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The Next Frontier of Crowdfunding

AI, Transformative Sectors, and Tokenized Crowdfunding

Global Crowdfunding Trends 2023: From Pandemic Surge to Equity Revolution

2023 was year which experienced the momentous ascent of equity-based crowdfunding, a notable expansion beyond the conventional reward or donation models. The evolution allows individuals to invest in startups, securing shareholdings and democratising access to high-potential ventures that were once reserved exclusively for private equity and venture capitalists. Simultaneously, the crowdfunding market has witnessed a global surge since the COVID-19 pandemic of 2020, fostering cross-border investments and supporting projects internationally.

The industry’s favourable conditions have been underscored by its ability to democratise fundraising, offering entrepreneurs an alternative to traditional financial institutions. Technological advancements, including blockchain integration and smart contract capabilities, have also been key to enhancing transparency and security within the ecosystem.

As we look ahead to 2024, the crowdfunding market is poised for continued growth. Increased global awareness and understanding, coupled with evolving regulations, are expected to attract more investors. The sector boasts abundant opportunities for platforms and entrepreneurs alike to leverage the momentum, with potential innovations and integration into sectors like fintech and the sharing economy on the horizon.

AI’s Ascendancy in Crowdfunding: A Case Study and Sector Analysis

AI is expected to play a pivotal role in reshaping the crowdfunding paradigm in 2024.

Let’s consider Give.Asia, a crowdfunding platform based in Singapore, which has pioneered the use of AI to enhance efficiency and reduce the resource burden associated with content creation for fundraising campaigns. Their proprietary AI tool, named Sidekick, leverages open models, including OpenAI, to generate a variety of content, such as infographics, images, text, and short-form videos. The tool is tailored to portray compelling personal stories of campaign beneficiaries and is shared across social media channels like Instagram and Facebook.

Sidekick not only empowers users without specialised skills to create content but also significantly accelerates the content generation process. Tasks that once took days, such as producing Instagram-styled videos, can now be accomplished in mere minutes. Give.Asia’s use of AI is a testament to its potential in optimising the workflow of crowdfunding platforms, especially in regions where human talent costs are high. Given the importance of marketing and content creation in fundraising through crowdfunding, this case-study of the use of AI may prove to be an integral strategy for platforms worldwide moving forward.

In parallel to the functional use of AI, the equity crowdfunding space is witnessing a surge in AI-related startups, positioning AI as the number one industry in this sector. Consider, who are harnessing machine learning and data analytics to provide investors with comprehensive insights. Recent data from Hubtas reveals that AI boasts the highest number of startups launched in equity crowdfunding, surpassing sectors like alcoholic beverages, clean tech, and retail. The statistics paint a compelling picture of AI’s appeal to investors, showcasing an average valuation of $27.0 million, a high price-to-sales ratio, and remarkable revenue growth at 298.4%. This growth is attributed to the versatility of AI applications, ranging from automating business processes to predictive analytics, and much, much more.

Hence, in 2024, the integration of AI may not be just a technological trend; it’s a transformative force shaping the efficiency of platforms and driving innovation in fundraising strategies.

From Startups to Sectors: Crowdfunding’s Contribution to Transformative Industries

As crowdfunding gains prominence and captures some scale of investment that was once reserved for traditional venture capital, the focus is shifting towards industries poised for transformative breakthroughs. Beyond the realm of AI, crowdfunding platforms are increasingly becoming hubs for innovation in key sectors, with a spotlight on Cybersecurity, Robotics, Quantum Tech, Climate Tech, and Healthcare Innovation.

  • Cybersecurity: In response to the heightened digital threats accentuated by the pandemic-induced digital transformation, cybersecurity emerges as a pivotal area of interest for investors.
  • Robotics Automation: The landscape of labour shortages is propelling demand for robotics automation, particularly in warehouse and supply chain operations.
  • Quantum Tech: While still in its nascent stages, quantum computing is attracting substantial attention from venture capitalists. The potential for major leaps in processing power has implications for industries such as drug discovery, finance, and communications security.
  • Climate Tech: Venture investment in climate technology soared to unprecedented levels in 2021, and has risen even further since, driven by tightening regulations and growing environmental concerns.
  • Healthcare Innovation: Healthcare innovation remains a priority for private equity, with digital health startups alone receiving over $29 billion in global funding in 2021. Factors such as aging populations, pandemic-induced demand for telemedicine, and advances in genomic sequencing, diagnostics, and wearables contribute to the sustained interest.

MiCAR and Beyond: Exploring the Game-Changing Landscape of Tokenized Crowdfunding

Regardless of AI and these transformative sectors becoming exposed to crowdfunding, the most exciting and game-changing trend of 2024 which is set to reshape the landscape is none other than tokenized crowdfunding. This innovative approach, leveraging blockchain technology, introduces operational and regulatory nuances that distinguish it from traditional models.

Recently, the European Union (EU) has proactively addressed crowdfunding challenges with the European Crowdfunding Services Provider Regulation (ECSPR) and the Markets in Crypto Assets Regulation (MiCAR). These regulations, implemented in 2021 and 2023, respectively, create a regulatory framework that holds the potential for transformative developments in crowdfunding.

MiCAR, which is due to be fully implemented by December 2024, establishes the world’s first cross-jurisdictional regulatory framework for crypto-assets. Categorising digital assets as “financial instruments” or “crypto-assets,” it imposes specific regulatory requirements on crypto-asset service providers and issuers.

The concept of tokenized crowdfunding shifts the paradigm by offering digital tokens representing ownership, access, or rewards. This decentralisation, facilitated by Distributed Ledger Technology (DLT), enhances transferability, globalises the investor base, and promises faster settlement, lower costs, and increased transparency.

The benefits extend to liquidity, flexibility in token design through smart contracts, and fostering social and environmental impact. However, challenges, including compliance, taxation, and operational complexities, require careful consideration.

As tokenized crowdfunding gains traction, market participants, especially Crypto-Crowdfunding Platforms, must navigate the interplay of MiCAR and ECSPR. Compliance assessments, alignment with token substance, and adherence to evolving regulatory frameworks are pivotal for success in this transformative era.

While the industry anticipates further legislative developments, the potential for tokenized crowdfunding in 2024 hinges on addressing challenges and capitalising on regulatory advancements. Nonetheless, the prospects of tokenized crowdfunding are captivating.

Embracing the Future of Crowdfunding

The synergy of AI, transformative industry contributions, and the advent of tokenized crowdfunding positions the crowdfunding landscape at the forefront of financial evolution. As we embrace the future, careful consideration of challenges and regulatory advancements will be pivotal for unlocking the full potential of crowdfunding in the years to come.

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