Spoiler Alert: This post contains references to things that haven’t happened yet
As 2014 opened most people had never contributed to a crowdfunding project. In fact, lots of people had not even heard of crowdfunding, Kickstarter, Indiegogo, or the hundreds of other crowdfunding sites. In the five nations Kickstarter is focused on, only about 1 percent of people contributed to a Kickstarter campaign in 2013. While the population of the five nations is over 400 million, there were only about 20,000 Kickstarter campaigns funded in 2013.
The main reason for the limited participation in crowdfunding to date is it takes lots of media coverage to bring new things to the attention of the public. In late 2013 there were some articles indicating that the SEC was working on developing rules for equity crowdfunding. There was also very limited coverage that indiegogo had received an investment of $40,000,000 for future expansion in January 2014. While industry insiders followed these events with great interest, the public didn’t really notice.
Everything will begin to change in March of 2014. First the news will break that total Kickstarter pledges have broken $1 Billion! This will unleash an avalanche of news coverage that will bring more attention to the industry than ever before. Soon after Kickstarter’s breakthrough, the SEC will release the regulations for Title III equity crowdfunding. This will spark a new round of coverage in the media. Many entrepreneurs will hear of crowdfunding for the first time, and realize that at last there’s a mechanism for them to access the funds they need.
By the summer various platforms will announce when they will begin offering equity crowdfunding. The fireworks will really start when indiegogo likely announces that they will begin offering equity crowdfunding almost immediately (see hints in the interview with indiegogo founder Slava Rubin posted on Forbes.com 2/1/14 . On the strength of a known brand name, and with the funding needed to offer and market equity crowdfunding services, indiegogo would provide almost instant acceptance for this new capability.
This period of extensive media coverage will raise crowdfunding’s public profile to a whole new level. Throughout the balance of 2014 there will be a vast expansion in crowdfunding activity. This expansion of the crowdfunding sphere will enable many of the hundreds of existing crowdfunding platforms to get more established. This increase in activity will support dramatic growth of the crowdfunding ecosystem. Firms providing consulting, crowdfunding software, marketing, shipping, video production, white label crowdfunding platforms, and countless other services will spring up to service the new demand.
While it’s clear that crowdfunding is poised for huge growth starting this very year, how large is it likely to eventually get? In 2013 less than 1 percent of people contributed to a crowdfunding project. How does this compare to how many people make investments or donations? Over 50 percent of U.S. households have investments in stocks or mutual funds. Almost 90% of U.S. households make contributions to various organizations and causes. These figures would seem to indicate that there’s room for crowdfunding to easily grow to 10 or 20 times its present size.
In 2013 20,000 individuals and businesses were funded through the Kickstarter platform. The vast majority of businesses have not yet pursued crowdfunding, largely because it’s difficult to raise over $200,000 without offering equity. The ability to offer equity crowdfunding will finally attract the small business market. There are about 23 million small businesses in the U.S. alone. In other words, there are over a thousand small businesses in the U.S. for every project that got funded by Kickstarter last year.
As the crowdfunding space grows to the point where there are hundreds of thousands of successful campaigns annually, the industry will become a major force for creativity and entrepreneurship as it helps drive job growth and economic expansion in the years to come!
Jay Wittner, Launcht Guest Blogger