Crowdfunding Has Now Become The New Seed-Funding

A new series of reports, published recently, reveals that Kickstarter-style rewards crowdfunding is now a global phenomenon providing seed-funding to entrepreneurs across 222 countries and creating an unprecedented ongoing wave of innovation.

The “2016: State of the Crowdfunding Nation” report kicks off a new quarterly series of annual and quarterly reports available from TheCrowdfundingCentre.com on global innovation with a slew of annual and quarterly reports covering 2014 and 2015 as well as ten countries, across 40 different sectors.

While the Technology sector has the highest average pledge and so raises the most, it lags behind Music, Film, Publishing, Art and Design in sixth place overall.

“Rewards Crowdfunding is now the new seed-funding” commented Barry E James, Founder of TheCrowdDataCenter as well as TheCrowdfundingCentre “It’s transforming innovation by transforming the prospects of entrepreneurs across the world, who have been excluded until now. Thus creating an unprecedented ongoing wave of innovation that shows no sign of letting up – quite the reverse. Over the last year it’s settled into a steady rate of growth of around 25%”.

From a high base, created by rapid growth in 2014, rewards Crowdfunding grew over the last year in excess of 25% – 27% as measured by amount raised – with participation (the numbers of pledges) increasing significantly (12%) while the success rate fell by 2% as publicity attracted those less prepared for the process.

Number of Projects launched on major platforms increased slightly (2%) while the numbers of projects (fixed model) exceeding target fell by 9%. 4% fewer ‘Flex’ campaigns raised money. Overall contributions increased by 40% and average pledges by 11% with the average number of backers per project also up 12%.

Total funding is estimated at over $1Billion with more than $820Million from just the two top platforms, Kickstarter ($590m) and Indiegogo ($233M). The worldwide total is estimated to be in excess of $1.6Billion – and could be as high as double that given the known high levels of additional activity in China and other non-English speaking territories. In addition to off-platform funding, such as $100m to Star Citizen alone.

Fixing Seed Funding and Deal-Flow?

The report finds that rewards crowdfunding is “The New Seed Funding” and that it is at least as significant as the larger numbers claimed for equity crowdfunding – set to surpass VC funding in 2016 (which itself is estimated to provide about $30Bn annually). The report point out that viewed as seed-funding rewards is 10x more valuable to entrepreneurship and the economy than the equivalent amount in angel and VC funding because the funding ask of angels and VCs is two or three orders of magnitude (ie 10 to 100 times) more than at seed stage. This is “not unlike addressing the ‘First Time Buyer’ problem in the housing market” it says.

“What this new data is telling us is that rewards crowdfunding’s growth is sustained and at a high enough level to be making a significant impact on the mainstream economy, especially entrepreneurship and innovation. Seed-funding has always been an important but difficult, and so under-served, market. Feeding as it does ‘upstream’ investment. The structural difficulties, exacerbated by the financial and banking crisis, have become worse but it looks very much as if rewards crowdfunding is now providing a real alternative” commented Dr Richard Swart of UC Berkeley

“This represents serious capital injected into an economy that will have a lasting impact” commented Sherwood Neiss, Partner, Crowdfund Capital Advisors & one of the architects of the USA’s JOBS act.

The “State of the Crowdfunding Nation” report is available here.

Re-published from GoodCrowd.info as part of CSRlive’s collaboration with Your Mark On The World