A $16 Billion Industry, Crowdfunding Nearly Tripled in 2014

massolution 2014 crowdfunding report
Zack Miller, Crowdfunding at About.com

April 4, 2015

Crowdfunding continues to roll. As a more efficient way to finance an idea, project, or a company, entrepreneurs are turning to crowdfunding to build their businesses.

A report from crowdfunding research firm, Massolution shows crowdfunding raised over $16 billion in 2014.

How does this level for crowdfunding compare to the previous year, 2013? It's a gain of over 167% ($6.1 billion).

And crowdfunding shows no sign of letting up, either.

The Massolution report forecasts crowdfunding levels in 2015 to hit $34.4 billion.

The Drivers Behind the Massive Growth in Crowdfunding

So, what's causing this massive growth in crowdfunding? A couple of things:

Crowdfunding Getting Personal

Firstly, we're witnessing a bit of a shift in crowdfunding from project crowdfunding (like the kind most popularized by Kickstarter) to personal crowdfunding (a la GoFundMe). You can read more about Kickstarter here and about how to fund your education with GoFundMe here, but it's clearly a trend that personal crowdfunding is growing like a weed. The numbers say as much: GoFundMe raised $470 million from 6 million donors in 2014, while Brooklyn, N.Y.-based Kickstarter raised $444 million last year from 3.3 million donors.

Marketplace Lending Growth

Next, marketplace lending or peer to peer lending continues its strong trajectory of growth, hitting $11.08 billion in 2014.

Individuals are turning more and more to sites like LendingClub and Prosper to consolidate credit card debt, remodel their house, or to finance a child's education. LendingClub's 2014 IPO is seen by many in the industry as the star of mainstreaming marketplace lending into the fabric of general finance.

Crowdfunding Taking Off Internationally

Also adding to crowdfunding's growth is the fact that it's global. Crowdfunding isn't just a US phenomenon -- it's happening everywhere. Here's what CFO.com had to say about the crowdfunding report's emphasis on international crowdfunding:

Asia accounts for much of last year’s growth, rising 320%, to $3.4 billion. North America continued to lead the world in crowdfunding volumes, increasing 145% and raising a total of $9.46 billion. Europe came in third at $3.26 billion.

The UK stands out as a prime example of how smart regulation can create more efficient flows of capital to high-potential entrepreneurs and individuals fundraising. As the rest of the EU needs to play catch up, Asia is already well on it's way to being a major international crowdfunding player.

Proliferation of Crowdfunding Sites

If I wrote this piece last year, I probably would have focused on the domination of a handful of crowdfunding platforms. What's interesting to note this year is that the top 5 crowdfunding platforms have lost 30% of their market share.

Here's what InvestUP co-founder, James Tuckett told Crowdfund Insider:

...Google was the 17th entrant into the search engine marketplace. It does not matter how ‘late’ you are to the party… The true crowdfunding game has yet to start.

As investors want more and more niche deals, the crowdfunding market will continue to grow, and new crowdfunding sites will continue to appear and develop. ‘Established sites’ are only established in the sense they have been there early on. With just 3% of the total population being aware of what crowdfunding is, the opportunity for all is vast. Truly.

No doubt crowdfunding is becoming a social phenomenon. In spite of its massive growth, it's pretty clear to most experts that we're still in the very early days of crowdfunding. What's exciting to watch is just how pervasive and popular crowdfunding is becoming in how we finance our lives, educations, businesses, and projects.