History of Crowdfunding

Most people today think that crowdfunding is a trending idea. Still, it’s an ancient one and has an enduring history with roots going back to the 1700s. Yes, you heard that right! Are you keen to know more about the events over decades that have enabled crowdfunding to gain so much popularity? We at Ketto have listed some historical movements that have led to the development of online fundraising.

Modern fundraising has its origins beginning in the year 1997; where a group of individuals and businesses came together to raise small amounts of funds from a larger group of people over the online platform. So, let’s go back in history again to understand in detail how fundraising in India started. To learn how the idea has impacted in a positive way of bringing a better standard of living in people’s life by just contributing.

Irish Loan Fund: 1700’s

Jonathan Swift a writer and Irish Nationalist launched the Irish Loan Fund. Jonathan Swift established the Irish Loan Fund in the early 1700s as a method to provide the poor but creditworthy citizens in Dublin with loans. The fund was thriving and it ignited a wave of imitations. In 1837 the fund was authorised by the Loan Fund Board. By 1843, there were around 300 loan funds across Ireland. Ireland’s loan funds were backed by contributions from more prosperous citizens, who saw it as a method to help and donate sympathetically to the unfortunate.

The Creation of Credit Unions: 1852

Credit Union- A non-profit bank receives loaning funds from members, who also get a part of ownership and voting power in the credit union. Herman Schulze-Delitzsch in 1486 constructed a considerately owned bakery-mill in response to a crop collapse and deprivation in Germany. After six years, Friedrich Raiffeisen and Delitzsch took that concept of cooperative ownership and transformed it on finance and generated the first credit union.

Since German credit unions had self-governing power, a member-elected board of directors, was volunteer-run. It offered each member an equivalent vote, despite the funds contributed. Modern credit unions stick closely to that innovative replica. The ‘crowd in credit unions are individuals, who donate by transferring funds in the bank and paying loans with interest.

The Grameen Bank and Microfinance: 1976

A Professor named Muhammad Yunus conducted an investigation on a project, where he gave $27 to $42 to the unprivileged women in Jobra, Bangladesh in the year 1976. The project did so well that it gave rise to the expansion of the Grameen Bank Project, which is broadly attributed to being the first example of modern microfinance. Similar to the Irish Loan Fund, microfinance offers loans to poor people who have no access to the traditional forms of credit. However, funds in microfinance organisations come from members and contributors. As also they look more like conventional banking institutions but have lower interest rates, lower deposit sum, and lower loan amounts.

The Beginning of Modern Day Crowdfunding: 1997

In the year 1997, the first-ever successful occurrence of crowdfunding was recorded. A British rock band ‘Marillion’ donated their gatherings from the tour via online donations to their fan-following and supporters. The latter was excited for them to join them on tour in the United States of America. Keyboardist Mark Kelly sent an email to 1,000 people, conveying that the band would lose approximately $60k if they did go on tour. It was, however, a smart move by the fans who decided to raise funds! One fan from North Carolina volunteered and pooled funds in Escrow to his bank account, on the condition to be returned if sufficient funds weren’t raised.

The good news was the campaign rose the funds, and the band eventually went on a tour. However, the impact of that email resonated beyond one music tour. Motivated by this technique of fundraising, ‘ArtistShare’ became the first enthusiastic crowdfunding platform in 2001. It focused on musicians who required funds to go on tours or create albums. Since then, many fundraising platforms based on the Marillion model started emerging, including IndieGoGo in the year 2007 and Kickstarter in 2009.

First Use of the Term ‘Crowdfunding’- 2006

Michael Sullivan- an entrepreneur was the first person to use the name ‘crowdfunding’ in August 2006. He used this term in the launch of his business — fundavlog, where he attempted to produce an incubator for videoblog ventures.

The Great Recession: 2008

The housing market downfall during the financial manufacturing year 2008 forced people to seek for funds by substitute means. As financial institutions were unable to offer the same loans, people took help from the internet and each other.

Fundraising Emerges as a foremost Funding Source: 2009-2015

With the launch of Kickstarter and IndieGoGo, many niche crowdfunding platforms followed. The crowdfunding business quickly emerged as a trendy choice for industrialists to authenticate their concepts, increase exposure, and expand funding. Fundraising revenue grew to range from $530 million in the year 2009 to $1.5 billion in 2011. By the year 2012, there were 450 plus crowdfunding platforms which raised a whopping of $2.7 billion globally. By 2015, that number had risen to $24.4 billion.

Crowdfunding Gains Washington’s Support: 2012

President Barack Obama marked the Jumpstart Our Business Startups (JOBS) Act into regulation in April 2012. Popularly known as the crowdfunding bill, the JOBS Act was designed to reduce regulation loads on small businesses and endorsed equity fundraising. This included eradicating the ban on a universal solicitation that prevented financiers from broadcasting that they’re raising funds.

Fundable Launches the First Business Crowdfunding Platform: 2012

Fundable was founded by entrepreneurs Eric Corl and Wil Schroter in 2012 to help entrepreneurs fund and expand their business via equity and rewards-based fundraising.

Highest Funded Crowdfunding Campaign: 2017

The highest funded fundraising campaign is Filecoin as of September 2017. Filecoin is a decentralised data storage application, which raised $257 million in a month of movement. The company ran its campaign operations on Ethereum. At the time, Ethereum was not a conventional fundraising platform but an “open-source, blockchain-based allocated computing platform and operating system marking smart contract functionality.

To learn more about crowdfunding in india, online fundraising sites and how to start a non-profit fundraiser in India, Visit Ketto today!