In the recent years, the use of online fundraising platforms for business startups has brought in a wealth of opportunities for those with money to invest and also for those seeking funds. Also, this has provided a greater opportunity for those seeking funds, and for the crowdfunding platforms facilitating their connection. The last three years has witnessed a large number of platforms entering the market and increasing numbers of businesses seeking opportunities in this sector.
Globally, it has been realized that Crowdfunding has the potential to spur businesses because of its ability to expand the pool of investors from whom funds can be raised. Businesses no longer need to depend on owners, relatives or venture capitalist for growth. Recent reports have shown that this industry has posted an average annual growth of more than 100% in the past three years. Also, these reports reveal that the global market economies are working in favor of this industry.
It is worth to note that crowdfunding is growing at a very high rate such that it is impacting on government policies. The majority of the governments realize the huge potential of this industry in the economy and thus creating a conducive environment for the industry to thrive. Consequently, crowdfunding has encouraged enterprise innovation, and has changed the traditional roles of financial institutions such as banks across the globe.
Data from Massolution, a research firm, reveal that crowdfunding platforms raised $16.2 billion in 2014, as compared to $6.1 billion raised in 2013. In its 2015 industry report, Massolution reveals that the strong growth in 2014 was as a result of Asia’s emergence as a crowdfunding region. In this year, Asia raised $3.4 billion as compared to Europe’s $ 3.26 billion. On the same report, North America led the world in crowdfunding volumes by recording a total of $ 9.46 billion raised.
Massolution forecasts further that the exponential growth in Asia will increase tremendously in 2015 with the difference between Europe and Asia increasing to over $4 billion. In this regard, forecasts on worldwide crowdfunding volumes are expected to double in 2015 to reach $34.4 billion. Further, it has been predicted that the rise in the growth in Asia will stem largely from the Chinese market.
Several factors have influenced the fast growth in this industry worldwide. First, crowdfunding platforms have been getting huge support from policy makers. In regard to this, there is the availability of direct government finance on several sites. Secondly, increasing diversity is also in favor of crowdfunding. This include, platforms offering equity finance, platforms in the consumer finance market, and platforms offering invoice finance to small and medium enterprises.
Lastly, institutional investment support has had a positive impact on crowdfunding. Different investors ranging from occupational pension schemes to private equity funds are attracted to the income streams generated by the peer to peer lenders. As a result, makes it easy for this group of investors to inject investment capital into this sector. In regards to the above statistics, crowdfunding is poised to continue registering huge growth in the coming years.