A recent article in CrowdFundBeat by Paul Niederer of ASSOB took a look of what crowd funding might be like by 2020, both from an investment and pledge-model perspective. As with any good futurist’s work, the projections don’t say how it will be for sure, but raise some discussion points around how, from a church spire view of current proceedings, the landscape may look given the emerging trends and developments in technology. From how individuals refer to crowd funding to how corporations will use it, we see that the sector will be in great but markedly different shape by 2020.
The first big change will be that the word “crowdfunding” will have virtually disappeared as peer to peer transactions will have become the norm. The same thing will have happened with the term “social networking” as that’s just the way most people communicate now and few call it “social networking” – even fewer will do so over time.
One of the big differences between equity crowd funding and the pledge-model is the latter’s offer of instant gratification to those who support campaigns. In most cases, project supporters are sent something tangible immediately at the end of the campaign in return for their pledge, but in the case of the investment model, the investor holds hope until the business eventually turns a profit or the company is sold and a capital gain is realized. The future will see a shift to more instant gratification for investors in equity crowd funding models, with royalty or dividend based crowd funding becoming easier as costly and complex transactions will become quicker and cheaper to handle as the processes are automated.
There is forecast to be a shift from the initial adopters of crowd funding, moving from just startups or small business, over to large corporations who will quarantine regular and long term shareholders from the risk associated with R&D, and these will be crowd funded in separate issues or tranches. Funding R&D and marketing initiatives in this way would be particularly attractive to companies involved in pharmaceutical, green tech, clean tech, and food processing sectors.
Perhaps one of the greatest bonuses that will come over time will be the increased security and the reduced risk with online transactions and the general issue of shares on the internet. Improvements in facial recognition technology enabling authentication of parties relative to their internet history, or other forms of identity management such as those which include biometrics will make potential investors more able to find out all relevant details about the issuer, giving more comfort around the process of investing. Similarly whistle blowing, which is currently the norm in the world of crowd funding, will play a greater role as sites centralise known data.
The biggest leap in thinking from what we currently understand crowd funding to be will come with changes to how rewards are created or offered. In the future, rewards will be able to be contrived by the pledger / investor rather than being specified at the beginning of the campaign. This two way negotiation, once built into platforms, will take the relationship between project creator / issue and supporter / investor to a whole new level and a market for rewards may develop.
Not unlike the Olympic motto of “Faster, Higher, Stronger”, crowd funding will become faster, more efficient, easier, and increasingly cost effective as computers will do more of the work around investor matching and documentation. Automation will be the key, especially with investment crowd funding where driving out cost and improving the speed of capital raising will be realised through computer-generated processes.
And this all leads to a better, safer, more engaging, and successful experience for all concerned. As in Paul Niederer’s words – “A glimpse at the future … and it is all good!”