The Crowdfunding Market Nearly Quadrupled in a Year.

$123 Million Year-over-year, Report Says

Earlier last week I posted with enthusiasm that the Senate passed a version of the House bill HR2930, but that we still had some work to do to get it passed. Since then, I have seen some pretty remarkable numbers related to the growth of Crowdfunding, and it isn’t even “legal” yet.

A report was published recently by the Daily Crowdsource that was based on an evaluation of eight reward-based crowdfunding platforms (where a donor receives a reward of value in exchange for a cash contribution) and six investment-based platforms (where investors receive equity or interest on their investment). All platforms evaluated in the latter category were based outside of the US, where they are in fact legal today. The rewards-based platforms evaluated are all US companies and are legal, as long as they don’t offer investors an equity or interest based position in the outcome, and include the popular fundraisers Kickstarter, RocketHub, and WeFund.

In 2011, crowdfunded businesses and projects raised $102 million on rewards-based platforms, including $85.4 million raised by projects that reached their total funding goal. Over 2010 figures, “this signifies a 266 percent increase in the total amount donated and a 263 percent increase in the amount donated to projects that received their full funding,” according to the authors.

They attribute the explosion to the “increase in the number of projects that are being posted online.” More than 31,000 projects sought crowdfunded donations in 2011, up from just under 12,000 in 2010.  The Daily Crowdsource reports that not only are more projects being launched, but the number of projects achieving their full funding goal is also increasing, “indicating the market is becoming more efficient at allocating resources.” The Daily Crowdsource says its research on the nascent crowdfunding industry was conducted over three years, and is based on data collection and interviews with leadership at all 14 crowdfunding platforms evaluated.

Investment-based crowdfunded projects raised a collective $20.5 million in 2011 – five times more than was raised the previous year. And, these aren’t projects that would have ever seen the light of day in front of traditional venture investors. These are projects like Duality of Bell, a short film about Bell, a teenage girl struggling to preserve her youthful innocence with some new-found whatevers, or Build a Greener Block (BABG), a community of Las Vegans looking to take over an empty block in downtown Las Vegas on April 28th and 29th, and for this one weekend they’re transforming the block into a living community, where instead of empty stores there will be a restaurant offering healthy food, a boutique, a café, a flower shop.  Well, you get the idea.

Can you imagine what this space will look like once Congress get’s this bill approved? How about Pandora, which was turned down 300 times by some super-smart Venture Capitalists? Or, Skype. Turned down 40 times before getting funded and going on to a massive exit.

Or, better yet, a little company in Mountain View, that in the early months of 1999, its founders Sergey and Larry, still students at Stanford University at the time, wanted to sell the project they named Google and focus on education. They approached George Bell, the CEO of Excite for a $1 Million buyout. This was rejected by George. There were a number of negotiations that almost led to a $750,000 buyout offer. This was rejected by Sergey and Larry and, according to George Bell (circa 1999) they asked for an investment instead. George said that he rejected the counter offers and let the idea drop. About five months and 22 venture presentations later, Kleiner Perkins Caufield & Byers and Sequoia Capital invested $25 million in Google, and the rest is as they say, history.

I don’t know about you all, but I can hardly wait to get my hands on the next Google, or Facebook, and I am convinced that our buddies in Congress are going to pave the way to make that happen. Of course (shameless plug) iPeopleFINANCE will be the platform on which the next Facebook will promote its first raise, and get funded. A whole new, on-line Silicon Valley for start-ups, funding innovation and creating real jobs. Truly exciting!  

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About Steve King

iPeopleFINANCE™ Chief Operating Officer. Former CEO of Endymion Systems, Inc. a $36m Information Systems Services company. Co-founder of the Cambridge Systems Group, the creator of ACF2, the leading IBM Mainframe Data Center Security product; acquired by Computer Associates. IBM, seeCommerce, marchFIRST, Connectandsell alumni. UC Berkeley alumni. View all posts by Steve King

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