Small businesses in search of financing got a significant boost in the past year from crowdfunding, new research shows.
A study by research firm massolution revealed that crowdfunding platforms and websites raised $2.7 billion in 2012 — an 81 percent increase over 2011 — and successfully funded more than 1 million campaigns.
The lending-based model, also known as microfinancing, and the donation- and reward-based model, in which investors receive a gift or service in return for their money, have been driving the growth. Specifically, donation- and reward-based crowdfunding grew 85 percent to $1.4 billion last year, while lending-based crowdfunding grew 111 percent to $1.2 billion.
The research found that equity-based crowdfunding , in which investors receive a portion of the company in return for their funding, had the least amount of growth, at just 30 percent. However, researchers say that could change in the coming year.
"While lending-, donation- and reward-based crowdfunding have thus far been leading this global financial revolution, equity-based crowdfunding is about to take center stage in the U.S.," said Carl Esposti, CEO of massolution. "The JOBS Act, which will allow non-accredited investors to make investments in exchange for equity, is expected to go into effect by the end of 2013."
The study discovered that funding creative, philanthropic and social endeavors are the most popular with investors, driving close to 30 percent of all crowdfunding activity. Small business and entrepreneurship investments are the second most popular, accounting for nearly 17 percent of all crowdfunding investments. Other popular investments are for films and performing arts, music and recording arts, and energy and environment ventures.
The research shows that although crowdfunding offers a growing number of countries opportunities to access funds, North America and Europe raised much more capital than platforms in other regions did. In total, crowdfunding investment in North America grew 105 percent to $1.6 billion last year, while European crowdfunding volumes grew 65 percent to $945 million.
"Consistent with our 2012 forecast, total crowdfunding volume nearly doubled last year, and with regulatory bodies continuing to pave the way, we expect global crowdfunding volumes to exceed $5 billion in 2013," Esposti said.
The research was based on data from 308 active crowdfunding platforms worldwide.