The impact of crowdfunding on jobs, revenue and further investment
How does crowdfunding impact
job creation, company revenue and professional investor interest?
A new research report from Capital Crowdfund Advisors (CCA) shows what has happened to businesses who have successfully crowdfunded.
The report can be downloaded for free here.
CCA contacted several hundred companies who had used rewards, debt or equity platforms across USA, UK and Europe.
44-48% had tried other methods of fundraising first. On average businesses spent 135 hours and $2,100 on the campaign.
The campaigns which took place between June 2012 and June 2013 were posted on platforms including Kickstarter, Indiegogo. Symbid, Crowdcube, Seedrs, WiSeed and several others. They were all for profit-making businesses.
8% completed an online survey and 23 of the 73 completed a 30-minute phone interview where the research team discussed their experience with crowdfunding in more detail.
The companies self-selected to participate and hence these findings represent those that had a positive experience with crowdfunding.
However in spite of the small, self-selecting sample it makes for interesting reading
The headline findings were
Sales: across all methods (rewards, debt and equity),average quarterly increase in sales (not including the revenue raised through crowdfunding) of 24%. For equity-based raises the increase was dramatic: an average of 341% increase in post crowdfund quarterly sales.
Jobs: 39% hired an average of 2.2 new people after crowdfunding. An additional 48% reported the intent to use the crowdfunding proceeds to create additional jobs.
Follow-on investment: within three months of successful crowdfunding, 28% had completed rounds of traditional investment with angels or traditional venture capitalists. An additional 43% were in talks with institutional investors.
ROI of Crowdfunding: every hour invested in a crowdfund campaign returned $813.
Benefits of Crowdfunding
The report also stressed that crowdfunding is much more than just raising money
Knowledge/Experience – funders bring relevant industry knowledge and experience to the table.
Strategy: they assist the entrepreneur in crafting winning strategies.
Market Opportunity – they provide introductions to entrepreneurs that provide valuable market opportunities.
Product – they assist in refining a product offering so that it meets the demands of the market
Demand – they assist entrepreneurs in gauging demand for a product by attaching monetary bets on the company future
Money – and they provide the capital entrepreneurs need to execute on vision.