And this is just the beginning. Rally Time!
Study Shows Crowdfunding Raised $1.5 Billion
Crowdfunding platforms raised almost $1.5 billion and successfully funded more than one million campaigns in 2011, according to a study released by massolutions, a research firm specializing in crowdfunding solutions. The study suggests that crowdfuding has become a viable for of capital formation, according to Carl Espostil, CEOP of massolution and founder of Crowdsourcing.org.
The Crowdfunding Industry Survey found as of April 2012, there were 452 crowdfunding platforms active worldwide. Massolution projects that could reach 530 CFPs by year’s end. The majority of these campaigns were in the donation-based category totaling 1,067 campaigns, and North America was the largest market for fundraising at $837 million.
Massolution identified and tracked four categories of crowdfunding platforms:
- Equity-based (for financial return): Platforms grew at 114% CAGR, primarily in Europe, and raised largest sums of funds per campaign; over 80% raised $25,000+
- Donation-based (motivated by philanthropic or sponsorship incentive): Platforms raised the most funds at $676M, but are the slowest-growing at 43% CAGR
- Lending-based (P2P, P2B, and social): Platforms represent the second largest category raising $552M, and grew at 78% CAGR faster than donation-based
- Reward-based (for non-monetary rewards): Platforms show very high growth at 524% CAGR, but from a low base of close to $1.6M in 2009
“As large sums can be raised via crowdfunding, it has become a viable alternative for capital formation for new commercial ventures, projects and both social and community-based initiatives,” Esposti said. “Driven by equity-based and reward-based crowdfunding, our forecasts indicate total funds raised will nearly double this year. Additionally, the passing of the JOBS ACT will have a profound effect on the growth of crowdfunding in the U.S. In 2013, we expect securities-based crowdfunding to bring new sources of funding to many startups and early stage businesses.”
The JOBS Act, signed into law by President Obama on April 5, 2012, authorizes the use of online “funding portals” to offer and sell crowdfunding investments of up to $ 1 Million per year. Investments will be limited from $2,000 or up to ten percent of the investor’s net value or annual income. The Securities Exchange Commission has 270 days under the act to forumate regulations crowdfunding.