Last year, businesses raised over $5.1 Billion worldwide as a result of crowdfunding.
With equity crowdfunding legal in the UK and Australia, the JOBS act passed though US congress in 2012 and paved the way for entrepreneurs and marketers to raise fresh capital across the states.
How does this Change the Crowdfunding Model?
Since 1997 when fans of the band ‘Marillion’ raised $60,000 in donations to fund a U.S tour, the concept of crowdfunding was always based on donations. Throughout the early 2000’s, websites such as Kickstarter, Indiegogo, Fundly and Pledgie emerged and crowdfunding began to be recognized globally. However, crowdfunding was generally recognized as an artistic endeavor with popular projects revolving around film, music, quirky inventions and video games.
Crowdfunding has always been seen as a popular marketing tool to fund artistic projects and charitable causes. Charitable causes often need no incentive, other than supporting a purpose or an individual in need.
In 2013 over $2 million was raised in aid of victims of the Boston Marathon bombing!
However, crowdfunding was never regarded as a safe place to gain equity for a business for a return on investment. Instead, campaigns have often been incentivized with small items, experiences and personalized messages from project leaders to crowdfunding backers.
This could be because of the risks involved when funding a start-up, and also because of initial legalities surrounding investing for equity.
Would you invest money into a start-up online with no guarantee of a return on investment?
There are now over 500 active crowdfunding websites, with over 9000 registered domain names around equity, ROI, crowdfunding and investment. Now that the laws are being relaxed across the USA to see equity crowdfunding legalized across certain states, will we see an influx in start-up successes? Or an influx in start-ups that fail?
Will we see individuals seeking more investment advice as it becomes a trend to buy a stake in the latest crowdfunding tech start-up? What will it mean for Silicon Valley? What will it mean for existing venture capitalists and angel investors?
Marketers will now be faced with new choices when helping start-ups, franchises, brand expansions, product launches and brand affiliations!
To fund or not to fund? That is the question!
What are your thoughts?