The first modern example of an online successful crowdfunding campaign traces back to 1997, when British rock band Marillion funded a reunion tour by taking online donations from North American fans hoping to see the infamous rockers one last time. At the time, the band was facing financial difficulties and couldn’t afford to tour without the help of their most dedicated fans, so they compiled an email list of 6,000 loyal followers and humbly asked them for their help. For their donations, fans were promised the groups newest album once it was finished, along with a personal thank you and a signed photo of the band. Marillion and their loyal followers thought nothing of this exchange, but it is now credited as being the first major step towards the massive crowdfunding arena that we are experiencing today.
The bands successful tour helped give Brian Camelio, an American musician and producer an idea of an an online platform served to put the power back in the artists hands. Camelio was tired of having limited creativity and wanted to provide rising artists with an opportunity to fund their own projects, so he created ArtistShare, the internet’s first fan-funding platform for creative artists. The platform has had it's up and downs since it first launched in 2005: it's funded 30 Grammy projects, created it's own label, and gone on to partner with leading industry brands. But it also failed to keep a stronghold on it's coveted crowdfunding patent, losing an important court battle with Kickstarter.
Even after the initial success of ArtistShare crowdfunding had yet to take off. In fact, the term ‘crowdfunding’ was not coined until 2006, when Michael Sullivan launched Fundavlog, a funding service for video-blog related projects. Fundavlog received early support, but ended up failing, largely because at the time vlogging had yet to become popular as Youtube was just getting started and the easy-to-use applications made specifically for vlogging that we see on the app market today had yet to be introduced to vloggers.
Following fundavlog and their failure a handful of micro-lending crowdfunding platforms began to pop up in the mid 2000’s. Kiva, the world’s first crowdfunding platform solely made for entrepreneurs was introduced and is currently recognized as one of the most legitimate micro-lending platforms on the market, thanks to it’s 98.83% repayment rate. Platforms such as Zopa, LendingClub, and Prosper quickly copied the Kiva model and worked towards capturing their own corner of the market.
By 2008 there were a handful of crowdfunding platforms available to anyone with a wifi connection and computer. By now, multiple projects funded through these platforms had gone on to experience a wealthy amount of success. The market continued to expand, reaching into the hundreds of millions of dollars. But, as a whole, crowdfunding had yet to gain the general public’s attention.
Indiegogo and Kickstarter quickly helped change that by introducing a more simple platform that could be used by anyone looking to raise money or fund an interesting project. The only real difference between the two platforms is that Indiegogo allows you to receive money before a campaign is finished, while Kickstarter won’t release the money until your goal is either reached or your campaign is no longer running. These two platforms are largely credited with expanding the crowdfunding industry, as the market tripled in size from 2009 to 2011, going from $530 million to $1.5 billion in just two short years.
In April of 2012 crowdfunding received a huge boost when President Obama signed the JOBS act into law, which aimed to lessen regulations surrounding crowdfunding while lifting the burdens that are often placed on small businesses. This act removed the ban that placed red-tape restriction on entrepreneurs when it came to publicizing or advertising their crowdfunding campaigns, allowing them to have more freedom within the crowdfunding arena.
Today, small business owners can choose from over 2,000 global crowdfunding sites, all of which claim to offer their own unique services. The crowdfunding space is starting to become more and more crowded these days, leading new platforms to focus on one specific industry rather than spreading themselves thin and having to compete with the biggest players. The future of crowdfunding has just started, don't expect the market to slow down anytime soon.