Crowdfunding industry set to pass $3 billion mark

COPYING AND DISTRIBUTING ARE PROHIBITED WITHOUT PERMISSION OF THE PUBLISHER: CHUNT@EUROMONEY.COM

By:
Helen Avery
Published on:

The first-ever survey to track the growth and trends in the burgeoning crowdfunding industry was released on Tuesday.

Crowdsourcing.org surveyed 170 platforms and analyzed 452 sites for its inaugural survey. The results illustrate the rapid growth of the non-banking industry.

In 2011, $1.47 billion in capital was raised via crowdfunding. Funding volume for 2012 is expected to be $2.8 billion.

Crowdfunding platforms surveyed by crowdsourcing.org included donations platforms like Kiva, rewards-based platforms such as Kickstarter, equity-stake crowdfunders like Crowdcube, and crowdlending platforms such as Lending Club.The biggest competitors to the banking industry are crowdlending, from which around $1.1 billion globally is expected to have been raised by the end of this year.

Growth in worldwide funding volume
Research based estimate ($mln)
Source: masssolution.com
Equity-based lending is more akin to venture capital. Again, platforms enabling start-up firms to sell equity stakes to raise capital are expected to have raised almost $1.1 billion by the end of this year.

North America boasts the largest number of platforms. However, it has achieved 59% compound annual growth in the number of platforms during the last six years.

Of the 450 platforms that the survey uncovered, 191 are in the US. The UK has the next biggest industry with 44 platforms. The Netherlands, France, Germany, Spain and Canada follow respectively.

Crowdfunding platforms are putting pressure on the traditional banking industry to modernize. As well as being an alternative to loans, platforms are using micropayments systems, such as PayPal and Amazon Payments, sidestepping bank transactions.

According to the survey, more than 60% of platforms require entrepreneurs to deposit money using PayPal as a means of payment.

See the May issue of Euromoney for a larger story on crowdlending and crowdfunding globally and its impact on traditional financiers,The money network: Why crowdfunding threatens traditional bank lending.

Also see Regulation: Bankers enraged by Jobs Act IPO rules, and More than banks’ Jobs are worth, published by Euromoney.