In 2015, global crowdfunding accounted for $34.4 billion in total volume, up from $16.2 billion in 2014 and $10.1 billion in 2013, according to the Massolution Crowdfunding Industry Report. Business and entrepreneurship ranked as the highest crowdfunding categories, with North America the leading area in volume, followed by Asia and Europe. Crowdfunding creates economic benefits both locally and globally.
How Crowdfunding Benefits the Economy
Four basic types of crowdfunding are lending, rewards, equity, and donation. All of these contribute to both a local and national economy. By providing individuals ways to finance new ideas, causes, projects, and businesses, crowdfunding platforms have boosted many sectors, from health, technology, real estate, and banking, to social causes and the arts.
For the individual, donation-based crowdfunding provides needed funds in a short time. It can be easier and faster than securing funding through a loan or securing capital. Using the Internet means spreading the word for free, whether it’s about a new business or a personal plea for help, or for a cause to do good in the world. Social media networks extend indefinitely, and work much like free advertising and marketing.
The Founder Institute measures crowdfunding’s economic value this way: on a national level, a surge in crowdfunding dollars raised contributes to an increase in industrial growth – especially for startups and small businesses – new jobs created, and more spending with additional money pumped into the economy. These economic benefits show how people have tapped into their own social networks with crowdfunding in the collaborative economy.
Examples of Crowdfunding Benefits
When a community raises money to repair a house after a disaster, who benefits? The people who live in the house, of course, but who else? Loved ones benefit on an emotional level, and local economies benefit on a material one. When the house is rebuilt, money from the crowdfunding campaign goes to the hired contractors making the repairs, the owner of the hardware store where the supplies were bought, and other families in the neighborhood, whose property values start to bounce up after rebuilding. So crowdfunding helps people with their finances and the economy, in ways you may not expect.
Medical Expenses Create Economic Problems
Fundraisers for unpaid medical costs can serve to prevent a financial burden from landing on taxpayers, employers, and hospitals. According to a 2013 Harvard study, medical bills bankrupted nearly two million people in 2013. While medical bankruptcies are decreasing, they are still a leading cause of bankruptcies in the United States. By crowdfunding to cover medical expenses, families avoid insolvency, protect their own credit, and prevent bailouts from taxpayers, as well.
What’s more, when 64 million working-age adults have trouble paying medical bills, they aren’t the only ones affected: employers have to hire more people to cover their shifts; hospitals continue to provide care when they won’t get paid; and less money is spent elsewhere in the economy, according to a 2014 study by the Commonwealth Fund. Thus, when adults must pinch and save to afford needed care, the larger economy is affected. With successful crowdfunding, families can continue to live their lives as usual.
Caring Communities Lay Financial Groundwork
Outside of medical expenses, crowdfunding campaigns build more financially stable communities by allowing people to cope well in times of crisis. Again, if a family can’t pay its medical bills, other people may suffer. The same is true when people contend with the death of a loved one, damage to property, or an unexpected injury that prevents them from going to work or taking care of their kids. Crowdfunding provides a cushion for vulnerable populations to fall back on when extreme circumstances occur. When many people use charitable crowdfunding at times of urgent need, the money they receive will likely circulate back into the economy quickly.
Fundraising Helps People and the Economy
If you want to encourage industriousness and creativity in others, encourage them to organize and run a crowdfunding campaign for a cause they care about. This endeavor builds community and raises vital funds. They’ll receive a lesson in marketing, storytelling, and assertiveness. Not everyone is comfortable asking friends and acquaintances for money. In order to run a successful fundraiser, they need to trust that their cause is worthy of a donation and articulate the cause effectively to an audience. Today’s crowdfunders are tomorrow’s entrepreneurs, and their fundraising skills will also benefit the economy.
Charitable crowdfunding helps families and communities in need of life-saving care or vital resources. Crowdfunding also contributes to a giving economy, in which people in extreme circumstances can rely on their social networks for help, eventually getting back on their feet and then offering similar assistance to others. By preventing any individual from succumbing to debt or financial hardship, a community becomes stronger and more stable financially. To learn more about how to start your own fundraiser, YouCaring provides more information here.