Sunday Morning Disruptive Technology – Crowdfunding increases 240%
Crowdfunding has been around for a few years now, but an article from co-exist has opened up my eyes as to the size and spread of the market.
“Crowdfunding is booming. More than 1 million campaigns across 308 platforms raised $2.7 billion last year, an increase of 81% on 2011. And that volume is set to almost double in 2013, to $5.1 billion”, according to the co-exist article. Wow, if we hit $5.1 billion this year thats a 240% increase in 3 years!
Crowdfunding offered a lot of opportunities for start ups and entrepreneurs to tap into funding that venture capitalists might turn down because of lack returns, playing on crowdfundings origins in philanthropy many people ‘invested’ for feel good over returns.
But the business model of crowdfunding is shifting, it started off as philanthropic donations, then moved to donations with perks (logo or name on the product) to now more of the traditional investment model – equity or dividend based returns on investment.
And crowdfunding’s philosophical philanthropic origins is maybe starting to ween as well. It started off as a method for helping fledgling bands, solar energy for developing countries and innovative technology but is starting to shift to more capitalist endeavours – Realty Mogul is one that crowdfunds for real estate investment. Will this start to dilute the initial ethos of crowdfunding – “by the people, for the people”? While it seemed to originally follow the ‘community’ approach of co-opertives, one person one vote, collective good, education and development it seems to be being taken in another direction.
As we see more money invested through crowdfunding we should expect to see more requirements and demands from investors – ethical business requirements, CSR, sustainability and much more. The nature of the market will demand that crowdfunded corporations will soon start to have to act like every other corporation. If they do what is the difference between crowdfunded investment and traditional investment?
So is it disruptive? I think it has been, and may still be for a short time to come. But I think it has the potential to be absorbed back into our traditional business models, and when it does it won’t be any different.