What Is The Future Of Crowdfunding? Six Emergent Trends For 2014

An anonymous user on Quora asked me and a few others to answer the following question: What is the future of Crowdfunding?

crowdIt’s a great question and one we think about quite often here at Crowdfund Insider. We cover so many stories in the space and because of this we have a unique view into what is going on day-to-day and over time.

I threw six potential trends that I think will emerge over the next year or two. Of all of these, I think #3 is particularly important. I think platforms will – and need to – become more social. Right now, the experience of backing a crowdfunding project happens in a silo. Having a user account on many mainstream crowdfunding platforms gives me the ability to back projects and I may get some cool emails from time to time keeping me in the loop regarding the latest and greatest campaigns, but I think platforms will take it a step further by facilitating discussion across crowdfunding offerings and allowing the act of sharing campaigns to move off of Facebook and Twitter and onto their own platforms.

Why? Two reasons. One, because this social interaction is core to the process of vetting campaigns. Two, because crowds are important. Individuals can build syndicates (social networks created for the purpose of vetting and funding projects) and drive more funding into projects they have an interest in.

Here are my six predictions. Think I missed some or disagree with any of these? Let me know in the comments…

  • Success stories will spur the growth and acceptance of the entire space – Over time, more and more entrepreneurs will use crowdfunding to their advantage, and the fruits of their labor will be seen by friends, family and the community as a whole. This will create interest in crowdfunding. As more people learn about it, more will decide to participate either as creators or funders. Right now major media outlets still cover success stories and attribute it to “crowdfunding” (in quotes, because many people are still learning the word). Those quotes will go away as crowdfunding becomes more widely understood and accepted.
  • The rise of the niche platform – This is already happening now to an extent, but I expect this to continue. Early conversation around crowdfunding has been dominated by general interest platforms, but I think platforms will specialize to serve specific verticals or sets of verticals. There are specialized problems that arise with projects in certain sectors, and platforms catering to a specific sector can augment their user experiences and business models to better match these problem sets. For example, Dragon Innovation and HWTrek launched just to serve hardware makers, and they provide value adds for creators – for example, they help with manufacturing and fulfillment if necessary. That makes sense for project creators and backers alike. The kicker is that these niches have to have enough activity to economically support the underlying platform. The entire space will benefit from ever-increasing scale and interest.
  • Platforms will become more social – Platforms today do a great job of facilitating funding, but I still think they lack in creating a social experience. I expect new platforms to seize upon this opportunity to create community on their sites, and I also expect existing sites to become more social going forward.
  • Certain verticals will stand out – Real estate, technology/hardware, food and beverage, alternative energy, gaming… these are just some of the sectors that may dominate in the future. Many are dominant now.
  • The crowdfunding space will contract – Right now there are hundreds of platforms active in the space. I think those numbers will shrink as some early market entrants fizzle out for a lack of deal throughput or backer interest. Expect more experienced market entrants in the future, too… refugees from Wall Street and the banking industry looking to create a more meaningful impact with their businesses.
  • P2P lending will go mainstream – Assuming we don’t experience yet another huge financial crisis, I think P2P lending is set to go mainstream. The risk/return beats so many other “safer” forms of investment. The promise of P2P lending is realized by diverting interest payments away from banks and credit card companies and into consumers’ pockets. Regulators need to embrace P2P lending and educators need to inform the public on how to use it to their advantage.

See the entire embedded answer below…

Read Quote of Charles Luzar’s answer to Crowdfunding: What is the future of crowdfunding? Where do you see it going next/want it to go next? on Quora

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