The State of Crowdfunding, 2020

As small businesses continue the long slog of recovery from COVID-19 impacts, we’re going to need all hands on deck.  We are going to need more resources for business technical assistance, more sources of business finance, and a greater focus on local business retention and expansion efforts.   There has been an outpouring of new programs to finance small businesses affected by COVID-19 (you can access a useful resource list here).  In terms of financing, crowdfunding has been an important tool for many businesses. Many of the major global crowdfunding platforms, like Kiva, Kickstarter, GoFundMe, and Honeycomb Credit, have seen significant growth in recent months.  In fact, monthly investment totals doubled during the summer of 2020.  Much of this growth is stimulated by the pandemic, but the crowdfunding market has been growing rapidly for years.  A new study, from Crowdfund Capital Advisors and the SBE Council, examines how the market has fared since new federal crowdfunding regulations went into effect in 2016.  The study notes that, since 2016, 2,600 companies have been funded via these new federally-regulated crowdfunding platforms.  These firms have raised an average of $340,000 per firm, and overall capital invested in crowdfunding platforms exceeds $500 million. These funds support local businesses operating in a diverse mix of industries, and also address pressing early stage finance gaps where traditional funding sources may not be available.

These figures suggest that crowdfunding remains a small, but increasingly important part of the small business finance landscape. The report authors recommend creation of a new $20 billion Main Street Recovery Fund to support additional crowdfunding investments.  While the future prospects for this fund are unclear, it is clear that crowdfunding will be an important part of ongoing small business recovery efforts.  If you don’t have active crowdfunding resources in your community, now is a great time to close that gap.



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