Crowdfunding is the practice of raising funds for various types of endeavours, such as product ideas, businesses, or activities. Although it sounds modern, this practice has actually been around for centuries. The history of crowdfunding can be traced back to the past, when individuals or groups sought financial support from the community to realise their projects or ideas. This article discusses the history of crowdfunding in 2 parts: the first part discusses the history of crowdfunding from its inception to the 19th century, and the second part discusses the history of modern crowdfunding.
History of Crowdfunding from the 20th Century to Now
The pioneering spirit of online crowdfunding emerged in 1997 when British rock band Marillion successfully funded their reunion tour through digital donations. This initiative became a milestone in the crowdfunding system, especially among musicians. Fans of the band Marillion donated money via the internet, enabling the band to continue their tour without the support of a major record label. This success demonstrated the potential of crowdfunding as an effective tool for funding creative projects.
The next major step in the history of crowdfunding occurred in 2001 when music producer Brian Camelio created “ArtistShare.” This platform allowed musicians to raise money to fund creative projects. This platform allowed musicians to crowdfund directly from their fans to fund the production of an album, tour, or other projects. ArtistShare became an early example of an internet-based crowdfunding platform that specifically supported artists.
In 2005, the first crowdlending platform, “Zopa,” was launched in London. Zopa was founded by a team with experience in finance and internet banking services. Zopa introduced a peer-to-peer lending system, where individuals could lend money directly to others without going through traditional financial institutions. This model provided a new alternative for people seeking loans, with a faster process and lower interest rates.
In 2006, author Michael Sullivan searched for a short name for this collective fundraising system and eventually coined the term crowdfunding. Crowdfunding quickly became popular as a method of raising funds for different types of projects, from small businesses to independent art and film projects. The early success of platforms like ArtistShare and Zopa fuelled the rise of many other crowdfunding platforms around the world.
In 2007, the Australian Small Scale Offering Board (ASSOB) became the first equity-based crowdfunding platform. Equity crowdfunding allows raising funds from different investors and placing them in small businesses. In return, the business offers a shareholding in their company. This model provides an opportunity for small investors to invest directly in companies that are not ready for the actual stock market.
In the United States, the practice of equity crowdfunding was initially illegal, but in 2012, President Obama signed the Jumpstart Our Business Startups (JOBS) Act, also known as “the crowdfunding bill”. The act aimed to reduce the regulatory burden on small businesses and legalise equity crowdfunding. This paved the way for the growth of crowdfunding platforms in the US, allowing small businesses and startups to gain access to capital in an easier and faster way.
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The History of Crowdfunding in Indonesia
In Indonesia, crowdfunding systems started to make inroads in 2012, especially in the non-profit social fields, such as health, education, environment, and culture. Platforms such as Kitabisa.com became popular as a tool to raise funds for social projects. Seeing the potential of crowdfunding in supporting small and medium enterprises (SMEs), the Financial Services Authority (OJK) then issued a regulation in 2018 that became the basis for equity crowdfunding in Indonesia. This regulation is OJK Regulation Number 37/POJK.04/2018 concerning Crowdfunding Services through Equity Offerings, which was later amended by OJK Regulation Number 57/POJK.04/2020 concerning Securities Offerings through Information Technology-Based Crowdfunding Services.
The changes in 2020 introduced the securities crowdfunding system, which is an updated form of equity crowdfunding to make it easier for SMEs whose business entities still find it difficult to meet the criteria for capital market funding. Based on this regulation, the Indonesian Crowdfunding Services Association (ALUDI) was formed in July 2020, which then received recognition from OJK in November 2020. ALUDI has the function of providing recommendations to organisers regarding the implementation of crowdfunding services in Indonesia and organising education related to the crowdfunding sector in Indonesia. In this case, ALUDI is also tasked with educating and disciplining matters that have the potential to violate market conduct in order to protect the interests of investors.
Through these developments, crowdfunding has become an important tool in supporting various projects and ventures, both locally and globally. With clear regulations and support from various parties, crowdfunding continues to grow as an effective and efficient fundraising method. The success of crowdfunding in various sectors shows that this method is not only able to overcome financial barriers, but also empowers communities to actively participate in realising innovative ideas.
Also Read: History of Crowdfunding from the Beginning to the 19th Century
The Expectation of Crowdfunding in the Future
In the future, crowdfunding is expected to continue to grow along with technological advancements and changes in community needs. Crowdfunding platforms will become more sophisticated, offering various features that make fundraising easier and increase transparency. In addition, more people will recognise and understand the potential of crowdfunding, resulting in increased participation in various projects.
However, along with its growth, new challenges and risks will also emerge. Strict regulations and effective supervision will be essential to ensure safety and trust in the crowdfunding system. Education for the public on how to participate in crowdfunding wisely is also an important key in preventing fraud and losses.
With a strong foundation and growing support, crowdfunding has great potential to continue to be a positive force in the financial world. Whether it’s supporting innovation, helping small businesses, or raising funds for social causes, crowdfunding will continue to play an important role in supporting initiatives around the world. The future of crowdfunding is bright, with many new opportunities and possibilities waiting to be explored.
Wallahu a’lam
Also Read: Islamic Crowdfunding-Based Agrarian Financing: Concept, Akad, and Benefits
References:
Otoritas Jasa Keuangan. (2018). Peraturan OJK Nomor 37 /POJK.04/2018 tentang Layanan Urun Dana Melalui Penawaran Saham (Equity Crowdfunding).
Otoritas Jasa Keuangan. (2020). Peraturan OJK Nomor 57 /POJK.04/2020 tentang Penawaran Efek Melalui Layanan Urun Dana Berbasis Teknologi Informasi.
“Securities Crowdfunding Resmi Diluncurkan, Apa Itu?” Kompas.com, 4 Januari 2021, link
“History of Crowdfunding.” SmallBrooks.com, link
“History of Crowdfunding.” Fundable.com, link
Wirawan, C. B. (2023). Sejarah Perkembangan Crowdfunding. Unpublished manuscript.
