Trends Show Crowdfunding To Surpass VC in 2016

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Forbes | Chance Barnett | June 10, 2015

Chance Barnett

By 2016 the crowdfunding industry is on track to account for more funding than venture capital, according to a recent report by Massolution*.

Just 5 years ago there was a relatively small market of early adopters crowdfunding online to the tune of a reported $880M in 2010.

Fast forward to today and we saw $16 Billion crowdfunded in 2014, with 2015 estimated to grow to over $34 Billion.

In comparison, the VC industry invests an average of $30 Billion each year.

Meanwhile, the crowdfunding industry is doubling or more, every year, and is spread across several types of funding models including rewards, donation, equity, and debt/lending.

View:  6 Provinces Adopt Start-up Crowdfunding Exemption in Canada

And now under new laws enacted in 2013, equity crowdfunding has sprung forth as the newest category of crowdfunding and is further accelerating this growth and disruption.

Finance Meets The Collaborative Economy

If we look at what is driving this growth and change… we see that the collaborative economy has brought new disruptive models to giant existing industries like real estate and transportation, leveraging automation and the internet to create massively scalable businesses.

For some notable specific examples see this visualization of the sharing economy with data from Mesh Labs founder Lisa Gansky, and the recent Venture Beat report led by Jeremiah Owyang showing 17 new billion dollar valuation companies created within the sharing / collaborative economy.

Many of these collaborative economy companies reached over $1 Billion valuations within 4 years or less.

Next  up in the crosshairs of the collaborative economy? The Finance industry – and the growth rates are already exponential. We’re seeing the disruptive power of collaboration online being unleashed on angel and venture capital via new laws and top crowdfunding sites focused solely on equity crowdfunding (see Canadian Crowdfunding Directory).

Here are the recent crowdfunding industry growth figures, as reported by Massolution in their 2015 Crowdfunding Industry Report.

Funding_Volume_Crowdfunding_Industry_2015_Models

Will Equity Crowdfunding Overtake Angel and VC?

The World Bank estimated that crowdfunding would reach $90 Billion by 2020. If the trend of doubling year over year continues, we’ll see $90 Billion by 2017.

To put that in perspective, venture capital averages roughly $30 Billion per year and in 2014 accounted for roughly $45 Billion in investment, whereas angel capital averages roughly $20 Billion per year invested.

View:  Why Venture Capitalists Are Turning to Crowdfunding

Equity crowdfunding, the newest category of crowdfunding, opened up publicly in September of 2013 under Title II of the JOBS Act and, while restricted to accredited investors only, has grown to an estimated $1 Billion invested online. In 2015 the estimate is for over $2.5 Billion to be invested through equity crowdfunding.

If equity crowdfunding doubles every year like the rest of crowdfunding has, then it could reach $36 Billion by 2020 and surpass venture capital as the leading source of startup funding.

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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 1100+ 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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