NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

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.