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The big business of crowdfunding

1:22am IST - 02:09

Entrepreneurs use crowdfunding to bypass venture capitalists and angel investors to raise money for new ideas and businesses. Shartia Brantley reports.

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Dave Weiner wanted to turn his passion for bikes into something he could do for a living. But needed the cash to do it, so he tried crowdfunding. His company, "Priority Bicycles," which makes and sells bikes, not only raised $600,000 for production, it also received plenty of feedback. (SOUNDBITE) DAVE WEINER, OWNER, PRIORITY BICYCLES (ENGLISH) SAYING: "I thought we had a good idea. My team thought we had a good idea. But did we? Did the community at large think we had a good idea? So, Kickstarter was really a way for us to test the market and see, do people want our bike?" Any entrepreneur with an idea - from food to product design to technology - can open a fundraising campaign on sites like GoFundMe, Indiegogo or Kickstarter, and see if the public supports it by pledging money. Kickstarter's Julie Wood. (SOUNDBITE) JULIE WOOD, SPOKESPERSON, KICKSTARTER (ENGLISH) SAYING: "You set your own goal and you set a deadline. Usually, it's about 30 days, and you have until that deadline to reach your goal. So, we use all or nothing funding model. So, if you don't hit your goal in the time allotted, then no money changes hands." According to research firm Massolution, in 2014, crowdfunding volume reached $16.2 billion, reflecting an annual growth rate of 167 percent. And it has a potential to hit $300 billion in the next five years, says Anindya Ghose of the NYU Stern School of Business. (SOUNDBITE) ANINDYA GHOSE, PROFESSOR OF IT & MARKETING, DIRECTOR OF CENTER FOR BUSINESS ANALYTICS, NYU STERN SCHOOL OF BUSINESS (ENGLISH) SAYING: "This is a fundamental shift in how companies and entrepreneurs operate. This is going to affect the venture capital industry, already is affecting in some way. It's gonna affect how people who want to raise money, think about ways of raising money. This is a very powerful means of, you know, potential investors and entrepreneurs coming together, bypassing the angel investors and the venture capitalists." And it is working for the big guys as well. The Smithsonian just raised $700,000 to restore Neil Armstrong's spacesuit. And companies like CocaCola, Nike and Chrysler, are using the platforms for branding and customer feedback.

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The big business of crowdfunding

1:22am IST - 02:09