Crowdfunding Investment in Technology Could Hit $8 Billion By 2020

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Small Business TrendsShubhomita Bose | January 17, 2016

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Investments in crowdfunded technology are set to increase seven-fold from an estimated $1.1 billion in 2015 to $8.2 billion by 2020, according to “Crowdfunding: Strategies & Impacts for Technology Markets 2016-2020,” a new study conducted by Juniper.

The study expects the crowdfunding industry to “see an accelerated growth from the lucrative, but less well-known, method of funding known as ‘equity crowdfunding’.”

“Equity crowdfundng” refers to raising money through crowdfunding means for a share or interest in the company, not simply an early or lower cost version of the product or other perks.

Related: Why crowdfunding is set to get a whole lot bigger in 2016

In other words, smaller technology investments will be available to firms unable to get investments from Venture Capitalists and Angel Investors.

Equity Crowdfunding to Grow

The crowdfunding investment research has identified the U.K. as the leading market for this equity crowdfunding with the U.S. come in lose behind. In recent years, equity crowdfunding has taken off in a very big way in the U.K. Equity crowdfunded deals and investments have, in fact, grown steadily since 2011.

Related: Equity crowdfunding will soon be legal in Canada. Should you jump in?

Juniper expects other countries to follow the U.K. model by legislating to allow smaller investors to engage in equity crowdfunding. But the future of equity crowdfunding in the U.S. remains bright the U.S., with the positive SEC (US Securities and Exchange Commission) ruling on the JOBS Act, Title III passed in October 2015.

This follows up earlier legislation as part of the Jumpstart our Business Startups (JOBS) Act of 2012 which began opening the door to more equity crowdfunding as an alternative kind of investment.

Hybrid Models in Focus

Well-known crowdfunding platforms such as Kickstarter have popularized the concept of reward-based crowdfunding, which benefits small businesses looking for funding. In return for their investment, project backers receive some type of incentive. But after some much-publicized failures, such as the Zano drones debacle, this model has lost much of its sheen.

Related: Crowdcube Founder Claims An Industry Tipping Point

Crowdfunding platforms are now looking at hybrid crowdfunding models, which allow users to invest in the project or company via equity or debt, rather than to receive an incentive for their support.

Report author Lauren Foye says, “The hybrid concept has been demonstrated recently, with video games crowdfunding platform ‘Fig’ hosting projects to be backed through a combination of the rewards and equity models. Equity is attractive for consumers, who feel they may be investing in the next ‘Oculus Rift’ or ‘Pebble Time’, hence in line to make a significant profit.”

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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support and networking opportunities to over 1300+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more About Us or visit www.ncfacanada.org.

 

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