at $837 million. As for the snapshot of the industry, as of April 2012, there were 452 active crowdfunding platforms worldwide, a number that the research firm expects to increase to 530 by the end of 2012. And, if I may interject, if my inbox is any indication, I would say it’s not unreasonable to expect that number to be higher.
In terms of its compound annual growth rate (CAGR), the crowdfunding industry is growing at a rate of 63 percent in terms of the total amount of funds raised. To break the crowdfunding market down into bite-sized chunks, the research firm has identified and grouped the industry’s platforms into four major categories.
Equity-based platforms grew at 114 percent CAGR, with the largest growth primarily taking place in Europe. Perhaps unsurprisingly, the equity-based category also raised the largest sums per campaign, as over 80 percent raised over $25K+.
The second category, donation-based platforms, defined by philanthropic or sponsorship incentives, raised the most funds at $676 million but were the slowest growing of the categories at 43 percent CAGR.
Lending-based platforms, or person-to-person, person-to-business, and social models were the second largest category, raising $552 million and growing at 78 percent. Lastly, reward-based platforms, or non-monetary rewards portals, grew by a staggering 524 percent CAGR. However, the base from which lending-based platforms started (as these platforms are, of all, youngest) was fairly low, beginning at approximately $1.6 million in 2009.
The report gives a very solid indication of just how much the crowdfunding industry has changed over the last few years (and will continue to change). It’s now more true than ever that these portals are being used to raise large sums of money, as crowdfunding itself has become a viable alternative for capital formation for new commercial ventures, said Carl Esposti, the CEO of Massolution and founder of Crowdsourcing.org.
Driven in particular by equity-based and reward-based crowdfunding, he said, the firm is projecting that the total amount of funds raised will double in 2012. Naturally, there is little doubt that, with the passage of the JOBS Act, this growth is just beginning and that the new legislation will have, as Esposti says, a “profound effect” on the nature and incidence of crowdfunding in the U.S.
With the SEC currently working out how it will regulate crowdfunding under new JOBS Act Era, Massolution expects securities-based crowdfunding to increase significantly in 2013 and will begin creating a host of new funding sources for many startups and early-stage businesses over the course of next year.
In this kind of report, it would obviously be very interesting to see how the various crowdfunding players stack up against each other, and it leaves one jones-ing for some comparative analysis. Sites like KickStarter, RocketHub, GoFundMe, IndieGoGo, Kiva, MicroVentures, buzzentrepreneur, and many more contributed to the report, so it would interesting to see what percentage of the total each represent, especially for the bigs like Kickstarter. But, in order to entice these platforms to participate, the research was conducted under strict non-disclosure rules — the reason why no company-specific data is mentioned. Perhaps next year…
For more on Massolution’s research methodology, or to view the report in full, click here.
Check out an abridged version of the report below:
[scribd id=92834651 key=key-1yyjtpmrlq9a6lros1bl mode=list]