Crowdfunding websites like Kickstarter, GoFundMe, Indiegogo, Crowdfunder, and several others have shown time and time again that millions of people are willing to throw money at any cause or product they support. People enjoy being able to be a part of the process of making a product viable or a goal achievable especially when they can do so in the comfort of their own home. So far, well over $3 billion has gone to over 130,000 products on Kickstarter alone, with over 42 million unique pledges and just about 14 million backers worldwide, according to Kickstarter’s own statistics page.
Crowdfunding is the simple act of mass funding a project via small, individual public donations. One of the great things about crowdfunding consumer products for future investors is that often they don’t have to worry about product validation, an industry term that simply means the likelihood a person is willing to pay money for a product. Since hundreds of thousands of people have already pledged their hard-earned cash to potentially receive the product, thereby showing how much the consumer is willing to pay, bigger investors who want a piece of the pie can be more confident in striking a deal with the inventor and getting the product on the general market faster.
An interesting aspect of crowdfunding products, however, is the sheer number of products that are in need of a crowdsourced backing, each one making a pitch to potentially millions of small investors. Each inventor or entrepreneur must make their product worth the average consumer’s time and appeal to the general public in some way. The reason for this is as of today, there have been more than 380,000 products launched on Kickstarter alone, with only roughly a third of them ever successfully making it to the general market.
As a result of there being thousands upon thousands of products to choose from, a new practice emerging is crowdfunding the crowdfunding process. Consumers and small investors don’t have the time to look through hundreds of thousands of products, and thus it may be easier for them to simply throw money at a specific category of products, such as kitchen utensils, toys, video games, etcetera. By doing so, more crowdfunding campaigns with potentially less exposure can achieve their funding goals and produce their product for the general public.
But helping to fund and receive future products that could possibly make life easier or more enjoyable, like what Kickstarter features, is only a sliver of what crowdfunding can become. Forbes has described multiple different and unique ways that crowdfunding is the way of the future.
Real estate is one of the last things we could probably think of that could be involved with crowdfunding. However, blooming website RealtyMogul has shattered that notion by allowing real estate investors to crowdfund property and reap generous profits without the worry and hassle that comes with day-to-day property management, according to Forbes.
Start-up companies, primarily in the tech industry, have also received a great deal of crowdfunding and have gone on to become successful companies. According to Forbes, between 2009 and 2013, tech companies that managed to secure $100,000 in crowdfunding secured up to $312 million in venture capital investment from bigger investment firms. Venture capital is money given to start-up companies with long-term growth potential.
According to entrepreneur and website owner of ExplainTheMarket, and interviewed by the company Virgin, Guy Shone sees crowdfunding as something now moving away from small-time companies and budding inventors and moving toward large companies that can bring products and services to the market that were previously non-viable.
“It’s become a bigger platform for business than people perhaps realize. It’s moving away from this local, democratized starting point, and is now positioned more under the corporate leadership banner in some instances.”
Then, it’s safe to say crowdfunding may be a huge step in future investment for not only products, services, and noble causes, but also for big companies, real estate firms, and the tech industry. Crowdfunding, for the most part, has become an extremely lucrative business tactic that will most likely shape the future of capitalism, as it’s become a tremendous phenomenon across the business world.