1. Alternative Financing is not a trend. Venture capital is being democratized. More and more entrepreneurs will build crowdfunding into their funding cycle to tap supporters. The market validation, feedback and community building are just as important as the funds being raised. Donations, rewards, equity and debt can all be utilized during the lifecycle of a venture. Still expectations will be reset. There will be disappointment for some. That is just the natural cycle unfolding.
2. Plug n’ Play on high traffic websites. Major online communities in need of funds will plug and play crowdfunding onto their websites, like top 10 US Health Info site Healthline.com did for medical crowdfunding. Incubators and accelerators will bake crowdfunding services into their programs. Brands will connect their good works more effectively into promotions on their Facebook page, webpage and other social networks.
3. There will be fraud but… Wherever there is money, there are unscrupulous people trying to take advantage. This has existed offline for many years. The good news is that the authentication, verification, social policing and fraud-prevention features platforms are introducing will help keep this in check. None of those checks and balances exist offline.
4. Enterprise will enter the game. Institutions will run matching campaigns to leverage budgets and meet CSR goals. Franchisors will discover the benefits of crowdfunding their brands, financing franchisees and seeding new markets. Social enterprise will continue to ramp up as they combine the entrepreneurial and cause drivers that have been key to successful crowdfunding so far. Communities will harness advocates, dialogue and critically needed project funds.
5. A shift away from destination sites. Once upon a time people built their own payment solutions. Then PayPal offered an easy way to plug in the management of payments, fraud prevention and the like. The same trend will unfold and the impact will be the SaaS availability of crowdfunding as a funding and payment option. Why build the community of a destination site when you can build your own?
6. Crowdfunding meets Corporate Social Responsibility. Sponsorship networks will emerge that enable brands to attach themselves to locations or categories of interest. Why not make a product offer to contributors as a perk? Attach your equity to the crowdfunding of environmental, technology, healthcare or humane campaigns. CSR objectives will be met at the same time as sales promotion goals. Customers will be acquired, revenues measured and the silos of Cause Marketing and Sales will be broken down.
7. Follow the Leader. States and provinces will closely observe the early entrants like Saskatchewan, Georgia, Kansas and Michigan. Regulations will move to the middle once Federal regulations are brought in like the JOBS Act Title III in the US. The competition for capital will create a more consistent regulatory environment over time.
8. The sky will not fall when equity crowdfunding for non-accredited investors opens more widely. This has been shown in Australia, UK and other markets. The early market regulations in North American jurisdictions where it’s been introduced cap raises and set investor limits among other protections. You can spend thousands gambling in a casino or investing in a faceless mutual fund. Why can’t you make a small investment in a brand, concept, person or gadget that you love?
9. Consolidation and Contraction. With 1000+ sites claiming to offer crowdfunding, the campaigner can get confused on their options. The vast majority of these sites are not engineered to effectively raise funds and they will fade into the sunset in the next year or two. Some of the top niche sites will be acquired as the finance industry figures out that alternative financing is here to stay. The top 50-100 International sites will experience massive growth and VC money will fuel some platforms to acquire others for market share.
10. New venture funding models will develop. Accredited and non-accredited investors will co-invest. Syndication will increase. Influencers will emerge from the non-accredited class. Models will be created that manage the interests of the crowd of investors so that they are represented, but not a thorn in the side of entrepreneurs. It will be messy but it will evolve.
What do you think? Agree or disagree? 2014 will be a wild ride that will fuel new entrepreneurial dreams and the economy. It is not a panacea for all funding needs, but it is a powerful new tool. I can’t wait to get started.