2012 has seen an upsurge in the number of crowd funding platforms and an increase in the general awareness of this dynamic form of e-commerce. The million dollar glass ceiling that we struggled to burst through in previous years, is now the ceiling we dance on as we continue to push the envelope and add another zero to the targets that can be achieved. Governments have now signed off on legislation that will not only bring about changes in the USA, but will see a seismic shift in funding for small business around the world. But as the sun sets on 2012, we start to look towards 2013 and consider where the world of crowd funding will lead us.
Making projections and predictions is always fraught with the danger of being proven embarrassingly wrong – Just ask the hapless Mayans who, in a couple of weeks, will be turning in their graves from the embarrassment of mis-forecasting the end of the world (it’s safe for me to say that, because if they are indeed right, there will be no-one around to prove me wrong!).
What will the New Year bring?
In the area of pledge-model crowd funding, the big platforms will continue to grow as awareness increases and success is sold off success. Juggernauts like Kickstarter have the critical mass and momentum to keep growing and keep going, leading the industry. They have the expertise, the ingenuity to continue to develop and implement positive change, and the financial reserves to reinvest in their market awareness. Save for a derailment due to lack of probity or any form of misadventure, the big will continue to get bigger.
Smaller platforms, on the other hand, will struggle. The attraction of starting a platform to cash in on the crowd funding phenomenon will be quickly met by the realisation that it is a bit more difficult on than inside than it appears from the outside. Engagement and the challenge to be heard in an increasingly noisy marketplace will see many of the smaller and emerging crowd funding platforms will die off. There will always be new players to enter the market, but the increase in new entrants will be less than those early adopters who will exit and seek other forms of business. The growth (in number of platforms) will still continue, albeit at a slower pace. Growth, from the perspective of funds raised on the other hand, will continue to increase in 2013.
As economic pressures increase in a post GFC economy, and many feel the pinch of collapses in Europe as well as “the second wave”, the need for alternative sources of funding will see a fertile environment on which CF will flourish. Artistic types, commercial entities from start-ups to SMEs to mature businesses with new projects, charities and community groups will all continue to find crowd funding as a way to stand out, to engage and to raise required funding. Given that crowd funding is still a relatively new form of e-commerce, those that engage will still manage to stand out from the crowd and attract attention for being different and relatively unique.
The JOBS Act and the introduction of Crowdfund Investment in the USA will be delayed past their anticipated January 1 start, but will make a significant impact when it does come into play, not just in the USA but globally. With an expected $300bil in funding coming online in the USA through Crowdfund Investment, it will definitely be The Year of the Entrepreneur as small business and start-ups will benefit from community funding. Exciting times ahead, but many other countries around the world will watch with interest, and assess the benefits of Crowdfund Investment. Governments around the world are eager to see if indeed there is this shift from reliance on government funding for those who need capital now being able to turn to their community for the monies they need. Around the world, regulators will, however, also see areas in which they can modify to further mitigate risk of project supporters (and, I dare say, how they can tax and licence the industry in their country to generate income from this growing form of ecommerce).
2012 will be remembered as the year in which crowd funding truly blossomed. 2013 promises to be a year in which the flowering will continue, and the first fruits will become edible. How bountiful and sweet that fruit turns out to be is yet to be seen. Stay tuned – we are in for interesting times!