In a matter of only a couple of decades, crowdfunding has grown to a multibillion dollar industry as new technology makes it easier than ever for home innovators to bring their ideas to market. With the rise of new platforms and the growth in popularity amongst millennials of this fundraising methodology, The World Bank estimates that by 2025 the global crowdfunding industry will be worth upward of $95 billion.
It is important for not only now for techies and tinkerers to pay attention to these platforms but also for investors as new trends in the industry allow for serious profit-making opportunities. As the industry continues to move forward at light speed, here are four trends in the crowdfunding industry for you to keep an eye on in the coming year.
Startup Accelerators
While startup accelerators have only existed for a little more than a decade, Silicon Valley superstars like Sam Altman, Paul Graham, Brad Feld, and a slew of others were quick to adopt the boot camp strategy. Exciting startups are offered the opportunity to receive mentoring in all aspects of business development and assisted with their projects and fundraising for a set amount of time. Startup accelerators, however, cannot quite keep up with the incessant innovation in technology.
To alleviate this influx of ideas, some startup accelerators have begun to introduce programs that facilitate crowdfunding rather than investment rounds, allowing for larger volumes of projects to receive mentorship and sufficient funding to continue with their work. Microcap focused startup accelerators like these are beginning to see more widespread adoption as promising accelerators of the type have already assisted successful projects.
If your eyes are on crowdfunding, make sure to stay on the lookout for the rise of microcap startup accelerators as new, more structured methods to developing companies with comparatively small financial needs.
Equity Crowdfunding
In the past, crowdfunding platforms have relied on reward based systems to incentivize backers for projects. While this works well for projects that can return a product or a service directly to consumers, the platform leaves out startups whose products or services may not be marketable to the average joe. A new trend in crowdfunding is remedying this problem by using the same method of incentivization as traditional investments.
New crowdfunding platforms are now allowing for entrepreneurs to raise capital via equity rather than a physical reward, allowing for a myriad of industries to be able to now effectively use crowdfunding to get their ideas of the ground. For investors, this trend is particularly important to pay attention to in the new year as more and more platforms begin to incorporate equity rewards into their current crowdfunding systems.
Investor Education
For a period of time, crowdfunding acted as a sort of wild west of business fundraising. Dozens of cases of projects that met or far exceeded their capital goals vanished with little that platforms of users could do about it. While the crowdfunding platforms were still able to collect their shares via fees, casual users and investors in these projects were left hanging with no product or service to show for their investment, and in many cases, no trace of their initial investments.
Luckily, a new wave of startups has come along to help alleviate this problem by conducting individual research into projects that exceed what a casual investor would be able to find on a fundraising site or the company’s website.
By acting as rating agencies of sorts, these new startups are helping to guide both casual tech enthusiasts interested in a new innovation as well as investors interested in funding a promising project in deciding which projects will actually be able to deliver on their promises. If you’re interested in crowdfunding, these startups will prove useful resources in the coming year as more and more projects pop up.
Blockchain Technology
Blockchain technology’s applications reach far beyond the cryptocurrencies that plaster news outlets and have created immense hype in investing communities. While many tech aficionados originally looked at crowdfunding as a way to democratize fundraising so that anyone could freely pursue innovation, the platforms in reality turned out to be more constricting. Excessive fees and vague guidelines coupled with exclusionary policies made many platforms inaccessible or inefficient for entrepreneurs.
New startups like Acorn Collective are applying decentralized ledger technology to crowdfunding situations. The company has created a token system, called OAK, that allows users on both sides of the platform to crowdfund free of fees. Fees as high as 10% for fundraisers has been effectively eliminated, making the platform much more friendly to up and coming companies.
In addition, the Acorn Collective’s blockchain-based platform allows any legal and non-harmful project from anywhere on the globe to easily fundraise, something that no other crowdfunding platform allows for. As the technology continues to develop and manifest itself into the fundraising industry, blockchain will certainly be a trend to keep your eye on if you are interested in the crowdfunding economy in 2018.
Disclosure:
The author has had a working or personal relationship with one or more companies mentioned in this article in the past. Access to mentioned company’s management and information was made through the author’s personal network. All information was vetted prior to posting.
Disclaimer:
This essay is not intended to be a source of investment, financial, technical, tax, or legal advice. All of this content is for informational purposes only.