Crowdfunding has evolved significantly since its beginnings in the 13th century. From the Irish Loan Fund in the 18th century to today’s online platforms, it has consistently offered alternative financing solutions for individuals and businesses.
This article looks at current crowdfunding statistics and trends, showing how it's changing the way people invest, donate, and support projects in the 21st century.
Data Sources and Methodology
This article combines open-access resources and proprietary data to present accurate, up-to-date statistics and trends on crowdfunding.
Our methodology involves:
- Aggregating data from government databases, industry reports, and academic publications
- Incorporating exclusive insights from leading industry providers
- Regular updates to reflect the latest information
Key data providers include:
While we strive for accuracy, trends in crowdfunding are shifting rapidly.
Key Takeaways
- The global crowdfunding market is projected to reach $1.20bn in 2024.
- Video pitches raise 105% more funds.
- Kickstarter has over 30 million backers and 8 million repeat backers as of January 2024.
- Those aged 24-35 are much more likely to participate in crowdfunding campaigns.
- Donations of $106 million were raised for natural disaster relief in 2023.
Overview of Crowdfunding
Crowdfunding emerged in the late 20th century, driven by the rise of the internet and the need for alternative funding sources following the 2008 financial crisis.
It refers to raising small amounts of money from many individuals, typically via online platforms, to finance new business ventures or projects.
Since its inception, crowdfunding has experienced remarkable growth, with key milestones such as the launch of Kickstarter in 2009 and the implementation of the JOBS Act in the US in 2012 marking huge developments.
Today, the crowdfunding market is characterized by various platforms and funding models, including donation-based, rewards-based, and equity crowdfunding.
Major players include Kickstarter, Indiegogo, and GoFundMe, and changing regulations and technological advancements continue to shape its trajectory.
With the global crowdfunding market volume estimated at $1.17 billion in 2023 and projected growth to $1.27 billion by 2028 (Statista), crowdfunding plays a crucial role in democratizing access to capital, making it a key area of focus for entrepreneurs, investors, and policymakers alike.
Major Statistics
The global crowdfunding market is projected to reach $1.20bn in 2024. (Statista)
Transaction value is expected to show an annual growth rate (CAGR 2024-2028) of 1.43%, resulting in a projected total of $1.27bn by 2028 globally. (Statista)
The crowdfunding market in North America is projected to reach $0.49bn in 2024. (Statista)
It is expected to show an annual growth rate (CAGR 2024-2028) of 1.50%, resulting in a projected total of US$0.52bn by 2028. (Statista)
The crowdfunding market in Europe is projected to reach $313.10m in 2024. (Statista)
The transaction value is expected to show an annual growth rate (CAGR 2024-2028) of 1.63%, resulting in a projected total of $334.00m by 2028. (Statista)
North America dominated the global crowdfunding market with a share of 40.43% in 2023. (Fortune Business Insights)
More than $25 billion has been donated through GoFundMe as of the end of 2022. (Gofundme)
Kickstarter has over 30 million backers and 8 million repeat backers as of January 2024. (Statista)
As of early 2024, the games category stands out as the most successful on Kickstarter, boasting more than 40,000 projects that reached their funding goals. (Statista)
Those aged 24-35 are much more likely to participate in crowdfunding campaigns. (Fundera)
1 of 5 crowdfunding campaigns achieves its funding goal, with an average success rate of 22.4%. (Fundera)
Millennials, specifically those between the ages of 25 and 34, constitute the largest segment of crowdfunding backers. (Startup)
Major trends
Rise of Niche Crowdfunding Platforms with equity crowdfunding increasing by 92% (Wifi Talent)
Equity crowdfunding has seen a remarkable 92% increase in funding volume from 2018 to 2019, with an average contribution of $690 per campaign. (Wifi Talent)
The way individuals engage with investment opportunities is changing, permitting smaller investors to take part in early-stage businesses.
This is important because it can make investment more accessible, allowing more people to support startups and novel ideas.
Notably, it strengthens entrepreneurs and cultivates a community of investors who are more invested in the success of their investments.
For example, in 2020, equity crowdfunding raised over $500 million in North America, illustrating the growing appetite for this funding model and its role in the broader crowdfunding lsector. (Wifi Talent)
Institutional Investors Account for 49% of Crowdfunding Funding in the UK (Toptal)
Institutional investors are playing an increasingly important role in crowdfunding, with data showing that they accounted for 49% of the funding secured in the UK in 2017.
This indicates that crowdfunding attracts more sophisticated investors than just retail participants.
The involvement of institutional investors is important for several reasons. First, it requires greater due diligence scrutiny of businesses seeking funding.
Institutional investors typically have more resources and expertise to assess the viability and growth potential of startups.
Their participation can help weed out weaker projects and improve the overall quality of crowdfunding deals.
Second, the presence of institutional investors can encourage companies who raise via crowdfunding to pursue multiple financing rounds and follow a more traditional venture capital path.
This benefits retail investors by providing more opportunities for growth and potential returns on their investments.
Video pitches raise 105% more funds (Wifi Talent)
Crowdfunding campaigns that include a video pitch tend to raise 105% more money than those without.
This underscores the importance of storytelling and visual engagement in attracting backers.
Majorly because it highlights the need for campaign creators to invest in high-quality presentations to enhance their chances of success.
A compelling video can effectively communicate the project's vision and create an emotional connection with potential backers.
Growth of Decentralized Finance (DeFi) in Crowdfunding Enhancing Transparency
The rise of decentralized finance (DeFi) platforms transforms the crowdfunding market by leveraging blockchain technology to enhance transparency and security.
Allowing for peer-to-peer transactions without the need for traditional financial intermediaries.
This development is important because it opens up investment opportunities to a broader array of investors, allowing them to engage in crowdfunding campaigns without being limited by geographical boundaries.
Platforms like TokenMarket exemplify this shift, providing a secure environment for equity tokenization and ensuring that transactions are recorded transparently on the blockchain.
Increased Adoption of Mobile Crowdfunding leading to 205% growth in donations (Wifi Talent)
Mobile crowdfunding donations have surged by 205% in recent years, reflecting a shift in how backers engage with campaigns.
Its advancement is backed by blockchain technology, which ensures secure and transparent ownership records.
This is crucial as it creates investment opportunities in historically hard-to-access markets, making them more reachable for everyday investors.
With an increasing number of people using smartphones for online transactions, campaign creators can access a larger pool of potential backers, making it easier to obtain funding.
For instance, platforms that have optimized their interfaces for mobile users have reported higher engagement rates, demonstrating the importance of mobile accessibility in enhancing campaign success.
Tokenization of Real Assets and Fractional Ownership Opportunities
The conversion of physical assets into digital tokens is an emerging development in the crowdfunding space.
It allows investors to own fractional shares of high-value assets such as real estate and collectibles.
This development is supported by blockchain technology, which guarantees secure and transparent ownership records.
It is essential because it opens up opportunities for investment in markets that have traditionally been difficult to access, making them more attainable for average investors.
By lowering the financial barrier, tokenization opens up diverse investment opportunities previously reserved for high-net-worth individuals.
For instance, platforms like Digishares are leading the way in real estate tokenization. They enable investors to participate in property ownership with smaller capital outlays, thereby democratizing access to lucrative investment opportunities.
Key Challenges in the Crowdfunding Industry
Regulatory Challenges
One of the major challenges confronting the crowdfunding industry is regulatory compliance.
Crowdfunding platforms must navigate a complex market of investment and capital-raising limits, reporting requirements, and varying jurisdiction regulations.
For instance, the Financial Conduct Authority (FCA) in the UK and the Securities and Exchange Commission (SEC) in the U.S. impose strict regulations on equity and debt crowdfunding platforms, which can complicate operations and increase costs for platform operators.
According to a report by the World Bank, the global crowdfunding market potential is estimated to reach $90 billion annually by 2025, but regulatory hurdles are one of the main factors that could slow down this growth.
Identity Verification Difficulties
Identity verification is essential for ensuring the legitimacy of both project creators and backers.
However, the process can be cumbersome and prone to errors.
Around 10% of crowdfunding businesses use manual verification, 51% use semi-automated and only 39% use fully automated. (Lenderkit)
The need for robust identity verification processes has become increasingly important, especially as regulatory scrutiny intensifies.
Payment Processing Issues
Payment processing is another critical challenge for crowdfunding platforms.
Many platforms face difficulties managing transactions, especially with multiple currencies and payment methods.
This can lead to delays in fund disbursement and friction between backers and project creators.
These issues not only affect user experience but can also result in lost funding opportunities for creators.
Technological Challenges
Technological infrastructure is another area where crowdfunding platforms face challenges.
Many platforms are built on outdated technology, hindering their ability to scale and adapt to changing market demands.
For example, SaaS is used by only 3% of crowdfunding platforms. (Lenderkit)
These technological shortcomings can undermine user trust and deter potential backers from campaign participation.
Emerging Opportunities in the Crowdfunding Industry
The crowdfunding industry is experiencing growth and diversification, presenting various emerging opportunities for entrepreneurs and investors.
This growth is driven by technological advancements, changing consumer behaviors, and the increasing acceptance of crowdfunding as a legitimate funding source.
Equity Crowdfunding Growth
Equity crowdfunding, where backers receive a stake in the company in exchange for their investment, is one of the fastest-growing segments in the industry.
In the U.S., equity crowdfunding grew by 50% in 2022, raising over $500 million. (World Metrics)
This growth is driven by regulatory changes, such as the 2021 amendments to the SEC’s Regulation Crowdfunding, which increased the maximum amount a company can raise from $1.07 million to $5 million annually. (Going VC)
Niche Platforms for Specific Industries
There is a growing shift toward niche crowdfunding platforms that cater to specific industries or causes, providing tailored support and audiences.
Platforms like Seed&Spark (focused on independent films), MightyCause (for non-profits), and Republic (for startups) are examples of how specialization can lead to higher success rates.
Seed&Spark, for example, has an 82% success rate for film and television projects, higher than the general success rate on broader platforms like Kickstarter.
This specialization helps projects reach the right audience and increase their chances of success.
Integration of Blockchain and Cryptocurrencies
Integrating blockchain technology and cryptocurrencies creates new opportunities for decentralized crowdfunding, where smart contracts and tokens can be used to raise funds.
Platforms like KickICO and WeTrust allow projects to raise funds using cryptocurrency, offering benefits like lower fees, transparency, and access to a global investor base.
Blockchain's ability to provide transparency and security is particularly appealing in an industry that struggles with trust issues.
Technology led by blockchain could have reduced financial services infrastructure costs by between $15 billion and $20 billion per annum as of 2022. (PwC)
A report by PwC predicts that blockchain technology could reduce crowdfunding fraud by providing immutable transaction records.
Social Impact and Environmental Projects
Crowdfunding for social impact and environmental projects is gaining traction as more people seek to support causes that align with their values.
Platforms like GoFundMe and Patreon are increasingly being used to fund social causes, community projects, and environmental initiatives.
In 2023, GoFundMe reported that donations of $106 million were raised for natural disaster relief in 2023
A Nielsen study found that 73% of global consumers are willing to change their consumption habits to reduce environmental impact, suggesting a growing pool of backers for sustainability-focused crowdfunding projects.
Corporate Crowdfunding and Partnerships
Companies increasingly use crowdfunding to test market interest and co-create with their customers.
For instance, LEGO used crowdfunding to gauge interest in a custom-designed set, which eventually led to the successful launch of a new product line.
This approach allows companies to reduce risk by validating ideas with real customers before full-scale production.
Strategic partnerships between crowdfunding platforms and corporations are also on the rise.
Kickstarter partnered with Amazon Launchpad, enabling successful campaigns to easily transition to Amazon’s retail platform.
This partnership enhances the value proposition for creators, offering them a clear path from crowdfunding to market.
Impact on Stakeholders
Emerging developments in the crowdfunding industry affect different groups, such as consumers, businesses, and investors.
The expanding crowdfunding sector, driven by technology, social dynamics, and economic factors, influences the experiences and opportunities available to each group.
Impact on Consumers
Access to Innovation
Consumers now have unprecedented access to innovative products and ideas that might not receive traditional funding.
Platforms like Kickstarter and Indiegogo allow backers to support projects directly, fostering a sense of participation in the entrepreneurial process.
This access enables consumers to influence which products reach the market, aligning with their preferences and values.
Intangible Benefits
Contributing to crowdfunding campaigns offers consumers intangible returns, such as the thrill of supporting new ideas, insider knowledge about project development, and a sense of community.
These benefits often outweigh the lack of financial returns, as consumers derive satisfaction from being part of a movement that champions creativity and innovation.
Increased Risk Awareness
While crowdfunding democratizes funding, it also exposes consumers to risks like project failure or mismanagement.
The absence of legal guarantees means consumers must rely on the credibility of project creators, which can be challenging.
This dynamic has led to a more cautious approach among consumers, who may prioritize projects with transparent communication and a strong social media presence.
Impact on Businesses
Alternative Funding Sources
Crowdfunding provides businesses, especially startups and small enterprises, alternative funding sources bypassing traditional financial institutions.
- This is particularly beneficial for ventures struggling to secure bank loans or venture capital due to perceived risks or lack of collateral.
Market Validation
Businesses can use crowdfunding not just for capital but also as a tool for market validation.
Successful campaigns demonstrate demand for a product or service, providing valuable insights that can guide further development and marketing strategies.
This validation can enhance a business's credibility and attract additional investors or partners.
Community Engagement
Crowdfunding fosters a community around a brand or product, allowing businesses to build a loyal customer base before launching.
Engaging with backers through updates and feedback can strengthen relationships and create advocates for the brand, ultimately leading to higher customer retention and loyalty.
Impact on Investors
Diverse Investment Opportunities
Equity crowdfunding offers investors a broader range of investment opportunities, including acquiring stakes in startups and small businesses.
This model democratizes investment, allowing individuals to participate in funding ventures that align with their interests and values.
Risk and Reward Dynamics
While crowdfunding offers potential high returns, it also comes with higher risks than traditional investments.
Many crowdfunded projects fail to deliver on their promises, which can lead to financial losses for investors.
As a result, investors are increasingly encouraged to conduct thorough due diligence before committing funds to projects.
Social Impact Investing
The rise of impact investing has led many investors to seek opportunities that not only provide financial returns but also contribute to social good.
Crowdfunding platforms focusing on social causes or sustainable projects are gaining popularity. These platforms allow investors to support initiatives that align with their ethical values while potentially earning returns.
Conclusion
The crowdfunding sector faces both challenges and opportunities.
Although regulatory hurdles and intense competition present major challenges, the opportunity for expansion in specialized platforms and equity-based crowdfunding continues to be considerable.
With the rise of social impact investing, it was reported that $106 million was donated to natural disaster relief in 2023 through GoFundMe.
Industry players navigating this industry must adopt innovative strategies and embrace emerging technologies like blockchain to enhance transparency and trust.
Those who successfully leverage targeted marketing and build strong community engagement will likely secure funding and sustain long-term growth.
As we look to the future, the ability to adapt to changing consumer preferences and technological advancements will separate the leaders from the followers in the growing world of crowdfunding.
Frequently Asked Questions
What are the 4 types of crowdfunding?
The four primary types of crowdfunding are:
Donation-Based Crowdfunding
In this model, backers contribute funds without expecting financial returns or rewards.
It is commonly used for charitable causes, personal emergencies, or community projects.
Platforms like GoFundMe are famous for this type of fundraising, allowing individuals and organizations to raise money for social initiatives or urgent needs.
Equity-Based Crowdfunding
Equity crowdfunding allows investors to purchase shares in a company, making them partial owners.
This method suits startups looking to raise capital while sharing ownership with backers.
Platforms such as SeedInvest and Crowdcube facilitate these transactions, enabling businesses to connect with potential investors interested in equity stakes.
Rewards-Based Crowdfunding
This type involves offering backers tangible rewards or perks for their contributions.
Commonly used by startups and creative projects, rewards can range from early access to products to exclusive merchandise.
Kickstarter and Indiegogo are well-known rewards-based crowdfunding platforms where project creators can validate product demand and engage directly with their audience.
Debt-Based Crowdfunding
Also known as peer-to-peer (P2P) lending, this model allows individuals to lend money to businesses with the expectation of repayment with interest.
This approach is ideal for companies struggling to secure traditional loans but confident in generating revenue.
LendingClub and Prosper are examples of platforms that support debt-based crowdfunding.
Who benefits from crowdfunding?
Entrepreneurs and Startups
Entrepreneurs benefit from crowdfunding, particularly those with limited access to traditional funding sources.
It provides them with a platform to raise capital without the stringent requirements of banks or venture capitalists.
This accessibility allows them to test market interest and validate their ideas before fully launching their products.
Successful campaigns can generate substantial funds, as evidenced by the Flow Hive project, which raised over $2.1 million in just one day on Indiegogo, far exceeding its initial goal.
Investors and Backers
Investors, including individual backers, gain opportunities to support innovative projects and potentially earn returns, especially in equity crowdfunding.
They can engage with early-stage companies and products, often receiving rewards or equity in return for their contributions.
This model allows them to diversify their portfolios and invest in ventures they are passionate about, creating a sense of community and shared purpose.
Consumers
Consumers benefit by gaining early access to innovative products and services that may not be available.
They often receive exclusive rewards or discounts for their support, fostering a direct relationship with the creators.
This engagement allows consumers to influence product development through feedback, ensuring the final offerings align with their preferences.
Communities and Social Causes
Crowdfunding also supports social initiatives and community projects, enabling nonprofits and grassroots organizations to raise funds for causes that resonate with the public.
This model democratizes funding, allowing smaller projects to gain visibility and support that might not be possible through traditional fundraising methods.
What is the success rate of crowdfunding?
The success rate of crowdfunding campaigns varies across different platforms and types, but overall statistics indicate that it still needs to be higher.
According to the latest data, the average success rate for crowdfunding campaigns is approximately 22.4% to 23.7%. (Fundera)
This means that less than a quarter of all campaigns reach their funding goals, highlighting the competitive nature of the crowdfunding industry.
Several factors influence the likelihood of success. Campaigns that achieve at least 30% of their funding goal within the first week are more likely to succeed overall.
Additionally, successful campaigns typically have an average of around 300 backers, indicating that broad outreach and effective marketing strategies are crucial for achieving funding targets. (Fit Small Business)
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