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THE ROLE OF EQUITY CROWDFUNDING GLOBALLY

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THE ROLE OF EQUITY CROWDFUNDING GLOBALLY

By Startup Valley (418 words)
Posted in Crowdfunding on October 13, 2014

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Crowdfunding is experiencing unbelievable growth worldwide. In the period of 2009-13, the compound annual growth rate (CAGR) of the funding amounts was approximately 76 percent with an estimated total funding volume of $5.1bn in 2013. In geographical standings, the largest market has been North America (and mainly in the United States where the idea of crowdfunding started) with just over 60 percent of the market capacity, followed by Europe, which has almost 36 percent.

{#/pub/images/Capture.png} Equity crowdfunding is the smallest category of the total industry and had a CAGR of about 50 percent from 2010 to 2012. Most of that growth was through European crowdfunding platforms because legal obstacles are slowing down the expansion and growth of equity crowdfunding in the United States. As a result, Europe is currently the leading market for this financing model.

Equity crowdfunding is more complicated than other types of crowdfunding, and needs appropriate checks and balances to offer a practical channel for financial help in the beginning stage of business in any country. It is beneficial for new and innovative entrepreneurs to give notice to these new ways of funding their ideas for business. Not only does this give the possibility of more employment around the globe, but it can also turn impoverished countries into prosperous countries. For example, what if there are a group of young people in Delhi that wish to start their own computer building company, but they had no funding? Equity crowdfunding can make their dream become reality by connecting them to a whole new way to raise money. When their new company becomes larger, they will need to hire more people, which creates jobs in the community. It also means more possibilities for income for the surrounding businesses with more traffic in the area who will need transportation, food, and other conveniences.

According to the website, crowdsourcing.org (http://www.crowdsourcing.org/), as of April 2012, 452 crowdfunding platforms (or CFPs) were operating globally. In total, CFP’s had raised close to $1.5 billion in funds in 2011. Although the United States is still the largest and most popular market for fundraising, the European market has been growing quickly. Funds raised through crowdfunding initiatives grew at a 63% compounded annual growth rate (CAGR) over the last three years.

References

 Crowdsourcing.org. (http://www.crowdsourcing.org/).

Wilson, K. E. and Testoni, M. (2014). Improving the role of equity crowdfunding in Europe's capital markets. Retrieved from http://www.bruegel.org/publications/publication-detail/publication/844-improving-the-role-of-equity-crowdfunding-in-europes-capital-markets/

 

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