New laws come into force next month which will place limits on the amount of money people can invest through online crowdfunding platforms
Germany is to introduce greater protection for small investors, in a move intended to shore up trust in online equity crowdfunding.
From next month, many people in Germany will only be able to invest €1,000 in crowdfunded projects, with amounts above this threshold permitted only if investors have liquid assets of at least €100,000.
In Germany there are approximately 80 crowdfunding platforms where tech start-ups can post business pitches. Members of the public can buy stakes in these fledgling companies online, through portals like Seedmatch, Companisto, and Innovestment, in deals that carry high risks and high expected failure rates.
Because the concept is so new, lawmakers are playing catch-up in a scene rife with complaints alleging poor investor protection.
“I think the limit of €1,000 per investor is a good thing in the short-term until confidence in crowdfunding increases and then the amounts will too. This is the trend in other countries such as France,” Mellett said.
Crowdfunding rules vary greatly between European countries. Italy was an early mover and opted for a tightly regulated market. In other countries, like the Netherlands and the UK, laws on equity crowdfunding are more relaxed.