What is the Future of Equity Crowdfunding?

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With the equity crowdfunding market doubling in size from 2014-2015 (reaching a staggering £50 million valuation in the UK alone), it is easy to wonder where this new form of democratised investment will go next. A recent report by the University of Cambridge Judge Business School shows that the alternative finance market in the Americas went up 213% from 2014 to 2015, an almost unprecedented rate of growth. With this growth rate in mind, Forbes magazine have predicted that crowdfunding will even surpass traditional venture capital models in 2016, helping to demonstrate the unique position that equity crowdfunding is in to perform a potential takeover of the investment market.

Where will equity crowdfunding go from there? Predictions have it that the massive expansion of the market will continue, with the World Bank estimating that the crowdfunding sector at large will reach $93 billion by 2025.

One significant development we may witness is an increase in more niche platforms. With the industry growing wider and wider over the coming years, the market may become saturated with the more generic crowdfunding and equity crowdfunding platforms, giving rise to more specialised crowdfunding sites looking to provide niche services – the recent emergence of real estate crowdfunding is a good precursory example of this.

Startup funding is something that will also be affected by the rise in equity crowdfunding. The internet age has allowed the global startup culture to thrive, with the number of new startups reaching record highs last year in a number of countries – over 600 000 in Britain alone. The crowdfunding revolution (itself born out of startups) has helped many new businesses gather funds where they might previously have been unable to, and the relationship between the startup culture and equity crowdfunding will be key to equity crowdfunding’s future: we may well see a rise in non-accredited/non-professional investors investing in startups, a practice that was previously reserved for venture capital. This will both encourage a culture of investing in newer enterprises among the non-high-net-worth population, and also make funding for startups more readily available.

The technology surrounding equity crowdfunding is also likely to improve. Many platforms are already implementing search technology that will allow them to find the right demographic for their particular crowdfunding niche, getting themselves in front of the crowdfunders who are most likely to invest in their sector.

Finally, we are also likely to witness a change in attitudes towards investing: with the crowdfunding market growing as it is and becoming more streamlined, more people will be encouraged to put their money into businesses they believe in, thus taking investment as a whole out of the hands of professional investors. Perhaps we may even see equity crowdfunding becoming the new norm for investment.

 

by Bricksave CEO, Tom de Lucy

May 23, 2016

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