April 8, 2013

Crowdfunding Volumes Explode, Heading to $5B in 2013

Equity-based crowdfunding is stepping up, according to report

Crowdfunding platforms raised $2.7 billion globally in 2012, an 81% increase over 2011, and could exceed $5 billion by year end, according to a report released Monday.

Research firm massolution collected data from 308 active crowdfunding platforms worldwide during the first six weeks of this year for its annual 2013CR–Crowdfunding Industry Report.

The report showed that platforms in two regions raised the lion’s share of capital in 2012. Crowdfunding volumes grew by 105% to $1.4 billion in North America and by 65% to $945 million in Europe. All markets grew by nearly 125%.

Lending- and donation-based crowdfunding drove growth in funding volumes last year, as did adoption of reward-based crowdfunding by small and medium enterprises:

  • Donation- and reward-based crowdfunding grew by 85% to $1.4 billion
  • Lending-based crowdfunding grew by 111% to $1.2 billion
  • Equity-based crowdfunding grew by 30% to $116 million.

The growth in lending volumes mainly stemmed from crowdfunded microloans and community-driven loans to local small and medium enterprises, according to the report.

“While lending-, donation- and reward-based crowdfunding have thus far been leading this global financial revolution, equity-based crowdfunding is about to take center stage in the U.S.,” massolution chief executive Carl Esposti said in a statement.

“The JOBS Act, which will allow non-accredited investors to make investments in exchange for equity, is expected to go into effect by the end of 2013.”

The report noted that crowdfunding first gained popularity as a way to fund creative, philanthropic and social endeavors, and although this popularity prevails, its application for entrepreneurial ventures has also gained traction.

Social causes drive close to 30% of all crowdfunding activity. Business and entrepreneurship capture a 16.9% share, followed by and the two major art categories: films and performing arts (11.9%) and music and recording arts (7.5%).

Energy and environment, with a 5.9% share, is the emerging category among the five most active ones.

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