When crowdfunding sites like Kickstarter and Indiegogo emerged in 2008, many people dismissed them as a novelty.
But six years later, its pretty clear the doubters were wrong. Successful projects like Pebble, Coin and the Coolest Cooler have raised tens of millions of dollars. Billions of dollars have been raised for creative projects, new companies and personal causes. Crowdfunding is at the center of a new economic revolution, one that democratizes the capital raising process and makes it accessible to anyone with a dream and a computer.
Since we launched our API for platform business in 2011, our crowdfunding partners have averaged a 28% monthly growth rate. We now process three times as much volume from crowdfunding partners that we did at the same time last year. These are staggering growth rates.
But crowdfunding isnt just growing, its changing and specializing. As the sector comes of age, its seen the growth of sites aimed at serving particular use cases and needs, and the emergence of crowdfunding in several categories.
One category is personal crowdfunding.With the prevalence of stories about fascinating new hardware being funded through Kickstarter and Indiegogo, its easy to get the impression that crowdfunding is primarily for people who want to start a business. Thats not what we see in the data, however.
GoFundMe, for example, is almost entirely dedicated to personal crowdfunding letting individuals raise money to tackle their life goals or deal with major setbacks like unexpected medical expenses. This isnt an area that gets as much press because the actual dollar amount raised is usually smaller than for a company or business model, but because the potential audience is much larger, personal crowdfunding sites have the potential to grab a much larger portion of the total dollars spent. Look for growth in this market in the next year.
Nonprofits of all kinds are now seeing the benefits of crowdfunding too. Not only is it a great way to generate donations, but it also serves as a marketing channel when donors share their contributions on social media. Thats led to a slew of new crowdfunding sites catering specifically to the needs of nonprofits, like Crowdrise, StayClassy and Aplos Software.
Most crowdfunding sites operate on a donation or rewards-based model. But another model exists: equity crowdfunding, where contributors receive an ownership stake in the business in return for their money. If this form of crowdfunding takes off, it has the potential to completely upend the way companies raise funds, adding an alternative to traditional venture capital, angel and debt financing. This model hinges upon the successful implementation of the JOBS Act by the SEC, which has proven to be a challenge thus far. Once the full crowdfunding rules that were proposed for adoption late last year go into effect, you can expect a bevy of startups to be ready to pounce on what will be a massive opportunity.
As it grows, matures and diversifies, the crowdfunding industry provides an excellent example of something we here at WePay call the bottom-up economy. The bottom-up economy is the idea that the drivers of economic growth in the coming century will not be giant entrenched corporations, but rather small businesses and sole proprietors, empowered by technologies that let them to access things like capital & distribution on a scale that was never possible before.
Thats not only true of the customers of crowdfunding mostly very small businesses, nonprofits and individuals, but also of the crowdfunding sites themselves, who in many cases are small businesses themselves and are seeing huge success. Were excited to see what the future brings.
Bill Clerico is CEO and co-founder of WePay.