Crowdfunding is a term that you often hear about everything ranging from art projects to financial investments. So, where does crowdfunding actually come from, and when did it originate? In this article, we will delve into the history of crowdfunding.
Crowdfunding literally means: raising money from the general public. It is a system of financing a project via a group of people or a “crowd” instead of a financial institution, singular entity, or company. The investors in a project, which can range from financing a short film to paying for someone’s wedding, often receive a reward for their investment.
Crowdfunding is not a new concept; it has a rich history dating back to the 1700s. The modern form of crowdfunding, via the internet, arguably came into being around 1997 in the United Kingdom: Fans of the British rock band Marillion raised $60,000 via an internet campaign to fund a US tour for the band. Following the success of this innovative method of financing this trip, the first crowdfunding platform, ArtistShare, was founded in 2000. Subsequently, more and more crowdfunding platforms were established, and the online crowdfunding market was born.
Fast forward to the year 2012 and President Obama's signing of the Jumpstart Our Business Startups (JOBS). This law made it possible for private individuals to invest in start-up companies and for companies to use crowdfunding to issue securities (such as stocks or bonds), something that was not previously permitted. This law also allowed non-accredited investors to invest in real estate, making 2012 the official origin of real estate crowdfunding.
After the signing of the JOBS act, many crowdfunding platforms emerged in various countries, from Kickstarter in The US to Max Crowdfund in the Netherlands. With the increasing security technology applied to online platforms and the strength of social media, the online crowdfunding market in 2021 was reported at 13.5 Billion USD.
Historically reserved for the elite, real estate investing has been opened up to alternative demographics with the emergence of crowdfunding technology. Nowadays, real estate crowdfunding platforms benefit project developers by giving them access to alternative funding and investors by exposing them to asset-backed investments with a lower entry point than in the past.