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The Most Successful Crowdfunding Methods

spending money, investors, expenses

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. [Read related article from Business.com: Guide to Choosing a Business Credit Card]

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.

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Chad Brooks

Chad Brooks is a Chicago-based writer and editor with nearly 20 years in media. A 1998 journalism graduate of Indiana University, Chad began his career with Business News Daily in 2011 as a freelance writer. In 2014, he joined the staff full time as a senior writer. Before Business News Daily, Chad spent nearly a decade as a staff reporter for the Daily Herald in suburban Chicago, covering a wide array of topics including local and state government, crime, the legal system and education. Chad has also worked on the other side of the media industry, promoting small businesses throughout the United States for two years in a public relations role. His first book, How to Start a Home-Based App Development Business, was published in 2014. He lives with his wife and daughter in the Chicago suburbs.