Daily Management Review

Crowdfunding Revolution


Crowdfunding platforms are projected to go beyond $5 billion in 2015.

Crowdfunding is an internet enabled model of business to collect investments from multiple individuals. No one can deny the key role of crowdfunding platforms in the world of digital entrepreneurship. The imaginative products including Ouya, Pebble, and Oculus Rift would not have gained recognition if they were not backed by millions of dollars contributed by the people who believed in them. The model gained popularity through websites like Kickstarters, Crowdcube and IndieGogo. This new form of capital formation originated in 2008. In just less than a decade, crowdfunding gained recognition in many developed economies including the UK, Australia, the Netherlands, Italy, and the US. Kickstarter, the market leader in the crowdfunding raised more than $815 million from 4.9 million backers since 2009.
With the help of crowdfunding, companies from different sectors such as, Pebble from technology, Veronica Mars from film, River Cottage and Brewdog from food & beverages, have successfully financed their projects. Crowdfunding’s remarkable venture acquisitions include $2 billion Facebook Oculus deal. With the aid of kickstarter campaign, Oculus gained billion dollar status. The Oculus Rift project raised $ 2.4 million in September 2012 through kickstarter and eventually became the Oculus VR company.  Red Wagon Creamery became the first Oregon company raised funds to expand operations through Community Public Offering (CPO) crowdfunding rules. In terms of both volume of funding as well as number of platforms, the US is the most mature market of crowdfunding.

Currently, the crowdfunding market is at its infant stage particularly in developing countries, but the market has huge potentials. Equity Crowfunding is an attractive avenue to raise capital for a tech start-up. Till now, crowdfunding has elevated aspiring entrepreneurs. However, crowdfunding involves huge risks as the online publish of a business plan can allow competitors to know about your business strategy.

 The crowdfunding has expanded substantially since its inception. With the help of the idea, entrepreneurs were able to raise funds for their nascent businesses. Presently, about 45 countries across the globe have crowdfunding platforms. According to the World Bank commissioned study, the international crowdfunding market can jump up to $96 billion over a span of 25 years that accounts for about 1.8 times the present size of venture capital industry worldwide.

Organizations like World Bank, governments and venture capitalists are observing the crowdfunding market very closely in order to analyse the potential of the practice to provide solution for last minute funding problem that is generally experienced by start-ups. However, as the crowdfunding market grows, there will be unavoidable attempts to avoid regulations and deceive investors. Besides the, the largest threat are business failures and implementation challenges. Such kind of failures may be the result of bad decisions, lack of sufficient funds and inaccurate analysis of market demand. And the execution challenges may occur when a company is not geared up with required logistics, business capacity to meet the demand created by the campaign. The substantial growth of crowdfunding market and its development in emerging and matured nations indicates that this phenomenon can become a tool of revolution in varied networks across the world.

Tags : Crowdfunding