Why investors are pouring millions into crowdfunding

Monday, April 21, 2014

There is no shortage of evidence testifying to the value of crowdfunding for those seeking to finance a new product idea, company, or even personal need. Just this month, Kickstarter-born Oculus VR was snatched up by Facebook for $2 billion. Smartwatch-maker Pebble sold more than 400,000 of its crowdfunded smartwatches last year. And in March, Kickstarter surpassed $1 billion in pledges made.

In all, crowdfunding platforms have raised some $2.7 billion and successfully funded more than a million campaigns in 2012, according to a Massolution report, with an 81% increase to $5.1 billion expected for 2013. By 2025, the global crowdfunding market could reach between $90 billion and $96 billion — roughly 1.8 times the size of the global venture capital industry today, according to a 2013 study commissioned by the World Bank.

At the same time, there’s another level of funding going on: for the crowdfunding platforms themselves. Indiegogo, Crowdtilt, Patreon — to name just a few — may seem like grassroots efforts, but they’re doing remarkably well at drawing investments of their own. Indiegogo raised $40 million in a Series B round in January. Not long before, Crowdtilt garnered $23 million in its own Series B. Arts-focused Patreon pulled in $2.1 million in a seed round last summer. And the list goes on.

Source: Forbes (link opens in a new window)