Crowdfunding takes a number of different forms today. It can be used as an investment strategy, a product testing mechanism, or even as a way to fund equity. Sometimes donations are the emphasis of a crowdfunding campaign. At other times rewards become the point of emphasis. Even non-accredited backers can get into equity crowdfunding if their state has approved rules for it, even though there is no national guidance on the matter as of yet.
It’s currently a $10 billion market. Some valuation estimates put the potential of crowdfunding in all industries as a $27 trillion market. That’s why the emerging trends of crowdfunding today simply cannot be ignored.
4 Key Trends Are Driving the Industry Forward
1. The first key trend that is enabling crowdfunding to gain influence in today’s marketplace is its ability to access private equity to virtually everyone. Even peer-to-peer lending brings in unaccredited backers for a chance to have a better overall return. This allows almost anyone a chance to find the funding they need for a good idea or an opportunity to support a good idea.
2. The second key trend to remember is that there are more platforms, industries, and ideas being put to the crowdfunding community than ever before. Accredited backers have many opportunities to find a high return. Non-accredited backers have the same chances, though still limited in most countries.
3. Then there’s the transparency that comes with the average crowdfunding campaign. People have the ability to choose where there money goes based on how effective the communication of a campaign happens to be. Backers benefit from the transparency because it reduces their due diligence requirements. This is why the introduction of equity crowdfunding is so enticing to so many.
4. The final key trend is the increase in institutional grade data. Individual backers are getting the same information and opportunities that were initially reserved only for large scale businesses or very wealthy individuals. This has allowed for better portfolio diversification, debt management, and investment opportunities.
Why Are the Emerging Trends in Crowdfunding Important to Recognize?
Crowdfunding is very effective at connecting people together so that something incredible can be accomplished. It is a place where backers who need help can meet backers who are able to provide help. It’s like having a new form of social networking where instead of sharing skills and talents, people are able to share monetary resources. This means backers that may normally never have come into contact with each other in the past can come together to create sometime amazing.
Crowdfunding is also making it easier for backers to perform their due diligence. If an angel spends at least 20 hours performing due diligence on an investment opportunity, there is a 5x better chance of achieving a profitable exit from that investment. An entrepreneur’s history is much easier to access through crowdfunding and this makes the process faster and easier to complete. Those 5x better odds could be potentially achieved in the future in just 50% of the time it takes right now.
It’s also changing the way the business world things about wage gaps and glass ceilings. Kickstarter, for example, has shown that women can be more successful at raising money than men can be. Crowdfunding also creates an opportunity for women and minorities to connect with entrepreneurs of the same ethnicity or gender so that an opportunity can be built from the ground up without a thought to a glass ceiling being at the top.
Even crowdfunding that focuses on donations has helped the general public understand what it means to actually contribute to a good cause. It’s also helped people understand that there is a deep connection between the for-profit world and the philanthropic world when it comes to social responsibilities. People can learn from each other, yet never even have a conversation with one another, and that’s the most exciting component of modern crowdfunding.
Crowdfunding Will Continue To Evolve
The emerging trends of crowdfunding are exciting to consider, but so is the fact that this is just the beginning of an evolving platform. It’s a brave new world and there is a lot to take in for accredited and non-accredited backers. There are many different forms of crowdfunding that are available today and all of them are going to be sticking around on a permanent basis.
As it evolves, we must continue to strive forward to learn more about each change so that we all have an opportunity to get a taste of the success this platform is able to provide.
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