Insight Bite

Proving that the public can rival venture capitalists in financing ideas, the popular crowdfunding platform Kickstarter recorded $1 billion in total pledges this week. This perfect sum is a good time for self-reflection. What does Kickstart offer and are there opportunities for start-ups in its shadow?

Kickstarter has rapidly become what eBay is to auction sites and Facebook is to social media. A crowdfunding giant that has become the de facto destination for original ideas and those seeking to find new projects to finance. It’s a hangout for fanboys, counter culturists and optimists. But importantly it is the most popular crowdfunding portal, one that represents the demands and desires of the masses. Therefore, unsurprisingly, the most successful projects have been in video games, with this category raising more than $1 million in funding more frequently than any other, while the music segment has seen the most total successful funding. The people love music and games – not really a surprise. Indeed, Kickstarter should be your destination of choice if you’re pitching a project that can be termed “entertainment”. But what if you’re looking for more niche public investors, ones not necessarily looking to get an amusement kick out of the product?

Fortunately, in the wake of the bulldozed path made by Kickstarter (and paved by other majors including Indiegogo), a number of niche start-ups have sprung up to serve segment-specific needs. Their dominant philosophy is to provide projects with investors that possess technical knowledge. Oakland-based Mosaic is one example of such a platform, with a focus on clean energy; San Francisco-based Watsi concentrates on health care; Upstart offers revenue-based crowdfunding; StartupValley focuses on tech. Competing by market segment is the future for crowdfunding, and finding the correct or “in-trend” niche will determine growth.

As the sector continues to mature, equity crowdfunding is set to gradually compete with stock markets as a more accessible and direct method of investments and returns. There is also potential to develop the positioning of a crowdfunding platform to deliver more services than just public bids – it could also function as a sell business, with implementation of the full capital-venture and ownership transfer cycle. Kickstarter may have kicked the crowdfunding landscape into shape, but more innovative and smaller firms are taking the market to wider pastures.