In recent years, the gap at the bottom of the funding ladder has continued to grow. Small businesses, start-ups, charities, and those with creative aspirations have been unable to reach the higher rungs of traditionally available funding. Stock exchanges, venture capitalists, banks and other more recognised funders do not support early stage initiatives or what amounts to little more than a great idea. They require evidence of traction, proof, surety, and a number of boxes to be ticked. And, of late, the gap has continued to get lager, opening the door (quite widely) for crowd funding to come in and answer the funding need.
Many are calling for venture capitalists to be renamed as “development capitalists” as they seem to have stalled in their propensity to venture. Over the last 10 years, global venture capital funds have decreased by 90%, as sources of this method of funding have become less bullish, preferring to put their money into development of proven ideas rather than “taking a punt” to back early stage, new to world concepts.
Right through to the most relied upon and secure backer of projects, the government, the finance sector is stretched. Bank lending to governments (in Australia) has been on a steady incline, with current numbers representing a figure triple that of 10 years ago. Just recently, federal government grants to start-ups and their grant schemes in general were “paused” while the government regroups and reassesses their ability to fund initiative. Governments, like many households, are under pressure to balance the books, and funding new initiatives is one of the first things to face review. Governments can’t sustain the pressure, and the gap at the bottom of the funding ladder creaks and groans as it continues to grow.
But crowd funding has filled the gap, and continues to establish itself as to the solution to the funding required at grass roots levels and at the bottom of the funding ladder.
Despite many thoughts to the contrary, there is money out there. Not in big packets and not in the vaults of the traditional lenders. It is in the pockets of the people – people who are willing to pledge to people they like, to a cause they believe in, to a project that will deliver them funky rewards or social kudos. The proof of the pudding is in the eating, and the evidence is there. Some individual sites are now receiving well over $100mil in pledges a year. In the USA, one crowd funding site alone funnels more money into the arts sector than the National Endowment for The Arts – the federal body that governs and supports the sector. And the crowd funding industry continues to evolve and grow at a staggering 91% globally – something unheard of by most other sectors in the post GFC world.