Crowdfunding: Revolutionizing the investment landscape

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Description: MarketLine Case Studies describe topics such as innovative products, business models, and significant company acquisitions. Fact-based and presented in an accessible style, they explain the rationale of commercial decisions and illustrate wider market and economic trends.



Research Report Overview

Published Date: 10/01/2013
Category: Therapies & Markets

Research Report Decription

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In April 2012, President Obama signed the Jumpstart Our Business Startups (JOBS) Act into legislation, (potentially) allowing small startup companies to gain investment from private individuals through crowdfunding. This case study explores the viability of crowdfunding as a means of investment, its advantages and disadvantages, its utilization thus far, and its potential success going forward.

Crowdfunding reduces startups’ reliance on venture capitalists and accredited investors.

  •  Reward-based crowdfunding lessens the risk of releasing a new product.
  •  Crowdfunding offers great product and brand exposure as a by-product.

Crowdfunding does have its disadvantages. 

  • Crowdfunding success may turn to distress for startups and entrepreneurs.
  • Crowdfunding could open investors, entrepreneurs, and platforms to theft and legal disputes           

Key Questions Answered:

  • What are the potential implications of the JOBS Act?
  • What are the advantages and disadvantages of crowdfunding initiatives?
  • How successful have crowdfunding initiatives been thus far?
  • What impact is crowdfunding likely to have on the traditional investment landscape?

Companies Mentioned:

KickstarterPebble Watch 

Paper Highlights:

  • In recent years, crowdfunding websites such as Kickstarter have seen a dramatic increase in activity as the trend has gained momentum. As a result, the number of crowdfunding platforms is on the rise, and such enterprises are beginning to see their business models change in accordance with the future direction of this burgeoning new industry.
  • Advantages of crowdfunding include the fact that it offers a much larger pool of investors from which startups and entrepreneurs are able to raise capital. Additionally, crowdfunding lessens the risk of bringing a new product to market, and enables startups to benefit from large-scale brand and product exposure.
  • Crowdfunding ventures, such as the Pebble Watch, which launched on Kickstarter, have shown the potential rewards of a successful crowdfunding campaign, although this example also serves to exemplify the drawbacks of such a means of raising capital.