As 2017 rattles onwards, the world recovers from volatile year for the spheres of finance and politics. Nonetheless, the equity crowdfunding industry continues to evolve in exciting and dynamic ways, with alternative finance democratizing investment. As equity crowdfunding continues to alleviate traditional barriers to investment, the World Bank has estimated the industry will be worth more than $93 billion worldwide by 2025. Given this staggering figure, we take a look at what 2017 has in store for the equity crowdfunding industry.
The industry’s biggest success stories to date consist of the first successful exits, which entailed the suggestion by Massolution that equity crowdfunding is set to pass surpass VC investment in 2016.
At present, the current largest factor determining the spread of equity crowdfunding is regulation. 2016 saw witnessed its spread amid significant economies. For example, as the JOBS Act’s Title III came into effect in June 2016 in the US, the next era of early stage companies able to use crowdfunded equities (up to a $1 million limit) was advanced.
Subsequently to this, Indiegogo, the rewards-based crowdfunding platform, has declared its run into the domain of equity crowdfunding (it has amassed a staggering $1 billion to date for rewards-based projects). At present, the US has 20 platforms in operation, but Indiegogo’s announcement heralds the beginning of a new era for ECF in America.
The US is now running neck-to-neck with the liberal regulation previously set by the UK and the rest of the EU. Once its industry has expanded and the regulations continue to expand, the dominance of the industry will be complete.
A Paradigm Shift
Another paradigm shift for the ECF industry has been the proliferation of investment aggregators. These businesses, like Access Invest, organize deals across the full spectrum of platforms. These platforms herald the manner in which equity crowdfunding has begun to target retail investors and accommodate prospective investors more easily, in order to readily welcome those uninitiated to the industry.
Beyond the general approach of Access Invest are more specialized platforms like Connected Investors, which support real-estate prospects. These companies that create an “aggregated crowdfunding marketplace” expose the services and potentials of equity crowdfunding to more investors than before, and help equity crowdfunding platforms reach even more customers. Crowd Rabbit has likewise used this aggregation model, without restrictive fees, attaining revenues through other means. These businesses and this innovation reflects the democratic nature of equity crowdfunding as a whole, and their proliferation should be encouraged as the landscape continues to encompass different investor types and new terrains.
As most investors typically wait five years before seeing returns from equity crowdfunding, the next few years look set to provide some fascinating exits, as the industry continues to assert its viability. When Camden Town Brewery was acquired by Anheuser-Beusch In Bev, the biggest drinks company in the world, once it had raised £2.75 million via Crowdcube, the sizeable returns of equity crowdfunding are no longer in doubt.
While we await the final assessment of 2016 growth for equity crowdfunding, these signs indicate excellent growth for 2017. With more advanced crowdfunding services, improved regulation and more exits than before, this is a dynamic era for the equity crowdfunding industry.
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About the author
Richard Andrée Wiltens is a commentator within the fintech sector, who has written for an array of international investment platforms. His career has spanned from investment banking to financial technology firms, backed by an education in economics and finance.