Alternative Financing Market Size, Share & Trends Analysis Report By Type (Crowdinvesting, Crowdfunding), By Region, And Segment Forecasts, 2022 - 2028

Report Overview

The global alternative financing market size was valued at USD 6.62 billion in 2021 and is anticipated to increase at a CAGR of 6.3% from 2022 to 2028. Easy access to capital in comparison with traditional funding is the key driver for the market. Moreover, increasing acceptance of alternative finance instruments, the convenience of the financing services, and the cost saved by the consumers are driving the market. The COVID-19 outbreak positively impacted the market. All over the world, small businesses have been hit very hard by the influence of the COVID-19 pandemic. To overcome this crisis, businesspersons and investors shifted to alternative financing to pursue funding and to invest, correspondingly, while staying safe from the COVID-19.

Alternative financing refers to financial products and services that are mainly developed outside of the traditional, controlled banking and capital market sectors often accessible to customers using digital platforms, instruments, and systems. The market segment basically relates to online financial services for business customers. Globally, alternative financing activities have observed a largely mounting trajectory over the years, with China leading the global alternative finance market.

Alternative finance has made raising funds a lot easier as well as less time-consuming. For smaller businesses and startups looking to expand, alternative finance providers are often well aligned to their requirements not only because they can provide less strict measures than traditional lenders such as banks, but also because they can be more flexible and responsive while providing superior customer service.

Alternative financing is rapidly becoming a more promising financing choice for businesses of all kinds. Some fresher forms of alternative finance are largely established outside the U.S., mainly in the UK and Australia. Community shares, in use in the U.K., have been defined as “a way for co-operatives as well as community benefit societies to increase capital from individuals, who in return obtain a direct equity stake in the company.” China, U.K., and the U.S. continuously have the major online alternative finance markets for businesses. In terms of individual markets, China still had a large alternative finance volume by nation followed by the U.S. and UK derived in second and third correspondingly.

The COVID-19 pandemic had a positive effect on the market. With COVID-19 effects felt all over the world, businesses all over have required help in debt relief and financial support. During the COVID-19 pandemic, alternative financing has been mostly used by small businesses and startups to increase capital for their creative projects as well as businesses. China is extrapolated due to a restriction on lending by non-banks by specialists in recent years. SME-focused P2P marketplace and balance sheet lenders stated the maximum development in terms of institutional funding volumes. According to Enventys Partners data, the number of Kickstarter campaigns from January 2020 to April 2020 observed an increase of 8.93% over the last year in spite of the COVID-19 pandemic. 

Type Insights

The crowdinvesting segment dominated the market and contributed a revenue share of around 85% in 2021 and is forecasted expand at a CAGR of 6.3% from 2022 to 2028. Crowdinvesting has been developed as a useful platform for small businesses as well as start-ups that may find it difficult to increase early seed funding, as most of the entrepreneurs are financed by a mix of credit cards, individual savings, and a local network of friends and family. Moreover, angel and venture capital investors are largely making use of the opportunities provided by equity crowdfunding platforms. Therefore, crowdinvesting platforms’ use is large and contributed more to the alternative financing market revenue.

The crowdfunding segment is expected to witness the highest CAGR of 6.7% from 2022 to 2028. Crowdfunding has developed mostly in popularity over the last few years and is a feasible choice to consider for small businesses along with startups. Though crowdfunding is often associated with raising funds for startups, months of lockdowns as well as restrictions, have resulted in various small businesses looking for crowdfunding as a way to get back to normal operations. As per a recent report on Startups.com, around 50% of crowdfunded campaigns were operative and over 75% of projects exceed their target goal. Thus, the demand for crowdfunding is continuously increasing at a rapid pace and is expected to expand at the fastest CAGR during the forecast period.

Regional Insights

North America is forecast to register the highest CAGR of 7.1% from 2022 to 2028. Alternative financing in North America has moved to the mainstream, inviting rising numbers of customers, start-ups, recognized small businesses, as well as institutional investors. The U.S. is the leading country in the number of startups as compared to the world. According to Startup Ranking, the number of startups in the U.S. and Canada is 70,339 and 3,194 respectively. Thus, there will be a large opportunity for alternative financing in North America. Therefore, the region is expected to witness the fastest CAGR during the forecast period.

As per the regional analysis, Asia Pacific accounted for a major market revenue share of over 80% in 2021. Alternative financing activities in the Asia Pacific are directly linking investors to consumers and small business borrowers, collecting venture funds for start-ups, and financing creative businesses. Innovation is a key driving force for the alternative finance market growth across the region, with companies making changes to their business models and the products on offer. In China, alternative financing acts as a source of finance that has been developed rapidly and evolved with incredible speed. Thus, the demand for alternative financing is high and contributes to more revenue generation in the Asia Pacific.

Key Companies & Market Share Insights

The market is characterized by the existence of established as well as new companies. Most of the corporations working in the market have implemented several strategies that include the launch of products, R&D, collaborations, mergers & acquisitions, partnerships, and joint ventures to strengthen their place in the global market. In January 2022, GoFundMe Inc. announced that it has engaged in a definitive agreement to acquire Classily. This acquisition will make a global leader in present giving through B2C and B2B, accelerating development and forming new opportunities to reach a large number of people and organizations all over the world. In October 2020, Crowdcube Capital Ltd. and Seedrs Ltd. agreed to merge, creating a significant private equity marketplace. That has permitted numerous start-ups to raise capital without having to tap venture capital or angel investors directly. Some of the prominent players in the alternative financing market include:

• GoFundMe, Inc.

• Patreon, Inc.

• Thunder Fund

• Indiegogo, Inc.

• Kickstarter, PBC

• Wefunder Inc.

• StartEngine Crowdfunding, Inc.

• CAMPFIRE, Inc.

• Crowdcube Capital Ltd

• FundedByMe AB

Alternative Financing Market Report Scope

Segments Covered in the Report

This report forecasts revenue growth at global, regional, and country levels and provides an analysis of the latest industry trends in each of the sub-segments from 2017 to 2028. For the purpose of this study, Grand View Research has segmented the global alternative financing market report based on type, and region:

• Type Outlook (Revenue, USD Million, 2017 - 2028)

  • Crowdinvesting

  • Crowdfunding

• Regional Outlook (Revenue, USD Million, 2017 - 2028)

  • North America

    • U.S.

    • Canada

  • Europe

    • UK

    • Germany

    • France

  • Asia Pacific

    • China

    • India

    • Japan

  • Central & South America

    • Brazil

    • Argentina

  • Middle East & Africa

    • Saudi Arabia

    • South Africa