Is philanthropic crowdfunding a growing industry?

 

Claire van Teunenbroek

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What are the characteristics and recent developments of crowdfunding worldwide?

Crowdfunding markets have experienced a severe growth in recent years; however, this was mostly among non-philanthropic platforms (Chervyakov & Rocholl, 2019). Philanthropic crowdfunding builds on a large group of (private) individuals each donating a small amount online. In exchange for their donation, donors can receive a reward (i.e. reward-based crowdfunding) or they can also opt to donate without receiving a reward, i.e. donation-based crowdfunding. Reward- and donation-based crowdfunding are also referred to as philanthropic crowdfunding (van Teunenbroek, 2016). The two other types of crowdfunding, equity- and lending-based, focus on crowdfunding projects with a financial incentive where backers expect an economic return (see Figure 2). Unless noted otherwise, we will further focus on philanthropic crowdfunding.

Figure 2. Simplified overview of the four crowdfunding types.

Figure 2. Simplified overview of the four crowdfunding types.

 

Worldwide, philanthropic crowdfunding fulfills a small role, since only 15 per cent of the total amount raised through crowdfunding is raised through philanthropic crowdfunding (The Startups Team, 2018). The global crowdfunding activity mostly exists out of platforms from the United States, Asia, and Europe (Chervyakov & Rocholl, 2019).

The US, has the largest percentage of philanthropic crowdfunding projects: about 18 per cent of the country’s total amount raised through crowdfunding comes from philanthropic crowdfunding (Chervyakov & Rocholl, 2019). One of the world’s largest platforms, Kickstarter, might be one of the most popular but not per se the most successful platform. Between 2014 and 2018 about two-third of the projects failed to assemble the target amount (The Crowdfunding Center, 2018). In 2018, Kickstarter experienced a record-breaking year for funding games, reporting an 18 per cent increase compared to the earlier year (Kickstarter, 2019).

China focusses mostly on reward-based crowdfunding (Huang, Chiu, Mo & Marjerison, 2018). The Chinese sector runs their own crowdfunding platforms with great success (Chen, 2016). Most of the reward-based platforms are closely branded with e-commerce and large Chinese technology firms where products and services are delivered in return for funding contributions (i.e. reward) (Huang et al., 2018). Most of the donation-based projects are put forward by non-profit organizations or non-governmental organizations (NGOs).

In Europe, compared to the US and Asia, philanthropic crowdfunding makes up for the smallest percentage (<10 per cent) of the total crowdfunding market (Chervyakov & Rocholl, 2019). The nominal growth has fallen back to the 2013 level (Chervyakov & Rocholl, 2019). Today, the largest crowdfunding markets in Europe are the UK, France, Germany, and the Netherlands.

The UK fulfills a big role in the European crowdfunding landscape in terms of market volume per capita, preferring donation- over reward-based funding. The UK witnessed a strong increase in the number of platforms between 2012 and 2014; however, since 2015 the popularity is decreasing (Bone & Baeck, 2017). Despite the decrease in the number of platforms, the donation amount raised continued to grow. This suggests that several platforms have become more successful at attracting donors, at the cost of other platforms.

French crowdfunding market decreased with 2 per cent in the past year, collecting a total of 81.5 million euros (FPF & KPMG, 2019). The French show a strong preference for reward-based crowdfunding over donation-based crowdfunding: 84 per cent of the total philanthropic amount raised through crowdfunding comes from reward-based crowdfunding projects. France is home to the two largest European reward-based platforms: Ulule (raising €109 million before 2019) and KissKissBankBank (raising €83 million before 2019) (Toris, 2018), both supporting a fast number of categories

Germany accounts for the largest donation-based crowdfunding percentage in the whole of Europe, but their focus is on financial crowdfunding (i.e. equity- or lending-based). German crowdfunding platforms experience a strong competition from the US. For instance, one of the most popular platforms among the Germans is the US based platform Patreon (Gründung, 2019).

Dutch platforms are among one of the few European platforms witnessing an increasing popularity. The Netherlands counts a fast-growing number of platforms, covering a wide variety of categories (from funding for the arts to science and international projects). Compared to the year before, the total amount raised through crowdfunding grew with about 16 per cent in 2018 (CrowdfundingCijfers, 2019).

In sum, crowdfunding is not yet a growing industry in every region, with decreasing market-values among European-based platforms.

Claire van Teunenbroek, Center for Philanthropic Studies, Vrije Universiteit Amsterdam

This blog post is an abridged version of a longer article which can be viewed here.


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