The internet has transformed the business world in the past couple of decades, impacting on a range of issues, including how companies communicate with consumers and the way that the latter pays for goods and services.
However, one particularly notable area where the internet’s presence has been felt is in how many entrepreneurs use it get their ideas off the ground in the first place. Once upon a time, asking strangers to back a project you believe in may have seemed bizarre, but now this has become commonplace thanks to the seemingly unstoppable trend of crowdfunding.
A major funding option
According to figures from Statista, it is believed that a total of $5.5 billion was raised through crowdfunding worldwide in 2017. Furthermore, a study released by Ernst & Young at the end of last year revealed that it trailed behind only venture capital in terms of the sources of funding being considered by UK entrepreneurs. For further context, this put it ahead of bank financing, invoice finance, and initial coin offerings (ICOs) as a strategy that they may employ.
The concept has even gone on to emerge in more unexpected areas, such as being used to try and keep famous music venues open and even to generate prize money in gaming.
In terms of the latter, the prestigious Dota 2 event in eSports, known as The International, always boasts prize money crowdfunded by fans, and in 2018, the pool reached a total of more than $25 million. On a smaller scale, online casinos like Paddy Power offer promotions such as the Jackpot King jackpot – a communal prize pool that builds up in value and is awarded to someone playing one of the selected online slot games.
While crowdfunding has become a hugely popular concept across the globe, several recent developments have underlined how the idea has really taken hold across the UK.
A great example came at the end of the last year in the form of Monzo, the challenger bank that was found to be the UK’s best in a survey by Which?. The company launched a crowdfunding campaign to raise £20 million in December and reached the target in just over two days thanks to the input of more than 36,000 people.
Even more recently, the UK became home to what is thought to be the world’s fastest funded restaurant project when chef Gary Usher announced his hopes to raise £100,000 to support the opening of his Manchester restaurant Kala. Incredibly, he raised the funding on Kickstarter in just 11 hours.
Finally, another UK bank to turn to the concept is NatWest, which has teamed up with Crowdfunder to create the Back Her Business initiative. The programme has been developed specifically to boost the number of women taking the leap and starting their own businesses.
All of the examples above undoubtedly highlight how crowdfunding has emerged to be a genuine game-changer for businesses in recent times.
While established methods of funding continue to play a key role in the fortunes of many ventures, it is clear that entrepreneurs and other organisations are discovering the benefits that this new approach could offer.