recommended reading

Why Crowdfunding Is Set to Explode in Size Over the Next Few Years

igor kisselev/Shutterstock.com

Peer-to-peer lenders may be in for boom times.

The type of social-driven lending that helped fund flashy startups such as virtual reality goggles maker Oculus VR could more than double over the next few years, according to research from the Tabb Group. Oculus was scooped up by Facebook for a cool $2 billion less than a month ago after receiving its original funding through the crowd-funding company Kickstarter.

Tabb, in a recent report, estimates that the crowd sourcing market could hit around $17 billion globally by 2015, with more than 1,000 funding organizations formed to raise money. That would represent an eye-popping 200% increase in crowd-funding and an 88% increase in the number of lending venues throughout the world, Tabb says:

Screen Shot 2014-04-23 at 9.43.11 AM

Angel investors (mostly so-called “accredited,” high net worth folks who pass a set of financial thresholds) will provide some of the crowd-sourced funding and, across all funding paths, as much as $50 billion in financing in 2015, up from $22.9 billion in 2012. A more conservative growth estimate puts 2015 angel investments at $28 billion in 2015.

Source: Tabb Group

Social lending outfits such as Kickstarter and Indiegogo, as well as organizations such as Lending Club, would benefitting from new general solicitation rules enacted last year. Under the new rules, which were mandated by the JOBs Act, the Securities and Exchange Commission permits private companies to advertise widely in order to raise funds from “accredited” investors, generally those with a net worth of at least $1 million excluding the value of a residence. (There are still some restrictions on such advertising, explained by the SEC here.)

Crowd-sourced funding would also benefit from the SEC’s proposed proposed framework for rules that would allow lower net worth, “non-accredited” individuals to invest in private enterprises. Under those rules crowd-funding would be allowed though a registered broker or lending portal and within certain limitation around how much investors can plunk down in a startup.

It’s also possible that crowd-sourced lending would benefit indirectly from newleverage ratio rules which require traditional US lenders to hold more capital in reserve. Tougher bank capital requirements already are taking their toll on the volume of small business loans originated by banks. As the chart below indicates small business lending has fallen by 32% from a 2008 peak of 711.5 billion loans.

Screen Shot 2014-04-23 at 9.43.30 AM

Crowd funders appear more than happy to fill the void being left by traditional lenders.

(Image via igor kisselev/Shutterstock.com)

Threatwatch Alert

Thousands of cyber attacks occur each day

See the latest threats

JOIN THE DISCUSSION

Close [ x ] More from Nextgov
 
 

Thank you for subscribing to newsletters from Nextgov.com.
We think these reports might interest you:

  • Data-Centric Security vs. Database-Level Security

    Database-level encryption had its origins in the 1990s and early 2000s in response to very basic risks which largely revolved around the theft of servers, backup tapes and other physical-layer assets. As noted in Verizon’s 2014, Data Breach Investigations Report (DBIR)1, threats today are far more advanced and dangerous.

    Download
  • Featured Content from RSA Conference: Dissed by NIST

    Learn more about the latest draft of the U.S. National Institute of Standards and Technology guidance document on authentication and lifecycle management.

    Download
  • PIV- I And Multifactor Authentication: The Best Defense for Federal Government Contractors

    This white paper explores NIST SP 800-171 and why compliance is critical to federal government contractors, especially those that work with the Department of Defense, as well as how leveraging PIV-I credentialing with multifactor authentication can be used as a defense against cyberattacks

    Download
  • Toward A More Innovative Government

    This research study aims to understand how state and local leaders regard their agency’s innovation efforts and what they are doing to overcome the challenges they face in successfully implementing these efforts.

    Download
  • From Volume to Value: UK’s NHS Digital Provides U.S. Healthcare Agencies A Roadmap For Value-Based Payment Models

    The U.S. healthcare industry is rapidly moving away from traditional fee-for-service models and towards value-based purchasing that reimburses physicians for quality of care in place of frequency of care.

    Download
  • GBC Flash Poll: Is Your Agency Safe?

    Federal leaders weigh in on the state of information security

    Download

When you download a report, your information may be shared with the underwriters of that document.