Today crowdfunding has become one of the most popular methods of raising funds for business operations, charitable causes or anything communities care to support. Business startups have turned to the crowds through social media and crowdfunding platforms where they pitch and get backers to raise the capital needed to start operations. First Wave PR Reviews lots of trends in crowdfunding and sorts them to make sure that we bring you the best news and trends around.
However, crowdfunding in its basic definition has to do with any method of raising funds from the crowds whether as donations, loans or investments. It can also be considered as a form of crowdsourcing as it turns to the crowds for help on projects or ventures. Crowdfunding as a type of crowdsourcing can be traced back to the 18th century. In 1714, the British government organized a contest looking for a solution that could make it safer sailing the Seven Seas. John Harrison emerged the winner with his marine chronometer invention and was awarded a big cash prize for it. The solution with the help of the stars made it possible for sailors to determine the longitudes of their ships. Another great example was the oxford dictionary project back in 1858. The project was huge and therefore the group of scholars required to do the work had to request volunteers to write on different topics according to their expertise. The scholars then put everything together after receiving all the work submitted by the volunteers.
Perhaps one of the best early crowdfunding examples comes from 1885 with the Statue of Liberty. The budget initially allocated for the project fell short by about a third. The governor of New York then did not authorize any funds from the city to complete the project. That prompted Joseph Pulitzer who owned a newspaper to start a fundraising campaign that ended up raising $101,091 from not less than 160,000 donors. There are possibly numerous examples of projects from early historical times that may have been done through donations that can be classified as crowdfunding.
Billions of dollars so far have been raised for startups, individuals and existing businesses that today launch campaigns on popular crowdfunding platforms such as Indiegogo and Kickstarter. That is mostly through the reward-based type of crowdfunding, which in its current form began in the US only during the early 2000s. The crowdfunding industry first started to record significant growth in 2009 and in 2012 managed to raise $2.8 billion for different types of projects. An accelerated growth continued with $6.1 billion collected in 2013, $16.2 billion in 2014 and $34.4 billion in 2015. In 2016 the crowdfunding industry growth is projected to surpass venture capital. The JOBS Act in 2013 introduced the equity type of crowdfunding but was limited to wealthy accredited investors until May 16th, 2016 when it legally became open for non-accredited investors.
Equity crowdfunding has significantly increased crowdfunding industry growth in general, but reward-based crowdfunding still remains the most popular way of getting business and entrepreneurship startup projects funded. With the challenges of obtaining funds through traditional business financing options, especially due to the high risks and low success rates associated startups, the crowds have now become the best sources of funds for projects and ideas that are perfectly pitched.