March 29, 2019

Crystal Ball Gazing into the Crowdfunding Landscape

Crowdfunding as a recent fad is an incorrect dichotomy. Our belief is that all types of funding is some play on the underlying model of crowdfunding. Take the case of PE investment. Of course, the type of investor will different, but if we look at it, crowdfunding is an expansion of a successful and well-used paradigm that has delivered results for years.

Great crowdfunding use cases

Right from ArtistsShare’s launch as the first crowdfunding platform in 2003 to the current date, the ecosystem has evolved dramatically.  Now we see some innovative applications of crowdfunding as below

1 – Brand building

Beyond the cash, there are other great benefits of crowdfunding. This is demonstrated by West Wind Gins that raised $932,000 on Equitise, a crowdfunding platform in Australia. This also connected them with 270 brand advocates who stood behind the value proposition of the premium artisan gins.

2 – Better terms than venture capital investment

Many may vouch for venture capitalists as a great source. However, the business owner has to dilute a lot of stake to meet the investor’s terms, including stocks, board seats, unfavorable liquidation terms, and limitations on business owners’ compensation. With crowdfunding, it becomes easy to stay on own terms while raising cash.

3 – Handy in case of venture capital rejection

Glowee couldn’t raise funds, neither with the clean tech investors nor with the biotech investors for its biotechnology-based lighting solution. However, this did not stop the company from introducing an innovative disruption in the lighting and luminesce market, thanks to the $788,000 it raised on WiSEED.

As evident, the utility value behind crowdfunding is not limited to a particular genre or industry. Would you believe if we said that the crowdfunding sector is going to be worth a whopping $300 billion by 2025? Well, research studies have proven that this is indeed the case, looking at the present state of crowdfunding.

Hence, we see a rapid traction in the growth of crowdfunding if we look at the landscape in 2019 and beyond. Interested to see what these will be? Then let’s do some crystal ball gazing into the future of crowdfunding.

What does the future hold for crowdfunding?

1 – Rise in token IPOs

Just like IPOs we will expect to see more of security token offerings (STO). In ICOs, access is given to a specific platform or service.

However, in STOs, the tokens are financial securities backed by assets or company revenues, and take the form of fractional ownership via distributed ledgers in blockchain.

2 – Micro investments

Nearly 70-75% of the investments emanate from retail investors that have some capital to invest, but not at the same scale as institutional PE investors like SoftBank. They also don’t have the resources to do due diligence to check for the profit-worthiness of new entrepreneurs or startups.

Such micro investors find crowdfunding to be a valuable avenue to park capital and earn yields. The rapid growth of micro-investors will continue to drive crowdfunding’s popularity in the near future.

3 – Tighter integration of blockchain

Beneficiaries cite the 6-8% fees charged by crowdfunding platform as highly impactful in shrinking the profitability of the platforms. This perhaps explains why Blockchain integration is on the rise. It promises to make the entire fundraising experience truly transparent.

Also a tighter integration of blockchain and cryptocurrencies with these platforms will help reduce the fees significantly and thus improve the viability of the platform.

4 – Optimized regulation

Currently the platforms are regulated by the laws of the nation where they operate in. This creates a barrier in expanding the platform’s offerings beyond national boundaries.

The future trend will seek to remove these barriers. The European Union is already working on a practical implementation to this objective. It is working towards facilitating cross border transactions and strengthen its internal functioning within the EU boundaries.

5 – Rise of Startup accelerators

Todays crowdfunding investors aren’t just pledging cash. They are holding proper ‘boot camps’ for entrepreneurs. Here they learn the ropes of the trade with invaluable mentorship, developing business strategy and guiding on generating initial sales and customers for the business.

Take the case of Crowdboost – which conducts intense 6 week accelerator boot camps with activities like campaign launch, generating maximum ROI for potential investors,  and jumpstarting sales and marketing with effective pitch videos.

To sign off

These trends and insights show that crowdfunding is well on its way to evolving more than a mere fad in the near future. Who knows, it might be the fundamental way in which corporate houses can raise capital in the near future?

What are your thoughts on the future of crowdfunding? Do write in with your views and let us know.

Already had a successful crowdfunding?

Then checkout our product manufacturing services to see if we’re a good fit for you.

About the author

Josh Fairbairn

CEO of MorphoMFG, fluent in Mandarin, Blogger, and Youtuber. Josh loves interesting materials and the craftsmanship that goes into creating innovative products - watches, tech, games, whisky, leather, wood, blockchain & electronics. Josh and his team in Guangzhou, China are striving to create (& consume) the world’s highest quality products. Partnering with entrepreneurs globally to help solve the world's problems - whether small or large.

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