Last weekend, I met with an entrepreneur to discuss her new project – a new type of crowdfunding platform that she’s been thinking about for a while. Our conversation definitely got me thinking a lot about the crowdfunding industry and what it means to our future. Kickstarter has released some interesting data recently ($1 billion in pledges). Indiegogo also raised $40 million in Series B lately to make themselves more competitive in the marketplace. With lots of new players in this space, crowdfunding is definitely a force to be reckoned with in the coming years. This post is to outline what the future of crowdfunding holds relative to other industries it may disrupt.
Crowdfunding has become a viable funding alternative to early-stage startups who decide not to take VC fundings before gaining tractions. Raising funds via crowdfunding is not only a way to extend their runway, it’s also a great marketing strategy to build a group of loyal followers and early adopters. Startups such as Pebble (Kickstarter) and Canary (Indiegogo) have raised millions of follow-on venture capitals proceeding their initial crowdfunding success. To investors, crowdfunding is no longer perceived as a competitive platform but a much-needed validation test with regard to target audience and addressable markets.
“Veronica Mars” raised $5.7 million on Kickstarter last year, more than any other film or video project in the history of Kickstarter. The film’s debut last week was a hit. Will the success of “Veronica Mars” be enough to convince Hollywood executives to embrace crowdfunding? According to Mike McGregor, Kickstarter’s head of communications, answer is a resounding “yes.” “A year ago Hollywood executives would have thought it was laughable that ["Veronica Mars"] would open in more than 250 theaters nationwide and be on the cover of Entertainment Weekly,” McGregor said. “Now it’s very much a reality.” (source)
Bitcoin is making big waves lately. The virtual currency can actually be used as a supplementary means of donation on existing crowdfunding sites. There are already bitcoin-enabled crowdfunding sites like this one. You can only expect more in the future.
4. The Internet of “Crowdfunding” (Other Niche Markets)
I will be moderating a panel tonight. One of the panelists is Amanda Barbara, Vice President at Pubslush. Pubslush is a platform for authors to crowdfund the publication of their works. Just like Pubslush, there will be more and more niche marketing being disrupted by crowdfunding in the future (i.e. gaming, design, fashion, food.) But why the need for niche when someone could just as easily launch a campaign on Kickstarter? When asked, this is Amanda’s answer to a TNW reporter, to which I agree:
“I think that we’ll see a need for more niche platforms in the next few years. Why? Because I think it’s important to identify who your audience is, and know you’re going to a platform that specializes in attracting that specific audience. Kickstarter and Indiegogo are both amazing platforms, and they’re obviously doing something right. But I really do find that the struggles with these types of platforms will always be that they have so many projects going on at one time, that some will be overlooked.”
The crowdfunding concept can also be extended and applied to peer-to-peer lending and microfinance, both of which have deep implications to small business owners. I believe in the potential of the crowdfunding market and recognize its benefits to the world. But in the meantime, as I told that entrepreneur over tea time last week, the crowdfunding space will get more competitive and crowded as more startups enter the play. In the end, I really enjoyed our conversation and wished her good luck.
If you want to learn more about the “crowdfunding” topic, join us at our panel discussions tonight at 6:30 PM – www.startuproundtable20.eventbrite.com.