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Crowdfunding, Still the Disruptor’s Disruptor

Three years ago crowdfunding was described as “the disruptor’s disruptor”. When it was still gaining in strength and popularity, crowdfunding was most probably considered a disruptor in the financial services sector. But, is it still considered so and should it be the go-to option for start-ups, or the last resort?

Some years on from when equity-based crowdfunding really began to register on the mainstream and fund successful start-ups in around 2010, crowdfunding is worth $34.4 billion and is expected to grow to three times that in the not-too-distant future. That underscores just how quickly the idea has been accepted by its audience. But, it doesn’t show how much of a disruptor it was or still is.

What Did Crowdfunding Disrupt?

What Did Crowdfunding Disrupt?

The timing of crowdfunding’s ascendancy coincides with the recovery from the global credit crunch. Mainstream banks and lenders’ risk appetite was at an all-time-low and many new start-ups were at the bottom of their lists when it came to business lending.

Against that background, crowdfunding didn’t particularly disrupt lender’s strategy too much, initially – although it probably helped make their workloads of negative responses lighter. What it likely did disrupt was the flow of sound new start-ups and growing small businesses that some mainstream lenders might have said ‘yes’ to.

While it’s impossible to put a figure on how much business crowdfunding took from mainstream lenders, figures on new start-ups make for interesting reading.

Companies house data shows there were a record 608,110 new start-ups in 2015, up from the previous record high of 581,173 in 2014. In the US, meanwhile, the Kauffman start-up index implies there were more than 6 million new businesses during 2015 as the rate of start-ups increased for the first time since 2010.

It’s probably fair to say then, that while crowdfunding’s disruptive nature might not have upset financial services too much – in the early days at least – it was certainly at the heart of the wider disruption brought into numerous sectors and technologies.

Benefits of Experience and Variety

Benefits of Experience and Variety

Crowdfunding was certainly there for entrepreneurs when others weren’t. But that alone shouldn’t make it the number one choice for fund-raising where start-ups and small, growing firms are concerned.

Given the expansion of the sector and the innovations new crowdfunding sites are bringing to the table, however, there are a lot of reasons why crowdfunding should be the first choice for entrepreneurs:

  • Access to a large pool of potential investors.
  • Entrepreneurs receive plenty of feedback which could provide the magic ingredient for success.
  • Its relatively easy to start small and return for future, larger fundraising rounds.
  • A few years on, regulation is now in place to protect entrepreneurs and investors.
  • The transparent nature of crowdfunding means due diligence will be conducted a number of times by different interested parties.
  • Entrepreneurs can start a PR campaign before their product or service has even launched.

With all this and more, crowdfunding has every component an entrepreneur needs. And, when it comes to new, disruptor technologies, crowdfunding means you can advertise the benefits of the new tech – both in terms of what it can do and how it will benefit the economy, create jobs and provide new investment opportunities – and make some noise in your chosen industry as soon as possible.

In short, a few years of support, experience and growth means crowdfunding is the disruptor’s disruptor, even more so than it was. With that in mind, as an industry and a tool it has more to offer businesses of all sizes and stages, than ever before!