Posted on March 11, 2013 By iPledg With 0 comments

Crowd Funding – The Rise and Rise of Peer to Peer Finance

final logo new small-01In the post-GFC environment (or as some have termed “the New Reality”) most business leaders would welcome sustained revenue increases or market growth. Even for those new industries that have emerged since the GFC, there seems a quick flattening in their growth curve as maturity is reached after just two or three years. But as a “mature” 4 year old, crowd funding continues to enjoy exponential growth as the world continues to embrace this dynamic form of e-commerce, and technology makes it easier to reach out to a broader crowd.

In 1997 UK rock band Marillion funded their US tour through many small pledges from diehard fans, and then returned token gifts back to their loyal fans to say thanks for their contributions. They had (without knowing it) invented the modern day concept of crowd funding. Some would say that with seventeenth century initiatives of funding the printing books through asking the public for pledges in return for a mention on the title page, or Joseph Pulitzer’s 1884 program to have the US public pledge money to fund the pedestal on which the Statue of Liberty sits today, were the real roots of crowd funding, but Marillion’s campaign saw the introduction of the concept to our modern times. Fast forward to 2009, and we saw crowd funding lay down the footings on which the current surge of this concept was built.

In 2009 crowd funding worldwide represented a $1.6bil industry. In an age when other industries were contracting and in decline, crowd funding continued to grow at not just double-digit rates, but rates in excess of 50% each year. In 2012 alone, the industry grew by 91%, demonstrating continued exponential growth each year since its rebirth. As a sector, crowd funding is now well on track to now generate $6.2bil in global revenue during this calendar year. Many have been quick to jump on the crowd funding band wagon, with the number of platforms having grown in the past year from 452 sites to 536, an increase of 27%.

Kickstarter, the “Big Daddy” of all crowd funding sites, proudly boasts figures that surely have enticed many into the market, optimistically seeking to enjoy a share of such successes. In 2012, Kickstarter hosted 90,000 projects, received $516bil in pledges, and hosted 21 campaigns that each raised over $1mil. Not only did they lead the crowd funding pack, but by their successes alone, enticed many newcomers to the market to try their luck as platform operators.

Many question whether the current growth being enjoyed by crowd funding will be sustainable. The imminent introduction of Investment Crowd Funding won’t just see the continued incline in the curve, but a whole new step change, seeing a greater level of growth than ever witnessed before. With $300bil estimated to come on line for small business in the US in the first year of investment crowd funding, such unprecedented growth will continue as other countries mimic the US experience and similar legislation is subsequently brought into play in many countries around the world in the years to follow.

But why is it that crowd funding is enjoying such phenomenal growth in a time then other industries and entire economies are struggling to survive? Perhaps the answer is found within the question.

Crowd funding offers a solution to the underlying need for funding in a time when there is a decreasing amount of ready capital. Banks are becoming increasingly risk averse, and governments are needing to tighten fiscal policy in line with efforts to balance their national budget. Social media has connected people like never before, making the world a smaller, more intimate place where everyone is connected to everyone else through the click of a mouse. Crowd funding offers the true democratisation of funding, allocating money to where the crowd feels it should best, rather than where review panels dictate or where governments allocate. Crowd funding may well be the next iteration of social media. To date people have been able to LIKE another person by giving them the thumbs up, but now they can like them with their wallets, and become true followers of the project creator and their endeavours.

Crowd funding continues to grow and to demonstrate that it is the right thing, at the right time, and delivered in the right way through the power of social media. May it long continue to ride the perfect storm of need, social awareness, and the power of the internet.

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