In the past five years, crowdfunding has grown from a fringe phenomenon, where artists cash in on social capital, to a huge billion dollar industry. Video game designers are developing games with huge success to multi-million dollar corporations starting to test their products like the Occulus Rift, even universities are raising funds for research. President Obama signed the CROWDFUND Act, part of the JOBS Act, so that equity crowdfunding and investment, usually reserved for the very rich, could be accessed by the average person.
Companies like RocketHub are closely working with the SEC, members of congress and FINRA to create safe and functional equity crowdfunding systems for the American public. The same is now happening in Canada as well as new equity crowdfunding platforms develop and launch there.
HISTORY
So what is the history of crowdfunding? In 1713, poet Alexander Pope started to take advanced subscriptions to his translation of Homer’s Illiad into English, a seven year project producing a single volume per year, similar to an advanced CD release through crowdfunding.
Did you know that the Statue of Liberty was crowdfunded to raise the $250,000 for the plinth in granite that housed her? Even Joseph Pulitzer did a fund raising campaign in The New York World, to assist this great project, raising $100,000 to erect the statue.
Fast forward to 2003 and we saw ArtistShare start the first Fan Funded site for special jazz projects, being really the first crowdfunding platform offering to let fans fund production costs for albums sold online, with artists receiving a larger slice of the pie than they would otherwise with traditional record labels.
THE PRESENT
In an interview with Danae Ringelmann from Indiegogo, about the the fact that they had struck a deal with the famous Forest Whitaker and his production company, she said that the deal would be more about de-risking the project than funding films. The trend now has become more about testing projects and products and their viability.
We also see the rise of niche crowdfunding platforms like ours ArtsFunding.ca.
n 2012 the ArtsFunding.ca team created TheJazzBox.ca for jazz distribution and learned a lot about music distribution and what artists and musicians need to continue making great music, a concrete way to share their creative vision by enabling fans to participate in the creative process. In 2015 they decided to create ArtsFunding.ca with their SaaS partner Fundrazr.com. A niche crowdfunding platform for all the arts where, unlike the larger platforms, they don’t get lost in the noise of thousands of campaigns.
Niche platforms can create a network & logistics service that directly connects users to create a new type of niche specific experience that enables them to not just sell directly to consumers, but also to share their world in a way where we can know them. Bonds are created, trust is created.
They Create Close Knit Communities.
Niche crowdfunding platforms tend to focus on a common interest that their users want to share. As a result users tend to be very supportive and contribute more to campaigns. Campaigns are able to feed off of the popularity of one another rather than just competing.
Campaign Funding Success Rates.
The fact is that Niche Crowdfunding Platforms have a much higher success rate. As much as 69% and raise an average of $14,700, as compared to Kickstarter’s just 40.2% and average funds raised of $12,878, from some film Niche Crowdfunding platforms. (Information supplied by Thrinacia.com)
ArtsFunding.ca is just such a platform specific to the Arts. Crowdfunding for the Arts.
Given these simple powerful arguments for why niche platforms are so successful, they felt the arts and specifically musicians, should be a part of that.
We are also seeing the rise of aggregation tools like Property.com and centralized marketplaces for liquidity, like CFX. Jordan Fishfeld, CEO of PeerRealty says “We’ll see a rise in investment grade product, like real estate, oil exploration, mining, viatical settlements, those assets that really were left for institutions finally finding their way to main street.”
We see that equity crowdfunding is really the next big wave making it possible for unaccredited (e.g. not rich) investors to easily buy ownership stakes in startup companies they care about, usually reserved for the wealthy. Because of Title III and Title IV of the JOBS Act, startups are looking to attract people wanting to back the company as investors, as well as the company’s project or a dream.
THE FUTURE
With all this comes the need for greater education about all the new forms of crowdfunding. It’s time to educate the new class of investors on equity, fundraising, investing and trends in crowdfunding in order to access their money. Shareholder Academy and OUR SOON COMING REWARDS BASED CROWDFUNDING SCHOOL have sprung up to cater to these needs.
The number of crowdfunding platforms jumped from 308 in 2013 to 1,250 in 2014, according to Massolution. Therefore it has become all important for crowdfunders to get in front of the right people. Data-driven targeting is being built into their systems including influencer search options to locate early adopters. A gold mine to some.
Other niche crowdfunding sites for app development, healthcare, food and agriculture have developed. However the larger players are still dominating the landscape. At this time Kickstarter had thousands of active campaigns. Meanwhile, AppStori had one; MedStartr, five; and Barnraiser, 12.
Marketing companies are realizing and seeing the growth and value in crowdfunding, too. Whole teams and digital marketing companies are devoted to coaching clients on using crowdfunding effectively by promoting their campaign, targeting funders and creating media coverage after the project is funded.
Now this one is mindblowing! This I think will be the wave of the future. Look for block chain tech and crypto-currencies such as bitcoin and ether to become involved. The need for tranparency in crowdfunding will be met through these systems where there is no middle man, solving the problem of fraufulent campaigns. On Ethereum.org you can set up an ether wallet and experiment with their open source crowdsale, crowdfunding, fundraising software. With this same tech they have 169 pilot projects in everything from new transparent political systems to gaming platforms.
Ujomusic.com and Ethereum.org have a pilot project that is promising to change the whole music distribution industry. Grammy award winning electronic music artist Imogen Heap, Ujomusic.com and Ethereum.org have teamed up with an exciting new experiment. Ujo is a new shared infrastructure for the creative industries that allows creators and their customers to achieve greater levels of transparency, fairness and profitability (does this sound like it’s necessary in the crowdfunding industry?). They have just released a live prototype which uses Imogen Heap’s new song Tiny Human as a test case.
So the whole economy of the world is changing. It’s a brave new world of profitability, innovation, democratization and transparency fueled by accessing the crowd.
