This article is part of a larger series on Business Financing.
Crowdfunding is a well-known method of raising money that continues to grow in popularity. Businesses can use crowdfunding to pay for expenses associated with a new venture or product line or to gauge interest before investing more money.
While funding isn’t guaranteed, analysis of crowdfunding suggests that a strong pitch and continued communication throughout your campaign can increase your chances of success.
If you are considering a crowdfunding campaign for your business, here are some statistics that you should know.
1. Equity Crowdfunding Raised More Than $239 Million in 2020
Since 2016, when the Securities and Exchange Commission (SEC) opened up equity crowdfunding to investors of all net worth levels, the amount of money raised has steadily increased. In 2020, $239.4 million was raised via equity crowdfunding in the United States, an increase of 77% from 2019.
2. Global Transaction Value of Crowdfunding Exceeds $1 Billion Annually
The US is the largest source of global crowdfunding, exceeding $500 million between equity and reward-based crowdfunding. The global crowdfunding market is projected to grow at more than 2% annually for the next five years, reaching $1.2 billion by 2025.
3. Companies Can Now Raise Up to $5 Million Annually Through Equity Crowdfunding
In March 2021, new regulations went into effect that allowed companies to raise up to $5 million in equity crowdfunding annually, up from the previous $1.07 million cap. That’s a 194% increase in the amount of potential funding. Analysts predict this regulatory change will help increase the number of investors to 800,000, help boost crowdfunding offerings by 40%, and help startups raise $1.2 billion within the regulations’ first 12 months.
4. Common Stock Is the Most Popular Crowdfunded Security
Companies offering equity crowdfunding can sell multiple kinds of securities, including common and preferred stocks, debt offerings, convertible notes, revenue shares, and simple agreements for future equity (SAFEs). As of December 2020, common stock was the most popular type of crowdfunded security, followed by debt offerings and SAFEs.
5. WeFunder Is the Top Equity Crowdfunding Platform in Dollars and Users
There are many different equity crowdfunding platforms that both investors and startups can use. Each site has different rules and restrictions, targets different audiences, and varies on buy-in levels for crowdfunding investors and those seeking investments. In terms of capital raised, WeFunder led the pack in 2020, bringing in $70.9 million in equity investments. Additionally, among equity crowdfunding platforms that report user count, WeFunder’s one million users top the rankings.
6. Food and Beverage Is the Leading Equity Crowdfunding Industry
In the world of equity crowdfunding, the best-funded industry is food and beverage. Restaurants and craft beverage providers often have equity investment or revenue-sharing notes from various sources like other restaurant owners or other individual investors.
7. Kickstarter Has Nearly 20 Million Contributors
Of the “big three” reward and donation-based crowdfunding sites, Kickstarter has by far the most donors, at nearly 20 million. Indiegogo, the next biggest, has slightly more than 9 million, and GoFundMe has 7 million donors.
8. Technology Projects Average Over $1 Million in Raised Funds, Regardless of Source
Out of the equity and reward-based crowdfunding programs in existence, successful technology projects have averaged over $1 million in raised funds since 2014. More than $13 billion has gone to the tech sector. The bad news is that only 18% of technology crowdfunding initiatives are successful.
9. On Kickstarter, the Average Successful Technology Project Raises Nearly $100,000
Successful technology fundraisers on Kickstarter have the highest average pledge, at $97,911.12. Out of the nearly 48,000 technology projects launched on the platform, 21.4% of them were successful. The success rate for technology projects was the lowest of all Kickstarter categories.
10. Games and Technology Account for Two-thirds of Kickstarter’s $1 Million Campaigns
Out of nearly 600 projects on Kickstarter that had a goal of at least $1 million, games and technology accounted for nearly 400. Design projects, which include gadgets and clothing, came in third, with slightly more than 150 successful projects of $1 million or more.
11. Less Than 25% of All Crowdfunding Projects Reach Their Goal
There have been millions of initiatives on crowdfunding platforms over the past decade. Only 23.3% of those projects are successful in reaching their goal. The most successful categories are comics and graphic novels (57.2%), gaming (52.9%), and charities (48.4%).
12. The Average Crowdfunding Pledge Is $295
Across all platforms, the average crowdfunding pledge is just $295. Among donation and reward-based platforms, Kickstarter’s average pledge is $81 and GoFundMe’s average pledge is $66. The average successful project, regardless of source, will have 332 backers.
13. 47% of Successful Indiegogo Campaigns Are Run by Women
Women-owned businesses make up just 1/5 of all businesses in the country. However, the number of women-owned businesses is growing. Indiegogo can proudly boast that nearly half of its successful campaigns are run by women.
14. Campaigns With Videos Can Raise Twice as Much Money
Including a video in your crowdfunding campaign can increase your fundraising by an average of 105%. Videos allow potential contributors to see who you are, what the funding means to you and your small business, and how their contributions benefit your goal. Sharing this personal message via video has more impact.
Additionally, direct contact via email is another successful way to spread the word about your campaign. With 53% of campaign email shares converting to donations, taking the time to send personalized emails to potential contributors is one of the most effective ways to solicit contributions.
15. Successful Campaigns Spend 11 Days in Preparation
Doing your homework in advance of launching a campaign is critical. Successful campaigns will research and prepare for their launch, creating a solicitation strategy and a marketing campaign to support it. The average successful campaign spends 11 days working on its plan.
16. The Average Successful Campaign Pitch Is Less Than 500 Words
Your pitch should be detailed enough to give important details but also succinct enough to not lose reader interest. Fundly reports that successful crowdfunding campaign pitches are between 300 and 500 words.
Crowdfunding can be equity-based―offering ground-floor investment in a company to potential investors―or reward-based, which offers items or prizes to those who purchase or pre-order supplies. While many crowdfunding projects fail to gain traction or reach desired revenue targets, if you use effective communication and imagery and develop a plan in advance of your campaign, you can increase the odds of success.