Equity crowdfunding has opened the doors for innovation and is disrupting the global economy.
In a little less than a decade, equity crowdfunding has raised billions of dollars in capital for start-ups and small businesses. It grew at a rate of 84% in 2015, and is set to grow even larger and more influential in the years to come. Fortune Magazine predicts that the global market for equity crowdfunding will reach up to $96 billion by 2025.
Indeed, equity crowdfunding has opened doors for numerous opportunities across the globe for innovations, new products, and companies. For instance, smart-watch maker Pebble was able to raise a staggering $10,266,847 in just 37 days, selling more than 400,000 of its crowdfunded smartwatches in 2013 alone. The following year, big data solutions start-up Bitvore closed a $4,500,000 equity crowdfunding round, while virtual-reality headset enterprise Oculus was acquired by Facebook for $2 billion dollars. There is no shortage of stories testifying the power of equity crowdfunding opportunities, and the speed at which entrepreneurs can raise capital can be as impressive as the amount they are able to amass.
However, on top of helping entrepreneurs get their ideas off the ground and connecting them to investors who can pitch in for as little as $50, equity crowdfunding also has significant effects on the global economy. The phenomenon of equity crowdfunding is present and regulated in all major cities and continents across the globe, and affects the global economy in several ways.
Fuelling Innovation
Start-ups are generally novel and innovative by nature, and while this can mean higher risks of loss and failure, it also means that the start-ups that do become successful tend to disrupt industries as we know them. Equity crowdfunding paves the way for these start-ups to find capital when larger banks and venture capitalists shy away, and is, in itself a form of disruption. Rosemont Group founder and CEO Freddie Achom explains that equity crowdfunding has disrupted traditional investment models, and should grow larger and more specialised in the future.
Equitise previously discussed how equity crowdfunding makes it possible for more innovative products and services to make it to the market and people’s homes and lives. By connecting good ideas to capital opportunities in the form of multiple investors, equity crowdfunding fuels innovation and disrupts investment and retail markets.
Driving Growth
By democratising capital and empowering individual and small-time investors to inject money, equity crowdfunding helps move money around. Start-ups offer employment opportunities on top of products and services that people can buy. Equity crowdfunding drives growth in industries where start-ups are most impactful – tech, health, food & beverage, construction, and education.
To illustrate, the Chinese crowdfunding market is valued at 100 billion USD (128 billion AUD), while the US industry is estimated to be at 28 billion USD (~36 billion AUD). The younger equity crowdfunding market in the UK is sized at 4.3 billion USD (~5.5 billion AUD), and along with the growth of the trend are the increase of tools that can help investors manage their investments. For instance, details on the FXCM Economic Calendar allow investors to keep track of important events related to the global economy, all of which could impact trading and the value of their investments. Monitoring these events is critical because investments in equity crowdfunding are best done spread out over start-ups of varying stages, industries, and sizes.
Provides a Boost for the Developing World
Last but not least, equity crowdfunding has lots of potential in contributing to the developing world. Although the phenomenon arose from developed countries in the wake of the 2008 financial crisis, equity crowdfunding has begun in developing countries. The World Bank Group's InfoDev program reveals that for the success of equity crowdfunding in developing countries, government and development organisations, investors, entrepreneurs, and crowdfunding centres must all align their objectives. In this way, developing countries have the potential to leap over, or at least catch up to their more developed neighbours. As the lives of their citizens improve through growth and innovation, so too will their capacity to contribute further to the global economy. Albeit a fairly new investment scheme, equity crowdfunding is poised to grow even more in the next few years, much to the benefit of investors, entrepreneurs, and governments alike.