Numbers on crowdfunding are linked to alternative finance and are huge ($25 Bil and growing fast) however when focusing on equity investment via crowdfunding in startups USA would still be around $2 Billion. This is because landing (P2P), real estate, donations are still the largest part of the cake.
The corporate financing market (equity of loans) is therefore in its infancy. It has a defined high growth direction but has yet to fulfill all its real potential. In front we have a time horizon of ten years in which new and unimaginable opportunities will open up thanks to technology and regulatory interventions. In this context, portals that are already present in the market will have a one-time chance to consolidate while catching opportunities and rocket speed growth for those who will be able to best combine telematic tools and users experience both at the national and multinational level! Moreover the EU market will be opening up to a unique sollicitation marketplace in 2021/2022. This is an opportunity.
A crowd investing platform is no longer a high-risk investment class but an execution project that requires working with the correct financial and human critical masses. In these first 6 years, in Italy alone equity crowdfunding has been used by around 460 companies and around 10-11 thousand investors (including many “family & friends”). The data is growing but still far from having expressed all its potential. Italian commercial banks are getting involved and investing in the platforms.
Changes will be incremental as the 1st wave of crowdfunding was born to help product pre-sell and were very consumer-based, easier to understand; now these platforms are evolving in a surge of equity based crowdfunding platforms composed of two different “crowds”: the accredited & the ones that have to be accredited by the platform. In some countries like Israel this is becoming an alternative way to finance seed and some round A for hi-tech in others also bricks and mortar business get financed. The average fundraise is still small but regulation is opening up. USA up to $50 Mil in EU up to €8 Mil. The attached crowdfunding investor matrix helps understand where the business is and where it is happening:
- on the horizontal axis the type of investment (equity vs lending) and
- on the vertical the type of company (startups & innovative) vs SME and public projects.
All reports predict a great potential for this market; to find the right entry point crowdfunders will need to ask: “how can we enhance financing transactions while avoiding the traditional IB channels?”
To answer, crowdfunders will have to learn how to surf a “maverick” … and we do have some technology and some marketing ideas to help. 🙂