For those of us who work in the Crowdfunding space, it can seem as if we’ve covered a lot of ground since April 5, 2012, the day President Obama signed the JOBS Act into law. At a conference in New York earlier this year, a panelist actually referred to Crowdfunding as a “mature” industry.
Nothing could be further from the truth. Crowdfunding is actually just beginning.
A couple weeks ago I received a promotional email from OurCrowd. Founded by Jon Medved, one of the most successful venture capitalists in the world, OurCrowd has developed into the most successful Crowdfunding portal in the world outside the real estate industry. Unlike most angel investors and venture capitalists, Jon understood that Crowdfunding is nothing more or less than the Internet disrupting the capital formation industry – his industry. Rather than resist the disruption, he built the most successful disrupter.
The email recites the impressive number of successful exits and IPOs of companies financed through OurCrowd (remember when Jon’s fellow VCs were claiming that a Crowdfunded company could never attract more financing?), and boasts that OurCrowd has signed up 15,000 investors. That’s a number many Crowdfunding portals would envy, for sure. On the other hand, it represents a market penetration of less than 0.2% among the roughly 8.5 million accredited investors in the United States, and a market penetration of less than 0.02% among the total population of U.S. investors, accredited and non-accredited. And that’s for the most successful non-real estate site in the market.
That’s not a mature industry, folks. By way of comparison to an industry that really is mature, I would say the Crowdfunding industry is about where the automotive industry was in 1912, when a few early adapters were driving these crazy machines with four wheels while their more respectable neighbors were driving proper horse-drawn carriages.
Today, everything about the automotive industry seems obvious, pre-ordained. But here are some of the things we didn’t know in 1912:
- Whether consumers would use automobiles
- How they would use them
- How much they would pay for them
- Who would make automobiles and their many parts
- Who would distribute them
- How automobiles would be regulated
- Who would make money, and how
- How automobiles would work
- Whether the automobile market would segment
- How it would segment
- Who would build the automobile infrastructure
- That a person with an orange wig would someday run for President
If you’re already in the Crowdfunding industry trying to make a living, realizing how little we know can feel disconcerting, even alarming. But try thinking of it this way: 98% of the innovation is yet come, almost all of the opportunities remain unexplored, the disruption of OurCrowd and others will be multiplied a thousand times.
One of the most influential essays of American history was Frederick Jackson Turner’s The Closing of the American Frontier, written in 1893, shortly after the Western frontier was declared closed by the U.S. census. Turner argued persuasively that the idea of a frontier had been central to the American national identify up until that time, and speculated how the national identify might change with the end of the idea.
In Crowdfunding, we are nowhere near the closing of the frontier.
Questions? Let me know.