Your Guide to Understanding Crowdfunding

Summary

The video script delves into the rapidly expanding online crowdfunding industry, which raised $16.2 billion in 2015 and is projected to reach $96 billion by 2025. It outlines four primary crowdfunding models: debt-based, equity-based, reward-based, and donation-based, each with distinct examples. The script advises on evaluating crowdfunding platforms by their growth stages, focusing on customer traction in the early stage, revenue model validation in the growth stage, and profitability maximization in the late stage. Key valuation metrics for each stage are provided, guiding potential investors.

Takeaways

• 💹 **Crowdfunding Growth**: The crowdfunding industry raised $16.2 billion in 2015 and is projected to grow to $96 billion by 2025.
• 🌐 **Global Funding**: Crowdfunding allows individuals and startups to gain funding for projects from contributors worldwide.
• 💼 **Four Types of Crowdfunding**: There are debt-based, equity-based, reward-based, and donation-based crowdfunding platforms.
• 📈 **Debt-Based Platforms**: Contributors receive interest payments, e.g., FundedHere, Crowdo, Moola Sense.
• 🔖 **Equity-Based Platforms**: Contributors receive shares, e.g., AngelList, FundersClub, CapBridge.
• 🎁 **Reward-Based Platforms**: Contributors receive rewards like early access to products, e.g., Kickstarter, Indiegogo, Ulily.
• ❤️ **Donation-Based Platforms**: Donations are charitable and often tax-deductible, e.g., Indiegogo, Patreon, YouCaring, FriendFund.
• 🚀 **Investment Considerations**: Before investing, consider the platform's growth stage and focus on customer traction in the early stage.
• 📊 **Valuation Metrics**: Key metrics vary by stage: early stage focuses on campaigns and funds raised, growth stage on funding value and revenue, and late stage on profitability and cash flow.
• 💡 **Further Learning**: For more information on crowdfunding, visit sgxacademy.com or download the digital research paper at sgx.com/digital-sector.

Q & A

What is crowdfunding?

Crowdfunding is a method where individuals or startups use an online platform to raise funds for a project from a global audience.

How much did the crowdfunding industry raise in 2015, and what is the projected growth by 2025?

The crowdfunding industry raised 16.2 billion US dollars in 2015 and is projected to grow to 96 billion by 2025.

What are the four types of crowdfunding sites mentioned in the script?

The four types of crowdfunding sites are debt-based, equity-based, reward-based, and donation-based platforms.

What do contributors receive on debt-based crowdfunding sites?

On debt-based crowdfunding sites, contributors receive interest payments in exchange for their contributions.

What are some examples of equity-based crowdfunding platforms?

Examples of equity-based crowdfunding platforms include Angel List, FundersClub, and CapBridge.

How do reward-based crowdfunding platforms operate?

Reward-based crowdfunding platforms operate by promising contributors rewards, such as first priority access to a product once it goes live, in exchange for their support.

What is the nature of contributions on donation-based crowdfunding platforms?

Contributions on donation-based crowdfunding platforms are charitable and usually tax-deductible.

What are the key valuation metrics for crowdfunding platforms in the early stage of growth?

In the early stage of growth, key valuation metrics for crowdfunding platforms include valuation divided by the number of campaigns, valuation divided by successful campaigns, and valuation by funds raised.

What is the aim for crowdfunding platforms in the growth stage?

In the growth stage, the aim for crowdfunding platforms is to prove the revenue model and scale up as rapidly as possible.

What are the key valuation metrics for crowdfunding platforms in the late stage?

In the late stage, key valuation metrics include valuation divided by revenue, valuation divided by EBITDA, and the P/E ratio.

Where can one learn more about crowdfunding and access a digital research paper on the topic?

To learn more about crowdfunding and access a digital research paper, one can visit sgxacademy.com or download the paper at sgx.com under the digital sector.

Outlines

00:00

🚀 Crowdfunding Industry Overview

The script introduces crowdfunding as a rapidly growing online industry, where individuals and startups can raise funds for their projects through online platforms. In 2015, the industry raised $16.2 billion, with projections to reach $96 billion by 2025. It outlines four types of crowdfunding platforms: debt-based, equity-based, reward-based, and donation-based, each with specific examples. The script also discusses the importance of considering the growth stage of a crowdfunding platform before investing, with different valuation metrics for early, growth, and late stages.

Keywords

💡Crowdfunding

Crowdfunding refers to the practice of funding a project or venture by raising small amounts of money from a large number of people, typically via the internet. In the context of the video, crowdfunding is presented as a rapidly growing online industry, with the potential to raise billions of dollars for various projects and startups. The video discusses its growth from 16.2 billion US dollars in 2015 to a projected 96 billion by 2025, highlighting its significance in the digital economy.

💡Debt-based sites

Debt-based crowdfunding sites are platforms where contributors lend money to a project or business in exchange for interest payments. These sites are mentioned in the video as one of the four types of crowdfunding platforms, with examples including FundedHere, Crowdo, and Moola Sense. This model is akin to peer-to-peer lending, where the contributors expect a financial return on their investment.

💡Equity-based sites

Equity-based crowdfunding involves contributors receiving shares or ownership stakes in a company in return for their financial support. The video lists AngelList, FundersClub, and CapBridge as examples of such platforms. This type of crowdfunding is particularly relevant for startups seeking investment to grow their business, as it allows them to raise capital by offering a piece of the company to investors.

💡Reward-based platforms

Reward-based crowdfunding platforms offer contributors non-monetary rewards, such as first access to a product or exclusive merchandise, in exchange for their support. The video mentions Kickstarter, Indiegogo, and Ulily as examples. This model is popular for creative projects and products that are not yet available in the market, as it allows creators to gauge interest and secure funding before production.

💡Donation-based platforms

Donation-based crowdfunding platforms focus on charitable giving, where contributors donate money without expecting anything in return. The video includes Indiegogo, Patreon, YouCaring, and Fundly as examples. This type of crowdfunding is often used for social causes, humanitarian projects, or individual needs, and donations are typically tax-deductible.

💡Valuation metrics

Valuation metrics are financial ratios or figures used to estimate the value of a company or investment. The video discusses different valuation metrics relevant to crowdfunding platforms at various stages of growth, such as valuation divided by the number of campaigns, successful campaigns, funds raised, funding value, revenue, EBITDA, and the P/E ratio. These metrics help investors assess the financial health and potential of crowdfunding platforms.

💡Customer traction

Customer traction refers to the ability of a business to attract and retain customers. In the video, it is mentioned as a key focus for crowdfunding platforms in their early stage, where the momentum built among project initiators and investors is crucial. High customer traction indicates a platform's popularity and potential for growth.

💡Revenue model

A revenue model is a business strategy that outlines how a company plans to generate income. The video emphasizes the importance of proving the revenue model in the growth stage of a crowdfunding platform. This involves demonstrating how the platform will sustain itself financially, which is essential for attracting further investment and ensuring long-term viability.

💡Profitability

Profitability refers to the ability of a business to generate profits. In the context of the video, maximizing profitability is a goal for crowdfunding platforms in their late stage. This involves increasing net income while maintaining growth, which is crucial for the platform's sustainability and attractiveness to investors.

💡Cash flow

Cash flow is the movement of money into and out of a business. The video mentions maintaining cash flow as a key aspect of late-stage crowdfunding platform growth. Positive cash flow is essential for covering operational expenses, investing in growth, and ensuring the platform's financial stability.

💡Digital research paper

A digital research paper is a document that provides in-depth analysis and insights on a specific topic, often in a digital format. The video encourages viewers to download a digital research paper from sgx.com for more information on the digital sector, including crowdfunding. This resource would likely offer a more comprehensive understanding of the industry's trends and opportunities.

Highlights

Crowdfunding industry raised 16.2 billion US dollars in 2015 and is projected to grow to 96 billion by 2025.

There are four kinds of crowdfunding sites: debt-based, equity-based, reward-based, and donation-based.

Debt-based sites offer interest payments to contributors, like FundedHere, Crowdo, and Moola Sense.

Equity-based sites provide shares to contributors, with examples including Angel List, FundersClub, and CapBridge.

Reward-based platforms promise rewards like early access to products, with Kickstarter, Indiegogo, and Ulily as examples.

Donation-based platforms are charitable and often offer tax deductions, with Indiegogo, Patreon, YouCaring, and Fundly as examples.

Crowdfunding platforms need significant upfront investment and gradual scale-up.

In the early stage of a crowdfunding platform, focus on customer traction and momentum among initiators and investors.

Key valuation metrics in the early stage include valuation divided by number of campaigns and successful campaigns.

In the growth stage, the aim is to prove the revenue model and scale rapidly, with valuation metrics like funding value and revenue.

In the late stage, the goal is to maximize profitability, cash flow, and maintain growth, with metrics like EBITDA and P/E ratio.

For more information on crowdfunding, visit SGX Academy or download the digital research paper at SGX.com.

Crowdfunding is one of the fastest-growing online industries, offering various platforms for different funding needs.

Understanding the different types of crowdfunding sites is crucial for potential investors and project initiators.

Valuation metrics vary depending on the stage of growth of a crowdfunding platform, affecting investment decisions.

The growth of the crowdfunding industry is expected to have a significant impact on the global funding landscape.

Investors should consider the stage of growth and corresponding valuation metrics before investing in a crowdfunding platform.

SGX Academy provides educational resources and research papers to help understand the crowdfunding industry.

Transcripts

[Music]

let's talk about one of the fastest

growing online industries crowdfunding

crowdfunding is when individuals or

startups use an online platform to gain

funding for a project globally the

crowdfunding industry raised 16.2

billion us dollars in 2015 and is

projected to grow to 96 billion by 2025.

generally speaking there are four kinds

of crowdfunding sites although some

sites include more than one type of

crowdfunding first debt based sites

these are where contributors receive

interest payments in exchange for their

contributions examples include funded

here crowdo and moola sense

next equity-based sites where

contributors receive shares in exchange

for their contributions examples include

angel list funnel cders and capbridge

third reward based platforms where

contributors are promised rewards in

exchange for their support like first

priority access to the product once it

goes live examples include kickstarter

indiegogo and ulily

finally donation-based platforms where

donations are charitable and usually tax

deductible examples include indiegogo

patreon you caring and friend fund

now crowdfunding websites have to invest

heavily in their platforms upfront and

slowly build up scale so before

investing in a crowdfunding platform

it's important to consider its stage of

growth in the early stage the main focus

should be on customer traction you can

gauge this by the amount of momentum

being built among project initiators and

investors therefore the key valuation

metrics include valuation divided by

number of campaigns valuation divided by

successful campaigns and valuation by

funds raised in the growth stage the aim

is to prove the revenue model and to

scale up as rapidly as possible

therefore the key valuation metrics

include valuation divided by funding

value and valuation divided by revenue

finally in the late stage the goal is to

maximize profitability and cash flow

while maintaining growth therefore the

key valuation metrics include valuation

divided by revenue valuation divided by

ebitda and the p e ratio

those are the basics of crowdfunding

to learn more visit sgxacademy.com

or download the digital research paper

at sgx.com

digital sector and good luck