The History of Crowdfunding
It may be too soon to write about the history of crowdfunding. Unless one is planning to follow Winston Churchill’s motto: “History will be kind to me for I intend to write it.”
Some trace the very beginning of crowdfunding back to 1713 when Alexander Pope asked for subscribers to pledge two gold guineas each to support his translation of Greek poetry into English. The supporters got an acknowledgement in the first edition of the book.
Another anecdotal evidence of the early days of crowdfunding comes from the completion of the statue of liberty in 1886. The French offered the statue but did not pay for everything and the New York Governor did not want to commit public money to cover for the shortfall. In comes the famous publisher of “The New York World”, Joseph Pulitzer, who launched a fundraiser that, in just 5 months, raised $100k+ from more that 160k donors. More than 3/4 of the donations were less than $1, but the reality is that the statue is there until these days…
Be that as it may, the true revolution of crowdfunding only started with the advent of two things: the internet and social networking.
The internet enabled the appearance of platforms that promoted the meeting of would be lenders / investors / supporters with would be artists / entrepreneurs / innovators.
Social networking provided the megaphone to turn a simple and often times local small product / project into an internationally acclaimed, must have / must follow, icon of worldliness.
The various platforms are obviously leading actors in this still developing play. It is impossible to mention them all (1000+ and counting…), but a few deserve a special reference. It is worthy of note that the UK is playing a leading role in the development of this industry, for reasons I intent do get back to at a later post.
Just Giving (UK, 2000) created by Zarine Kharas and Anne-Marie Huby , a company to provide online tools and processing services to enable the collection of charitable donations. Note that this is a for profit company that reached profitability in 2006!
Artist Share (USA, 2003) founded by Brian Camelio, a Boston musician and computer programmer. It started as a website where musicians could seek donations from their fans to produce digital recordings and evolved into a fundraising platform for film/video and photography projects.
Kiwa (USA,2005) was the first microlending site to connect lenders with low income / underserved entrepreneurs and students. It was my first experience with crowdfunding and I was really happy to find out that the nigerian boy and the two chilean women I had lent money to (the first to buy a popcorn machine for his general store and the other two to buy supplies for their apparel and footwear businesses) actually paid the money back!
Zopa (UK, 2005), Prosper (USA, 2006) and Lending Club (USA, 2007) were the first high profile peer-to-peer lending sites, and Lending Club is currently the clear leader in P-2-P lending.
2006 was the year that the word Crowdfunging was coined! Big cheer for the 10th anniversary!!!
Then came the big names for the rewards based crowdfunding: Indiegogo (USA, 2008) and Kickstarter (USA, 2009). These sites fund art in general (comics, dance, fashion, film, photography, etc.), social causes (animals, community, education, environment, health, politics and religion) and entrepreneurs and small businesses (food, sport, gaming, publishing, technology).
Go Fund Me (USA, 2010) was a pioneer in donation based crowdfunding. It enables very small organisations and individuals to solicit donations through the crowd.
2012 was another big year for the industry. The Jobs Act in the USA and the Breedon Report in the UK expose the governments’ need for some sort of alternative finance for SMEs to emerge. The aftermath of the big recession was sucking all the money out of the economy and rendering SMEs financially breathless! With better and quicker results in the UK than the USA, the dawn of crowdfunding as an industry demonstrates that sometimes politicians do get somethings right.
Following on the footsteps of these political initiatives, the equity platforms started to spring up: Micro Ventures (USA, 2011), Circle Up (USA, 2012), Crowdcube (UK, 2011), Seedrs (UK, 2011) and Syndicate Room (UK, 2013)
However, this recent history of crowdfunding would not be complete if it were not for the landmark deals that this alternative finance method generated. There is nothing more eye popping than the sheer numbers that some campaigns generated.
Pebble stands out as the quintessential rewards based campaign ran in Kickstarter. The first campaign was looking to raise $100k in 2012. It eventually raised $10,2M (biggest amount until then by one single campaign). In 2015 they did it again, this time raising $20M, a new record, once more!
But not only sophisticated tech products make a successful campaign. The Coolest Cooler was an instant hit in Kickstarter in 2014. They set to raise $50k and ended up with $13,3M from 62.000 supporters, the highest amount raised at the time! Apparently they are facing some problems actually delivering the product, but that is a different issue!
In the equity side of crowdfunding, the story would not be complete without mentioning Brew Dog. They have successfully raised three rounds of equity crowdfunding, with the rather alternative punchline of “Equity for punks”. They have a very strong stance against the establishment, as the following statement attests:
“Equity for Punks is all about shortening the distance between us and the people who drink our beer, and enabling us to keep putting passion in people’s beer glasses without resorting to begging funding from big monolithic banks who don’t care about the beer,” James Watt, BrewDog Captain
Under the name of “World’s Biggest (funding) Rounds”, Brew Dog is trying to raise £25M with a combined Debt and Equity raise (this will be their 4th raise since 2010). The last news I heard, they had allegedly raised £10M, which would already qualify as the biggest funding round ever (no news since then though).
Until that final closing, as far as I am aware, Chappel Down Winery did the biggest ever equity raise, £4M through Seedrs in 2014.
Strange coincidence that these big equity raises are all for alcoholic drinks businesses! Or maybe not; if the investment turns sour you can still down a few pints and glasses from the inventory!
I guess that would be the type of investment Wiston Churchill would agree on.
