Crowd funding may seem to many people like a relatively new phenomena, but it’s roots go way back to the 1700’s and the Irish Loan Fund. Modern-day crowdfunding, as we all know it, has its origins in the late 90’s.
The first recorded successful instance of modern crowdfunding occurred in 1997. British rock band Marillion crowdfunded their reunion tour through online donations from their fans. This inspired ArtistShare to set up and become the first dedicated platform for crowdfunding in 2000. This saw the beginning of the crowdfunding industry, which has grown year-on-year since.
According to P2PMarket Data, the UK is the third largest ‘alternative financing’ market in the world, behind China and the United States (1). The sector suffered a dip in investment in 2020 due to the Covid-19 pandemic, but has recovered to continue its growth throughout 2012 and 2022.
The UK is the second largest crowdfunding nation globally based on transactional value ($62 million), behind only the United States ($504 million) (1).
Crowdfunding is a way for businesses to raise money online from a large group of people – usually members of the public, rather than from just a few investors.
The popularity of this form of funding has seen the market grow at an alarming rate, which is now predicted to grow by $196 globally by 2025 (2).
An entrepreneur has an idea to either start a new business based on an idea or passion, or an established business wants to develop a new product, but neither has enough capital reserves to develop their ideas into reality.
The entrepreneur posts their idea onto a crowdfunding platform and asks for donations to help raise the capital they need to develop their idea. Individual investors each invest a small amount towards the idea to build up towards the financial target.
Not all crowdfunding platforms work in the same way. There are five different types of crowdfunding:
The key problem with Kickstarter campaigns is that success rate is quite low. Only 40% of Kickstarter campaigns succeed, while only 14% of those looking to raise $10,000 or more succeed. You will also need to create promotional materials for your campaign, which can run for at least 3 months before you get anywhere near your target.
The rules around crowdfunding are regulated in the UK by the Financial Conduct Authority (FCA), and every person-to-person lender and every provider of equity crowdfunding must meet the FCA’s requirements (4).
You can raise a lot of funds very quickly to achieve your dreams and turn your ideas into reality.
In the UK:
Global sites that accept UK projects:
To attract investors, you will need to take a few steps to prepare:
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