Takeaways:
- The crowdfunding market is expected to reach $34.4 billion in 2015, a staggering increase from $5 billion in 2013.
- As 2015 draws to a close, it’s reasonable to expect that legislative changes will continue to evolve and have a tangible impact.
- Companies and platforms that might have been instrumental in helping the fledgling industry grow might be ill-suited or lack the resources to transition to a more mature marketplace.
Few markets offer as much promise and opportunity as crowdfunding. According to Massolution’s 2015CF industry report, the crowdfunding market is expected to reach $34.4 billion in 2015, a staggering increase from $5 billion in 2013.
While many might immediately think of Kickstarter and similar crowdfunding opportunities, thanks to the Jobs Act, real estate crowdfunding provides some of the greatest opportunities for the savvy investor.
With that in mind, and with the year half over, what can we expect from the crowdfunding market for the latter half of the year and beyond?
1. The Jobs Act will continue to evolve
Despite being the very legislation that has made real estate crowdfunding possible, the Jobs Act has by no means been static. Instead, the SEC has continued to flesh it out, adding amendments, regulations and thresholds that have further defined the market.
As 2015 draws to a close, it’s reasonable to expect that legislative changes will continue to evolve and have a tangible impact.
2. Real estate crowdfunding will continue to thrive
As one of the segments of the market that offers the most opportunity for reward, real estate crowdfunding promises to see significant growth in the latter half of the year, as well as the years to come.
“From a global perspective, real estate crowdfunding will continue to grow and gain traction as more investors worldwide will view these platforms as a simple — and safer — way to invest with the support of companies that are dominant in this space, rather than trying to do it all on their own,” Scott Picken, CEO and founder of Wealth Migrate, said in an interview with CrowdFundBeat.
3. Maturation, mergers and consolidation will begin
With any new industry, there is usually a “Wild West” period where growth is rapid — even reckless — and laws, rules and best practices have yet to be fully established and understood.
In time, the “Wild West” gives way to a more stable and mature version of the same industry.
One typical result of such maturation is a shakeup within the industry. Companies and platforms that might have been instrumental in helping the fledgling industry grow might be ill-suited or lack the resources to transition to a more mature marketplace.
Writing for Crowdfund Insider, JD Alois drives this point home: “A growing number of investment platforms will merge or form substantial partnerships to bolster operations.
“Smaller investment banks will move more aggressively in the space as well, creating more competition and opportunity. While not a full-blown consolidation, smaller platforms will find support in forging alliances.”
This emphasizes the importance of investors choosing their crowdfunding platform carefully — a company that has a proven track record of success and a management team that can successfully adapt to the coming changes.
4. Existing platforms will become household names
A significant side effect of this continued growth is wider recognition for crowdfunding companies and platforms. Virtually everyone has heard of companies such as ReMax, Century 21, Prudential Mutual Funds, Edward Jones and the like.
As this market continues to grow, however, RealtyShares, EquityNet, Realty Mogul and others will become equally well-known, thanks to increased marketing and success stories of investors who have benefited from these crowdfunding platforms.
5. The U.K. will continue to lead the way
As crowdfunding continues to mature, new and innovative changes to the finance market will continue to come from across the pond.
“The U.K. has experienced dramatic growth in all forms of new finance, in part, boosted by incentives such as the SEIS and EIS tax programs,” continues JD Alois, in the article mentioned above.
“In equity crowdfunding, there [have], of course, been failures, but zero fraud. Facts and data count. This is one area the U.S. should be learning from the U.K.”
As a result, savvy investors and those who want to gain insight into possible future developments should keep a watchful eye on the U.K. market.
As crowdfunding continues to gain its footing and meet with ongoing success, traditional firms will have to adapt in response.
This evolution will lead to a blurring of the lines between traditional investment firms and crowdfunding platforms.
This, in turn, will force crowdfunding platforms and companies to continue to innovate, as well as focus on the customer experience and offer a level of service that goes above and beyond what traditional firms offer.
Without a doubt, the crowdfunding market is awash with possibilities, opportunities and prospective rewards. As with any new and growing industry, crowdfunding will experience the accompanying growing pains that are a natural part of such sectors.
By keeping an eye on the above trends, however, the savvy investor will be able to anticipate upcoming changes in the industry, adapt to them and continue to thrive in 2015 and beyond.