On the Possibility of Crowdfunding in Europe

europeflagCrowdfundbeat.de ECN, 07.02.2014 - We, the European crowdfunding industry as represented by the European Crowdfunding Network, wish to comment on the current debate on regulation in our role as the trade association of the European crowdfunding platforms. In particular, we seek to expound the perspective of the crowdfunding platforms in order to increase the practical relevance of the discussion. Moreover, we want to lay down the prerequisites without which crowdfunding cannot function in Europe.

This paper is a reminder of key practical aspects, in order to help the European Commission consider any regarding crowdfunding in Europe.

In particular, our wish is to supplement the current debate with practical experience. The European Crowdfunding Network has been vital to launch the political discussion on crowdfunding with the European Commission. As a open collaborator to public organisations we have provided detailed insights and research to the European Commission and many other European and national administrations since 2012. In order to create a positive discourse on the potential of crowdfunding and the necessary steps to ensure its potential in job creation, competitiveness and innovation, which are used to its full extend within and for the benefit of the European Union.

Crowdfunding is a Bridge to Traditional Sources of Financing

According to statistics, some 30% of Europes 23 million SMEs face liquidity problems and only 30% of SMEs access bank credit at any given time. The availability of bank loans for SMEs has declined by 23% over recent years, while collateral requirements have increased by 34% and interest rates by 54%. Traditional methods of financing such as bank loans are often not available, factoring and other forms of finance do not focus on the majority of SMEs. And public funding is rarely a viable option either.

There is less and less capital available to SMEs and start-ups in particular in any business sector. Private investors in general do not fund non-profit initiatives and the lack of social venture capital and philanthropic funds in Europe is pronounced. Banks will not lend without revenue, assets and customers. The shrinking professional venture capital industry, which focuses nearly only on start-ups with established operations, and the difficulties of growing the business angel community to scale, many only act locally without sufficient capital to provide follow-up investments, call for urgent alternatives. In general, venture capital and business angels only invest in less than 0.1% of all SMEs. Alternatives are necessary, especially in times of decreasing national budgets.

Prerequisites for Crowdfunding

  1. The Process Involving the Investors Must Be Handled Fast and Easy: Online.
  2. The Cost Structure of Crowdfunding Campaigns Must Remain Lean.
  3. Participation Must Also Be Possible with Small Amounts of Money.
  4. Crowdfunding Must Not Be Limited to Qualified Investors.
  5. The Amount of Capital Raised Must Not Be Limited

About the European Crowdfunding Network

The European Crowdfunding Network AISBL (ECN) is a professional network promoting adequate transparency, (self) regulation and governance while offering a combined voice in policy discussion and public opinion building. Founded in 2011 as an interest group, we formally incorporated as an international not-for-profit organization in Brussels, Belgium in 2013.

The ECN currently consists of 24 full members from 9 European countries and more than 1200 associate members and supporters from across the Union. Each full member is among the leading crowdfunding platforms in their domestic markets. There is a very broad spectrum of crowdfunding platforms represented in the ECN, notably various types of crowdfunding platforms, such as reward based platforms, equity based platforms, lending platforms, donation platforms etc.

We support our members in carrying initiatives aimed at innovating, representing, promoting and protecting the European crowdfunding industry. We aim to increase the understanding of the key roles that crowdfunding can play in supporting entrepreneurship of all types and its role in funding the creation and protection of jobs, the enrichment of European society, culture and economy, and the protection of our environment.

In that capacity, we help developing professional standards, providing industry research as well as professional networking opportunities in order to facilitate interaction between our members and key industry participants. On behalf of our members, the ECN will maintain a dialogue with public institutions and stakeholders as well as the media at European, international and national levels.

Complete Statement of the European Crowdfunding Network

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