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The Real Power of Crowdfunding

Updated: Oct 8, 2021

In 2013, Glenn O’Neill created a GoFundMe for his daughter, Eliza, out of pure desperation. Eliza had been diagnosed with Sanfilippo Syndrome; a disease often referred to as “childhood Alzheimer's”. Not sure where they would get the money they needed for treatment, Glenn turned to the internet. He hoped that the masses of people connected online would be able to unite, chip in, and help. They did. After telling their story to the world, Glenn and his wife raised over $2 million for their daughter’s treatment, with over 37,000 people contributing. Family, friends, friends of friends, and strangers came together, pooled their money, and provided hope for a family in need.

You might be familiar with similar stories or experiences. This phenomenon is called crowdfunding. Maybe you’ve known someone with a similar experience raising money, or maybe you’ve donated via crowdfunding platforms like Kickstarter and Indiegogo to help get a new product or business concept off the ground that you believed in.

Crowdfunding is a powerful tool that empowers the “crowd” to come together and invest, often in small increments in order to witness something exciting come to fruition. From donations that make miracles happen to creative ideas that might be too innovative for traditional lenders to support, crowdfunding has no doubt been a catalyst for uniting individuals in financing a shared cause.

Many experts believe that crowdfunding has the potential to upend the lending industry over the next two decades, prying loose the fingers of traditional banks and credit unions who have controlled the flow of money for far too long. In simple terms, crowdfunding cuts out the middlemen and allows the internet to do what the internet does best, connect people and create innovative opportunities for the “average Joe”. It has the potential to do to the traditional lenders what Airbnb did to the hospitality industry, Uber did to the transportation industry, and Robinhood did to Wall Street.

With crowdfunding, savvy entrepreneurs have access to capital like never before, tapping into a vast network of people and providing them the opportunity to witness innovation come to life.

However, crowdfunding doesn’t just have to be donation or support-based. Instead, it can be the chance to receive a return on an investment. For example, I think of the countless board games that I’ve seen funded online promising a free t-shirt and the first iteration of the game once it comes to market. Rather, crowdfunding has the potential to provide you with a financial return when you invest in projects and businesses that appeal to you.

In 2012, the JOBS Act opened the door for what could become the greatest threat to the lending industry. It made it possible for entrepreneurs to offer investment opportunities to everyday people seeking to earn a return on their crowdfunding investments. What was intended to empower business owners to find alternate sources of raising capital for business startups was quickly identified as a powerful new solution for people to invest in real estate projects without being experts in the field.

The possibilities of what could happen with real estate crowdfunding are limitless. It is conceivable that in the near future, a young couple buying their first home who doesn’t fit all the strict criteria of banks would have an opportunity to turn to a crowd of investors to finance their first home. In addition, a real estate developer revitalizing historic buildings in an urban center could invite others to profit from the efforts to see a once-thriving community come back to life. Also, one doesn’t have to stretch too far to realize that real estate entrepreneurs seeking capital for their next home project could invite local investors to earn extra income by fueling revitalization efforts in rural communities.

It is clear that crowdfunding has incredible potential for entrepreneurs and investors alike. The question that remains for each of us is if we will take advantage of this emerging technology and watch it blossom into something that redefines traditional lending, or if we will miss out on this innovative opportunity. The power of crowdfunding not only has the ability to completely change how real estate business is conducted, but it also allows the average person to step into real estate without having to get their hands dirty.

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