‘Crowdfunding’
entered the Oxford English Dictionary in 2011, and is defined therein as, “the practice of funding a project
or venture by raising money from a large number of people who each contribute a
relatively small amount, typically via the internet.” Essentially, with a new business or project idea, one can
seek to raise funds from friends, family and the general public online, instead
of going to banks or the ‘Dragons’ Den’.
The global Crowdfunding industry
is growing exponentially, having raised an estimated $6.1 billion in 2013,
$16.2 billion in 2014, and more than doubling again to $34.4 billion in 2015.[1]
The World Bank forecasts that it will be worth $93 billion by 2025 – perhaps a
conservative estimate considering recent growth – as it is set to top the
venture capital market ($45 billion) in the near future.[2]
Figure 1 shows the recent growth, alongside a growth curve to the World Bank’s
2025 estimate based on compound annual growth rate (CAGR, dotted green) and what is a
more likely convex curve following recent growth (dotted black).
 |
| Figure 1 |
Kickstarter is among the market leaders
in Crowdfunding, with their latest statistics showing that they have had nearly
$2.4 billion pledged, across 105,871 successful projects funded by 10.9 million
backers, including 3.4 million repeat backers.[3]
Kickstarter is a reward-based Crowdfunding platform, focusing on creative
projects, which provides important context for what follows. In the UK, both
Crowdfunder (reward-based) and Crowdcube (equity-based) are big players, both
with a wider variety of project types and larger funding goals.[4]
When initiating a project on
Kickstarter, a funding goal is stated and the project is only successful if
that goal is met. Globally, they have a project funding success rate of 35.98%. This analysis takes the liberty
of reviewing project data by location to shed some light on the nature of this
entrepreneurial pursuit here in Shropshire, as one tentative indication of
entrepreneurialism, benchmarking it against that global average and surrounding
counties.
Figure 2
below, ranking counties by success rates on Kickstarter, shows that Shropshire
does not perform well overall. With a success rate of just 23.47% - based on only 101 projects[5] –
it is ahead of only Herefordshire and Cheshire (marginally), and trails direct
neighbour Staffordshire. Gloucestershire is the foremost of the nearby
counties, with a success rate of 38.95%, and along with Cambridgeshire and
Oxfordshire – added as benchmarks on the assumption that they would be highly
enterprising – the only counties ahead of the global Kickstarter average.
 |
| Figure 2 |
That
ranking has seen some notable risers and fallers over the last year – when I
first extracted this data – as shown in Figure 3. Shropshire has actually risen
one place in the table, despite a falling success rate, because of the notable
collapse in Cheshire’s success rate. Derbyshire has done the opposite, as the
fastest riser, while Staffordshire, Warwickshire and Lancashire all made gains.
Significantly, at the top, Gloucestershire has emphatically surpassed
Worcestershire, which previously held the number one spot.
 |
| Figure 3 |
A fuller
picture is presented along three variables in Figure 4, showing the total
number of projects initiated in these counties (represented by the size of the
bubble), alongside the success rate (y axis) and, importantly, the number of
projects adjusted for the size of the population (x axis). Now we see that Shropshire,
and Herefordshire, actually do very well in terms of the number of projects
initiated on Kickstarter considering the size of their populations – indeed, as
shown by its position along the x axis, Shropshire is third on that measure.
 |
| Figure 4 |
Next, Figure
5 shows the outcomes of projects in these counties in more detail. There is an
interesting dynamic here with regards negative outcomes on projects, whereby
they have either been unsuccessful, in that they did not achieve the funding
target, or they have been cancelled by the originator of the project. Shropshire’s
low success rate comprises a greater proportion of cancelled projects (16.3%)
than all areas except Derbyshire (21.3%) and Wales (17.4%). This is especially
so in Telford, where over one third of the projects initiated have been
cancelled, rather than unsuccessful.
 |
| Figure 5 |
Industry
Sectors
Kickstarter
is focused on the creative industries, with the highest numbers of projects
being in music, computer games, books and films; and this is so both globally,
and in Shropshire. Figure 6 below shows the proportion of projects by sector,
showing that most in Shropshire are in Music, Games, Film, and Publishing; with
Music, Games and Comics being the areas where Shropshire has a notably greater
proportion than the overall Kickstarter portfolio.
On the
face of it, this does little to explain the low success rates in Shropshire;
actually, the areas where Shropshire has a higher proportion of projects –
especially Music and Comics – are some of those with higher overall success
rates. What is more likely as an explanation is that creative projects do not
have as much success in Shropshire, because its creative industries are not as
well developed as in other places: 5.8% of UK employment is in the creative
industries, against only 4.6% in Shropshire.[6]
 |
| Figure 6 |
On the other hand, the Food industry is underrepresented in Shropshire's Kickstarter portfolio, despite agriculture and food manufacturing being notable local industries. This article from The Guardian Small Business - as well as providing a good overall viewpoint - talks about the success of the food & drink industry in Crowdfunding.
Summary
So, taken
in the round, what does this tell us as Salopians with an interest in the
county’s entrepreneurialism? First, caveats: clearly this is just a snapshot of
one Crowdfunding platform, crudely used to take the temperature of Shropshire’s
entrepreneurialism; and, furthermore, it is one heavily skewed towards creative
projects, not necessarily robust, profit-making business ideas – the kinds of
things that would usually attract venture capital. However, within this sphere,
it seems as though those with ideas in Shropshire face challenges, and this may or
may not be indicative of wider problems.
Taking
the data on face value by looking at the total number of projects, then
Shropshire is a small market, with only a shade over 100 projects ever launched
on Kickstarter. However, when considered per capita, Shropshire is actually highly entrepreneurial, with more ideas per
head than the vast majority of other counties considered in this analysis. So,
Shropshire does not have a dearth of ideas, but its problem is that these ideas
do not receive funding to the same extent that others do on Kickstarter, with
poor success rates.
Hence,
the ideas are either not of sufficient quality, are not well marketed, or
investors don’t have the appetite to fund them. A high proportion of the
projects are also cancelled, and this could occur for a number of similar
reasons: the initiator may realise that they are not going to achieve the
funding target, they may have received funding from another source, or they may
not be going ahead with the project at all.
Lessons
There is
definitely a burgeoning market out there for alternative sources of business or
project funding, with Crowdfunding growing in prominence. Shropshire needs to
make sure it is on this curve.
It may
well be the case that Shropshire does not do too well because the nature of the
projects on Kickstarter is removed from the nature of the local economy.
Telford provides a good example, where only one in ten Kickstarter projects has
been successful – Telford is known for its industrial base, and not for its
creative industries. But the county as a whole does have creative industries: Shropshire
County Council cites it as one of their five key sectors[7], organisations
such as Creative Shropshire exist, Shrewsbury is very artisan, TCAT educates
lots of people in the creative industries, and Telford & Wrekin Council has
won awards for creative Apprenticeships. These are all avenues for generating
creative project ideas and promoting them for funding, via platforms such as
Kickstarter.
On the
other side, perhaps prospective entrepreneurs in sectors more closely aligned
to the Shropshire economy could be using Kickstarter. Food is the notable
discrepancy in Figure 6, given Shropshire’s agricultural heritage and above
average levels of employment in Food Manufacturing. These projects may be more
likely to entice local investors, and there is one very good recent example of
a local confectioner, Champion Reeves, raising a large amount of money through
Crowdfunding (Crowdcube, in this case).[8]
Food is the sixth biggest sector on Kickstarter in terms of $ pledged (although
with a lower than average success rate), and there surely cannot be a dearth of
ideas in Shropshire, given that it is also home to one of the pre-eminent
universities in the Agri-Food chain in Harper Adams University.
As an
alternative source of funding, I don’t think that this can be encouraged
enough. And this is recognised locally: The Marches Local Enterprise
Partnership, for example, has intimated that it will take leadership on this
issue, proposing to, “use our website hub
to set up a Crowd Funding platform, a collective solution to loan funding in
which the Marches wishes to be a pioneer.”[9]
Timely, because Shropshire (and Herefordshire) need a Kickstart!
[2] http://fortune.com/2014/04/17/why-investors-are-pouring-millions-into-crowdfunding/
[3] https://www.kickstarter.com/help/stats
[4]
They are not considered in this analysis, because they either do not publish
information on failed projects or location data is not readily available. The
hypothesis here being that Shropshire performs less well on Kickstarter given
that it has a creative focus, and Shropshire does not have a large ‘creative’
sector.
[5] As
at May 2016
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