Crowdfunding is Overtaking Venture Capital


By 2016, it is expected to have crowdfunding account for more investment cash than what VCs provide. In 2010, crowdfunding couldn’t even clear $1 billion in total investments. In 2015, there is expected to be at least $34 billion contributed to various projects. In comparison, VCs average about $30 billion per year.

Year after year the crowdfunding is coming close to doubling the results from the previous year. With equity crowdfunding either happening already or about to happen, there are more ways to get involved than ever before. The collaborative economy is taking over and it will be here to stay.

How Does This Change the Finance Industry?

In the collaborative economy, valuation is approached in a different way. Traditional valuation is reflective of sales and assets, with maybe a small percentage attributed to potential. It is completely the opposite from the collaboration standpoint. Billion dollar valuations are happening time and time again with the collaborative economy for one simple reason: people feel like they are part of the process.

This process has already evolved into the financial markets when it comes to lending. Angel and venture capital has already been disrupted by the power of the people. More than $25 billion of the expected crowdfunding volume that is expected in 2015 will come from lending.

Crowdfunding Can’t Do It All

The potential growth of crowdfunding is staggering. Despite this fact, crowdfunding can’t be a one-stop source of funding. It may be able to provide scale to an organization, but it doesn’t provide the necessary experience of implementation. That can only come from the minds of people.

That’s why crowdfunding will eventually need to merge with other forms of investing in order to really reach its full potential. When you’ve got a mob of tens of thousands of people who are funding an idea, it limits everyone’s financial risks. It also means that there are no outside eyes really pushing an organization to be better every day.

There is room for everyone in the future market. Crowdfunding is going to take the lead and it’s just a matter of time until that happens. With the right planning, VCs can compliment the crowdfunding market to create what could be an unprecedented economy of opportunity.