Normally, organizations that needed capital for their investments were obligated to borrow money from the bank but new forms of financing are evolving. One of them is crowdfunding. Crowdfunding can be either a complement or a substitute for the traditional ways of financing. Is crowdfunding the future for organizations?
Crowdfunding is getting a lot of press lately. Crowdfunding is becoming an increasingly powerful and popular way for organizations to raise money. By signing up on a crowdfunding platform organizations and ‘the crowd’ are able to get in touch and the organization is able to raise money. This way of financing means that the crowd makes money available in exchange for a compensation such as interest, stocks or a discount on the developed product. The growth of the popularity for crowdfunding is especially related to the growth of social media in the previous decade. It is for organizations nowadays very easy to interact with the crowd trough social media. The mass is becoming increasingly important.
The increasing popularity for crowdfunding also has a disadvantage, especially for the banks. Taking loans at the bank will decrease more and more by the evolution of crowdfunding. This way of financing is for organizations more attractive because they can interact with the crowd, whom are also their possible customers. This way of interaction with the crowd can be beneficial for the organization. It is also possible to gather information about these investors.
By focusing on the growing popularity there are 2 obvious developments in the crowdfunding process. Crowdfunding is not equally distributed over the world. Crowdfunding is especially growing in the United States, Asia and Europe but South America, Africa and parts of Asia are staying behind in this development (Massolution, 2013). The market in Asia is becoming increasingly popular, especially in the countries Japan and Singapore. Crowdfunding has grown in 2014 with 320% (Dealindex, 2015). The main reason for this phenomenon is that Asia is on average lower developed than Europe and America.
Although the phenomenon crowdfunding is not very familiar in the whole world, I do think that crowdfunding future is very promising. I do believe that crowdfunding will become a strong way to finance the investments for organizations and will keep on growing. With the growth of social media and Internet technology it will become more easy to get in touch with the crowd. The use of crowdfunding also has some advantages for organization. Customer involvement is the biggest advantage for the organizations.
All combined, I believe that crowdfunding will keep developing, the popularity will increase more and more and crowdfunding will take an important spot in the financial world.
References:
Manaktala, N. (2015) Democratising Finance, Dealindex publication
Massolution. (2013). 2015CF Industry Report
