Crowdfunding disperses capital
Crowdfunding platforms, such as Kickstarter, have opened a funding spigot to startups in regions that have suffered from a venture capital drought, according to a new Berkeley study recently published in Science.
Historically, funding for innovation is concentrated in a small number of regions and is driven by venture capitalists. The study found that crowdfunding has expanded startup financing far beyond these traditional entrepreneurial bubbles.
“Most venture capital gets invested in Silicon Valley and Boston, and thus shortchanges the rest of the country for entrepreneurial financing,” says Lee Fleming, one of the study’s authors and faculty director of the Coleman Fung Institute for Engineering Leadership. “But crowdfunding has opened up funding to everyone else.”
For the study, researchers analyzed data from 2009 to 2015 on successful Kickstarter campaigns and venture capital investments, identifying 55,005 Kickstarter projects in categories similar to the industries in which venture capitalists invested, and 17,493 venture capital investments in industries engaged in activities similar to those of Kickstarter campaigns. The researchers then used this dataset to map Kickstarter projects and venture capital investments by county and year.
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