By James Tuckett, Co-founder and CEO of investUP, the crowdfunding supermarket
Massolution’s global crowdfunding report reveals a complete picture of overwhelming optimism. Looking at over 1,250 different crowdfunding sites worldwide, the report estimates that crowdfunding platforms raised over $16.2bn globally in 2014, and predicts that crowdfunding will raise $34.4bn in 2015. That’s pretty heady stuff for this young game-changing industry. By all means it is safe to say that crowdfunding is undergoing startling growth globally. To celebrate this very fact investUP has picked its top five reasons to be cheerful from the 2014 crowdfunding report.
Reasons to be cheerful, part 1: Crowdfunding is growing in Asia
Here’s an interesting and ultimately unsurprising revelation for you: In Asia the amount raised by crowdfunding as a percentage of the global amount is greater than in the EU. It has been conceptually clear for some time that, for all types of geo-economic and geo-political reasons, crowdfunding is perfect for Asia. It seems we are now leaving the ‘proof of concept’ phase and crowdfunding is going mainstream. Anyone at a start-up would refer to this as the ‘product market fit’ phase. Crowdfunding now has the perfect opportunity to be a game changer for the entire region.
Reasons to be cheerful, part 2: The UK is dominating EU growth
In the EU it is clear that supportive regulation (namely a lack of) is holding back the sector. Although crowdfunding volumes grew a strong 141% to $3.26bn (including the UK), this could have been a lot higher if the EU had adopted a more positive regulatory position. A wise and proactive regulator has massively aided crowdfunding’s growth in the UK. A direct consequence of this has been the development of investor trust in crowdfunding, again helping user adoption. The EU is crying out for the same, or will be in danger of being left behind as the rest of the world embraces crowdfunding. Don’t believe me? Crowdfunding in the UK raised as much in 2014 as total crowdfunding across mainland Europe.
Reasons to be cheerful, part 3: Lot’s of space for new crowdfunding sites
An interesting stat which came out of the report was the fact that the EU’s top five crowdfunding platforms lost 30% of their market share in 2014. Rather than seeing this as a negative for the top crowdfunding sites, it is arguable that it shows that the market is growing and there is space for new entrants.
A stat I always like to remember – and which should hearten any new crowdfunding sites – is that when Google was launched it was the 17th entrant into the search engine landscape. Sometimes it does not matter how ‘late’ you are to the party. If your product is better, unique and hits the spot, you can do a ‘Google’. Based on the estimates, crowdfunding is set to be a truly game-changing industry. In the UK just 3% of the total population is aware of what crowdfunding is. The opportunity for all is vast.
Reasons to be cheerful, part 4: The rise of ‘crowdfunding supermarkets’
A trend Massolution highlights is the observation that with over 1,000 active crowdfunding sites (there are over 100 investment based ones in the UK), crowdfunders are overwhelmed with options. From the investor’s point of view, the market place appears dysfunctional and is hard to access. This is the main motive behind why we set out to create investUP in our bedrooms a few years ago.
Massolution’s report sees investUP as the first investor focused hub, offering crowdfunding sites a solution to their need to attract a balance of both retail and institutional investment. It is well known that the number one inhibitor to crowdfunding sites’ growth is the uncertainty around the supply of capital – of course deal origination plays a factor to. Well, as investUP is the world’s only ‘crowdfunding supermarket,’ that’s a pretty good reason to be cheerful for investors and crowdfunding sites alike.
Reasons to be cheerful, part 5: Market consolidation will help crowdfunding grow
Many commentators have started to argue that the market will shift towards consolidation over the next few years. I tend to agree with Massolution, which argues the point that crowdfunding sites are beginning to seek to expand geographically or within a target category. Another trend that has been identified is the idea of consolidation via the creation of super-marketplaces that aggregate deal-flow from multiple partner platforms. As the creator of this new trend in the marketplace, I naturally cannot say I disagree with this evaluation. It will massively help crowdfunding to become accepted and understandable from the investor perspective.
Finally the report estimates that in the next year crowdfunding should be globally raising a cool $34.4bn. That’s pretty exciting stuff. It’s always worth noting Massolution’s last estimate was in fact wrong though. Crowdfunding grew approximately four times more than their estimate!
Making estimates really boils down to one fact: no one really knows what the full potential of crowdfunding is. It’s growing globally, and that is very exciting for anyone involved in the industry, the start-ups it helps and of course the investors.