Tech Crowd

The global crowdfunding money machine

Crowdfunding by the numbers

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It's no secret that crowdfunding is a fast-growing movement, but did you know its success leads back to the 2008 financial crisis? A report by the World Bank, issued late last year, credits the crisis as one of the main catalysts to spur interest in crowdfunding, as more traditional forms of equity to establish new businesses became harder to get.

Since then, the numbers have spoken for themselves. Up until now, most people have focused on the figures for specific projects (like the $10.2 million Pebble raised on Kickstarter) or the price tag that some of those projects have commanded in their post-crowdfunding days—i.e. Facebook's $2 billion acquisition of Oculus.

The Crowdfunding Centre, which has collected data from roughly 125,000 crowdfunded projects worldwide, recently issued a major data analysis of the fundraising practice during the first quarter of 2014. The study, the most recent data available, gives a clear look at just how big crowdfunding has become and offers some insight as to how far it still has to go.

—By Chris Morris, special to CNBC.com
Posted 9 September 2014

The British invasion

All data courtesy of The Crowdfunding Centre

Crowdfunding might have gotten its start in the United States (with ArtistShare, a fan funding site for music launched in 2001), but it has grown to become an international phenomenon. In fact, in the first quarter of this year, the epicenter of crowdfunding as judged by active projects per city has been London—not traditional U.S. tech hot spots, like New York and San Francisco, according to The Crowdfunding Centre.

The U.K. capital saw 250,000 new campaigns between January and July and led in key categories, including gaming, technology and publishing. Britain averaged 41 new crowdfunding projects per day in the survey window, with 12 of those per day originating in London.


Big money machine

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Globally, crowdfunding took in $57,365 per hour in the first quarter of this year. And even in that short window, the numbers were climbing at a very impressive rate: jumping more than $5,000 per hour between January and March.

Early data from the second quarter, provided exclusively to CNBC.com by The Crowdfunding Centre, indicates the trend isn't slowing. As of the end of July, the U.K. saw its total amount raised increase by 99 percent to just over $26 million. The U.S. was up 44 percent (to $134.7 million), and the rest of the world jumped 43 percent to nearly $191 million.


New projects grow exponentially

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Moore's law theorizes that computing power doubles every two years. Global crowdfunding, though, doubles every 60 days, according to The Crowdfunding Centre. In the first quarter, a crowdfunding project launched every three minutes around the world, with more than 500 new projects being created each day.

On average, there are between 18,000 and 22,000 projects that are open and accepting funding at any given time.


Not everyone follows through

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A cool crowdfunding project tends to elicit impulse pledging from people. Unlike a candy bar in the grocery store checkout line, though, people usually have some time to reconsider their pledges, and not everyone follows through.

As the bid totals increased in the first quarter, the percentage of people who didn't honor their pledges grew as well. January saw companies collecting 89 percent of the amount pledged (before service fees from crowdfunding sites were collected). In February, though, the total dropped to 81 percent. And by March just 71 percent of backers honored their pledge.


Equity deals vs. non-equity deals

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Equity crowdfunding is rare in the U.S., but U.K. investors are able to easily buy a stake in start-ups through services like Seedrs and Crowdcube. The not-so-surprising results from that data show that people prefer partial ownership to a product reward.

The average growth in donations between January and March for reward-based crowdfunding projects in the U.K. during the first quarter was 140 percent. Equity projects saw a 391 percent average improvement, though.

It may be a while before U.S. wannabe investors get their chance to own a small part of their favorite start-ups. Though equity crowdfunding is now technically legal here, the restrictions are considered onerous—and the practice hasn't taken off so far.