Shhh. I’m going to let you in on a little secret. Next week, Funding Launchpad is going to announce our intention to become an investment crowdfunding platform. You might say that we’re dreamers, but we’re not the only one.
This is our second analysis of Crowdsourcing.org’s Crowdfunding Industry Report, looking at the explosion in crowdfunding platforms.
Before we analyze the platforms, let’s examine industry revenue. Per the study, crowdfunding was a $530 million global industry in 2009. That figure was nearly $1.5 billion in 2011 and is projected to be $2.8 billion in 2012. Thanks to a 74% compounded annual growth rate (CAGR), industry revenue grew 420% through the great recession. Wow!
Unfortunately for most competitors, massive industry growth was consumed by a slew of new entrants. Back in 2009 there were 148 crowdfunding platforms. As of April 2012 there were 452 – with an estimated 536 by year end. If that estimate holds up the number of competitors will have grown 260% in five years. During the crowdfunding boom, where industry revenue grew by 420%, revenue per platform increased by only 45%. Taken a step further, if you assume each platform only keeps 5% of total revenue (like Kickstarter), the average platform really earns just $261,754 per year, before expenses.
It is true, most companies can only dream of having achieved a 13% CAGR over the last three years. And it seems inevitable the JOBS Act will open a major additional avenue for growth. But if the number of crowdfunding platforms continues to grow unabated, this will not be a lucrative industry for most operators. In turn, market noise and desperation to stay afloat will not help startup and small business owners looking to raise funds through crowdfunding. One of the reasons Funding Launchpad became a founding member of both CFIRA and CfPA is because in its emerging stage, it is important to build an industry that keeps investment crowdfunding’s original dream alive – providing entrepreneurs with a new avenue for raising capital.
Following the crowdfunding industry? Building a crowdfunding platform? Please share your opinions on the state of the crowdfunding industry.