Crowdfunded technology projects are set to receive backing of up to $8.2bn per year by 2020, according to research by Juniper.
The paper Crowdfunding: Strategies & Impacts for Technology Markets 2016-2020 suggests the rise of equity crowdfunding will drive the increased level of investment.
It predicts that will more than pick up the slack of an investment market that is currently seeing a slowdown in traditional investments from VCs (Venture Capitalists) and Angel Investors.
The inclusion of “less sophisticated investors” in equity crowdfunding schemces, achieved through the loosening of international regulation, will contribute to higher volumes, according to the report’s author Lauren Foye.
The US in particular holds considerable promise, with the positive SEC (US Securities and Exchange Commission) ruling on the JOBS Act, Title III passed in October 2015. The result of this will be a surge in equity funding from 2016 onwards; as funding portals seek registration as early as January 2016.
One significant shift we can expect to see is a move away from a reward model to a hybrid approach. The reward crowdfunding model, popularised by the likes of Kickstarter and Indiegogo, has been the most widely adopted, but has suffered recently following a number of high-profile failures, such as the Zano drones debacle.
In response, platforms are beginning to look at more hybrid crowdfunding models, whereby users have the option of investment in the company or project itself via equity or debt, rather than receiving a one off ‘gift’ for their support courtesy of the rewards model.
“The hybrid concept has been demonstrated recently, with videogames crowdfunding platform ‘Fig’ hosting projects to be backed through a combination of the rewards and equity models,” Foye explained. “Equity is attractive for consumers, who feel they may be investing in the next ‘Oculus Rift’ or ‘Pebble Time’, hence in line to make a significant profit.”
The report also predicts the debt model will represent the greatest share of crowdfunded contributions until 2020, although most of these contributions will go to non-technology projects.
The proportion of technology crowdfunding investments based on equity will see significant growth, almost doubling by 2020.