Crowdfunding is the practice of raising monetary contributions from a large number of people, typically online, to fund a project or venture. In the past 10 years, crowdfunding has evolved into a $16 billion market, largely concentrated in North America and Europe.
In developing countries, the crowdfunding market is expected to reach $327 million this year—about 2 percent of the global total. Despite this slow adoption, crowdfunding has been heralded as an opportunity to expand access to capital for entrepreneurs.
To better understand the challenges of crowdfunding in emerging markets, the World Bank Group conducted interviews with a number of East African technology entrepreneurs who ran crowdfunding campaigns, both successful and unsuccessful. From the interviews emerged six lessons about when, why, and how to launch crowdfunding campaigns:
- Crowdfunding is more difficult than most entrepreneurs anticipate and is not for everyone.
- Business needs should dictate platform choice.
- Payment systems impact platform choice.
- Quality and quantity of contributor networks are key.
- Entrepreneurs should tap into complementary resources and organizations to increase their likelihood of success.
- Crowdfunding can have non-monetary benefits.
The report was written by Sam Raymond. It was made possible through the support of the UK’s Department for International Development (DFID), Australia’s Department of Foreign Affairs and Trade (Australian Aid), Denmark’s Ministry of Foreign Affairs (DANIDA), Norway’s Ministry of Foreign Affairs, and the Netherlands’ Ministry of Foreign Affairs.