Juniper’s latest research, “Crowdfunding: Strategies and Impacts for Technology Markets 2016-2020”, estimates that investments made in technology via crowdfunding platforms are set to increase sevenfold from an estimated $1,1-billion in 2015 to $8,2-billion by 2020.
New data from Juniper Research has found that the crowdfunding industry is to see an accelerated growth from the lucrative, but less well-known, method of funding known as ‘equity crowdfunding’. This is against an investment market which is currently seeing a slowdown in traditional investments from venture capitalists and angel investors.
Equity Legislation Drives Inclusivity
The new research identified the UK as the leading market for the regulation of equity crowdfunding, with the establishment of successful platforms such as CrowdCube.
Juniper believes that other nations will follow this model by legislating to allow less sophisticated investors to engage in equity crowdfunding.
The US in particular holds considerable promise, with the positive SEC (US Securities and Exchange Commission) ruling on the JOBS Act, Title III passed in October 2015. The result of which will be a surge in equity funding from 2016 onwards; as funding portals seek registration as early as January 2016.
Hybrid Platforms Come into Play
The ‘Reward’ Crowdfunding model, popularised by the likes of Kickstarter and Indiegogo, has been the most widely adopted, but has suffered recently following a number of high-profile failures, such as the Zano drones debacle.
In response, platforms are beginning to look at more hybrid crowdfunding models, whereby users have the option of investment in the company or project itself via equity or debt, rather than receiving a one off ‘gift’ for their support courtesy of the rewards model.
Report author Lauren Foye added: “The hybrid concept has been demonstrated recently, with videogames crowdfunding platform ‘Fig’ hosting projects to be backed through a combination of the rewards and equity models. Equity is attractive for consumers, who feel they may be investing in the next ‘Oculus Rift’ or ‘Pebble Time’, hence in line to make a significant profit.”
Other Key Findings Include:
- The debt model will represent the greatest share of crowdfunded contributions until 2020, although most of these contributions will go to non technology projects.
- The proportion of technology crowdfunding investments based on equity, will see significant growth, almost doubling by 2020.
The whitepaper, “Following the Crowd: Investment through Equity Investing”, is available to download from the Juniper website together with further details of the new research.