Kickstarter recently launched a new live stats page with some interesting data. I analyzed the data with the hope of finding some trends that might bleed into equity crowdfunding. First I’ll discuss some interesting findings from the Kickstarter data before illustrating a potential connection to equity crowdfunding.
From the data available I felt there were two important questions to be answered. First, which categories get the highest percent of their projects fully funded? All projects on Kickstarter have an average of about 44% fully funded success rate. Figure 1 shows that dance, theater, and music all get more than 50% of their projects funded. While, technology and fashion are lagging with success rates below 30%.
Figure 1.
This leads me to my next question. Dance, theater and music have the most likelihood of being fully funded, but how much capital do they actually raise? In Figure 2, you’ll notice that these three raise the highest percent of their money in the $1,000 to $9,999 range when compared to the rest of the categories. On the other hand, design, technology and games have most of their money raised in higher funding ranges. Interestingly, as seen in figure 1, these three also have some of the lowest success rates on Kickstarter. So it seems that these categories are either boom or bust.
Figure 2.
The reason for these outcomes could be because dance, theater and music project owners are looking for a smaller amount of money for their projects so they get funded easier. Furthermore, design, technology and games project owners could be looking for high amounts of money for their projects. Thus creating a boom or bust scenario.
My last chart (Figure 3) shows the correlation of success rate verses the percent of projects over $20K by category. I chose $20K because I felt it separated well the low budget projects from the high level projects. Again this design, games and technology have the strongest correlation.
Figure 3.
We believe the two questions answered above for Kickstarter data: “which categories get the highest percent of their projects funded?” and “which categories raise the most money when funded?” are going to be very important questions for the crowdfunding for equity industry. Crowdlanding will be executing this analysis for the crowdfunding for equity industry and making it available. In this industry, everyone wants to pick the winner because it is in our best interest to do so. We want to pick both the winner of the crowdfunding experiment and the company that will return the most on our investment.
Venture capitalists are increasingly wary of the new Crowdfunding for equity industry unleased by the JOBS(Jumpstart Our Business Startups) and rightfully so. Crowdfuning takes the power away from a single or small group of individuals and shifts it towards a large number of peers, totally changing the investment capital landscape.
Rather than having the terms of capital financing being determined by venture capitalist, startups can now dictate how much control is given up and determine the creative direction of the venture. Until now, most VC’s have had very little competition in this area and have had a major say in how the startup idea is executed along with which ones would even be given an opportunity.
Crowdfunding over four forms: equity based, donation based, lending-based and reward-based, has raised over $1.5 billion internationally in 2011, the majority of which has come from the equity-based investments. The prediction is that number will double by the end of this year. Once the SEC formalizes its rules for the United States by December 2012 the growth is bound to skyrocket.
Most venture capitalists scoff at the mere mention of crowdfunding and do not see it impacting their firms in the least. If the growing trend of crowdfunding investing continues at it’s current pace, venture capitalists may end up loosing their foothold in the startup industry unless they adapt and change the status quo. Equity Crowdfunding is less than a fad and there are major changes on the horizon in the United States starting in 2013.
CrowdFunding News
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