Global crowdfunding to exceed $5 billion in 2013

Global crowdfunding raised nearly $2.7 billion for more than 1 million campaigns in 2012, according to a new report by Massolution. This means that the crowdfunding market grew by 81 percent over the year prior.

Numbers generated by Massolution, based on data collection from 308 active crowdfunding platforms worldwide, show that 27.4 percent of crowdfunding money went to social causes. Coming in second place was business and entrepreneurship with 16.9 percent, followed by films and performing arts with 11.9 percent. Also making the top 10 crowdfunding list were, music, the environment, fashion, and art.

“Consistent with our 2012 forecast, total crowdfunding volume nearly doubled last year, and with regulatory bodies continuing to pave the way, we expect global crowdfunding volumes to exceed $5 billion in 2013,” CEO of Massolution Carl Esposti, said.

(Credit: Massolution)

What is crowdfunding?

Crowdfunding is a powerful way to raise large amounts of money to sustain an existing business or to start a new venture. Here,other users of a crowdfunding platform would help you raise the required capital in the shortest possible time. All you have to do is to convince them that your idea is worthy.

Advantages of crowd funding

  • Freedom from banks: Banks are always quite hard to get convinced about taking risks on creative ideas and usually have many big-shot customers who are providing them enough return on their investment, so they are usually not ready to risk their money on new ventures.

  • Unparalleled publicity: Your business would be exposed to millions of users and investors all over India when crowdfunding is used.

  • Confirmation that your ideas are worth investing: It makes a lot of sense to present your ideas before the general public, and know the pulse of your users. If they fund you, then that simply means that your ideas have the potential of earning you a lot of money.

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Crowdfunding in India

Crowdfunding, appears to be gathering momentum in India with at least four such initiatives being introduced in the past one year.

  • Pik A Venture, besides funding, also provides advice on legal and company registration issues and offers consulting and guidance on campaigns.

  • VentureFund.com is a crowd-funding platform for startups additionally providing mentorship and global exposure.
  • Wishberry.in give every project they believe in a chance to show case itself and reach out to supporters across the globe for contributions (yes, money, wohooo!), be it Rs. 500 ($10) or 50,000 ($1,000), online (or, well, offline, if you live in India and love cheques or cash more than the internet, boo!)

  • Fundmypitch.com is an India focused crowdfunding platform which will provide an easy and transparent method of raising seed stage/early stage capital for Indian startups from Qualified Angel Investors.

  • MyVenture.co.in is an upcoming Social Network Service. One of the three services it provides is CrowdFunding. The “crowdfunding” and “fund your business” services are in the beta stage.

Experts say while crowdfunding takes time, as much as 8-10 months for a deal, it increases the pool of available capital.Start-ups can use crowdfunding to make a pitch that can be accessed by investors subscribing to the service.

The investors range from professional ones to business people. The minimum investment could be as low as Rs.1,000 with no upper limit.The pitch includes details such as the background of the entrepreneurs, the business offering and plans, financials and funding requirements.

How it works?

Once a pool of investors shows interest in backing the start-up, the funds raised are directed to the company through the platform. The platform could have a member of its team on the board of the venture. Investors will have complete access to the company’s financial plans and performance on a monthly basis. The platform typically takes a percentage of the fund raised through it.

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Crowdfunding, however, is not without its share of difficulties. In India, for example, people don’t offer money if there is no return, even in a social cause. This could be something as basic as a coupon from a retailer.

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