Can you guess which website raised over $600 million in financing in its first four years of existence?
Zynga? Groupon? Facebook? No, it wasn’t any of those.
How about Kickstarter.com?
Ding Ding Ding!
Crowdfunding is Born
Yes, the site I’m talking about is Kickstarter.com. And the $600 million they raised? They raised that money for OTHER businesses.
Kickstarter is what’s known as a “rewards-based” crowdfunding site. Thousands of regular people come to Kickstarter each day and donate money to help new ideas and products get off the ground. In return, these early backers receive a free reward from the company – usually the product they helped fund, whether it’s a cool new watch or a signed copy of a film that got made.
But the sorts of campaigns and products you’ll find on Kickstarter are different than the opportunities we feature here on Crowdability in a very important way. Our opportunities are “equity-based” instead of “rewards-based.”
What’s that mean?
In brief, it means that if you invest in one of the companies you find on Crowdability and the company becomes the next Facebook or Google, you’ll own a stake of the business, and can profit financially.
I don’t bring up Kickstarter as a lesson in rewards vs. equity crowdfunding. Chances are, if you’re a Crowdability reader you already know the difference.
I bring it up because Kickstarter played a big part in why we decided to launch Crowdability.
You see, when my partner Matt Milner and I first started talking about the JOBS Act in 2012, we (incorrectly) assumed equity crowdfunding would be a niche industry. We didn’t immediately jump to the conclusion that thousands, or even millions, of people would be willing to invest small sums of money in exchange for a stake in various start-ups.
The Numbers Are HUGE
But then we dug into the statistics behind rewards crowdfunding – and were SHOCKED by what we found…
- In 4 years, Kickstarter has successfully funded over 45,000 projects and raised over $600 million
- Literally hundreds of rewards-based crowdfunding sites now dot the globe
- In 2012 alone, these sites collectively helped raise over $2.8 billion
These numbers are staggering for at least two reasons:
- This industry didn’t even exist 4 years ago. Now it’s helping thousands of new ideas come into the world, and
- If people are willing to donate $2.8 billion a year, imagine what they might be willing to invest if they could own a piece of the upside. We think the numbers could become extremely significant.
We believe that equity crowdfunding , if done right, will lead to more new businesses getting off the ground, more new jobs being created, and more wealth being generated for investors.
Well, that’s the logic Matt and I are operating under, and that’s why we’re extremely bullish and passionate about this space.
We can envision early-stage private investments becoming a small part of every investor’s portfolio – essentially, a new asset class.
For those investors who agree with us, it might be wise to start developing a strategy for investing in the space.
We’re Here to Help
If you haven’t done so already, we recommend that you visit our Resources section and read two of our whitepapers»
- Equity Crowdfunding 101
- 10 Crowd Commandments
These reports will give you a better idea of how the equity crowdfunding process works and some guidance on how to evaluate different opportunities.
We’re looking forward to being your resource for equity crowdfunding. Thanks for joining us!