Up until a few short years ago, most consumers were entirely unfamiliar with the concept of crowdfunding websites. The advent of Kickstarter has brought the phenomenon to the attention of millions of connected users, however, allowing relatively unknown artists, entrepreneurs and business owners to obtain financing for their respective projects. As government legislation allows crowdfunding to develop beyond the confines of sites like Kickstarter, there is little question that this exciting financing option will continue to experience phenomenal growth. According to research conducted by massolution, crowdfunding is projected to generate some $5.1 billion this year alone.
Whereas Kickstarter has primarily been used to fund small projects and artistic endeavors, the tide is turning in favor of would-be entrepreneurs and established businesses in need of immediate capital. As the industry continues to develop rapidly, niche sites have been created to address the unique needs of those seeking internet angel investors. By targeted specific segments of the industry, these sites allow financers to connect with causes and companies they appreciate.
Soliciting Direct Contributions
Crowdfunding’s enormous success via channels like Kickstarter has certainly brought it to the forefront, but some companies seeking funding have begun to migrate away from the platform. Instead, these groups have worked to create their own unique sites and systems to solicit and process contributions from financers willing to back their projects. While small-time investors are likely to favor recognized sites, this shift towards proprietary systems has allowed those seeking capital to skirt fees imposed by services like Kickstarter and create their own terms and conditions for angel investors.
Developing New Crowdfunding Methods
Regardless of whether an entrepreneur or business chooses to utilize a service like Kickstarter or instead create their own financing platform, savvy marketers have begun to throw their weight behind new methods of sourcing funds online. For example, rather than asking investors to participate solely for the joy of being part of an intriguing project, many companies are offering equity and royalties in exchange for financing. This development reflects the crowdfunding migration to a more traditional financing model, wherein investors receive compensation in the long term for their monetary support.
Although some have expressed concern about the trends changing the world of crowdfunding, giving both large and small financing groups the opportunity to join hands in a funding endeavor should have positive results for those seeking capital. Crowdfunding allows investors to diffuse some of the risk associated with funding a new business endeavor. By offering equity, royalties and other monetary rewards, crowdfunding is able to cater to investors while simultaneously competing with traditional financing that can take months to secure.
Crowdfunding is an exciting phenomenon that has already allowed millions of individuals to pursue their goals and aspirations. As the industry grows and government legislation evolves, the impact crowdfunding will have on the business world has become incredibly apparent. Rather than staying sequestered as a niche tool available to artists and individuals, this industry is poised to explode as one of the most powerful financing options to ever hit the business world.