The recent rise of crowdfunding as a means of alternative finance has prompted a global reshuffle of the finance industry as a whole. The shift in practice is so significant on the world stage that even the academics have taken note, publishing multiple papers on crowdfunding’s ascent and its effects on the economy at large.
The University of Chicago, for example, published a paper ahead of equity crowdfunding’s arrival in the US, outlining the track record of crowdfunding so far and its potential in the equity investment sphere. The paper stresses that though crowdfunding had a few early teething problems, the industry began to iron out its issues due to competition among platforms, which acted as a catalyst and helped companies streamline the process again and again to get ahead, thus eliminating early problems that the public disagreed with (for example fraud and bad planning for projects). The paper suggests that this will be the same for equity crowdfunding: some hiccups out the gate, but competition-driven innovation will soon stamp these out, helped along by regulation that will help navigate the tricky landscape of the finance industry. The paper concludes by outlining how crowdfunding’s online nature will provide data that can be easily analysed and enable platforms to adapt and “harness the upside potential of crowdfunding and realize the social gains from trade that may result from financing an important yet potentially undercapitalized sector of the economy.” (Agrawal et al., 2014).
On the other side of the Atlantic, the University of Cambridge have entered the crowdfunding debate, publishing their own report on modern alternative finance. Teaming up with EY, the University of Cambridge Judge Business School produced its European Alternative Finance Benchmarking Survey, detailing its analysis on crowdfunding and other alternative finance products and their effect on the global market, as well as crowdfunding’s predicted future in the coming years. The report states that the European alternative finance market rose 144% in 2014, with the UK standing as the main driver behind the use of alternative finance. Cambridge are now collaborating with a number of major European industry associations to launch their second alternative finance report, which started earlier this year.
The position of crowdfunding is now so prominent in the global economy that Cambridge have now opened the Cambridge Centre for Alternative Finance, dedicated to the study and monitoring of the emerging alternative finance industry. These reports and centres for study are significant because they provide benchmark data that helps create policy and guides industry leaders – this previously was done mainly on an anecdotal and hearsay basis.
One interesting development in the industry is not only the reporting and analysis of crowdfunding in academics, but the actual adoption of crowdfunding as a way to pool funds for academic endeavours. At the University of Guelph in Canada, for example, Assistant Professor Dan Gillis used crowdfunding to raise $15,000 to fund his scientific research. Dr. Gillis praised crowdfunding’s ability to provide early stage funding for academics who might otherwise struggle to find backers for their projects.
With academics across the globe taking note, crowdfunding is beginning to make its way to the financial industry’s top tier and has now been accepted as mainstream form of investment and financing, and with continued backing from universities and individual academics the industry as a whole will gain more credibility and recognition worldwide.
by Bricksave CEO, Tom de Lucy
July 12, 2016
How real estate crowdfunding lets you invest like the world’s wealthiest people
Always wanted to be like Jeff Bezos or Bill Gates? Investing could be the way to make your fortune. While you might think you need lots of cash to get …
How real estate crowdfunding can provide a safe haven in times of crisis
Hedging against market volatility should be high on the agenda for any investor. Recent months have highlighted just how important it is to protect your investments from market vulnerabilities. For …
Why women should invest in real estate crowdfunding
Women have more opportunities to lead independent lives than ever before. But when it comes to investing, it seems there is still a long way to go before women feel …