For those less familiar with the sphere of alternative finance, 2017 has been a dynamic year, with governments, investors and financial institutions alike embracing the industry like never before. At present, we have FinTech unicorns such as TransferWise that subvert existing paradigms of finance, leading to price decreases, improved transparency and increased competition. Meanwhile, in Australia, the Australian National Bank has formed a partnership with equity crowdfunding platform OurCrowd (which has raised over $440 million to date). Similarly, in Europe, the European Securities and Markets Authority, in response to the European Commission’s consultation paper, has urged for EU-encompassing regulations and protections.
All this, within the first half of 2017!
Accordingly, Invesdor considered it worthwhile to examine three key trends in equity crowdfunding, as we see how the evolution of equity crowdfunding is more swift, complex and exciting than ever before.
1. Partnerships with traditional finance industry
By existing institutions from within the traditional finance industry, and by many equity crowdfunding platforms themselves, equity crowdfunding has been posited as the ‘disruptive’ or ‘destabilising’ alternative. 2017 has marked a shift in this narrative, thanks to the emergence of several collaborative efforts internationally between financial institutions and equity crowdfunding platforms that enhance the services offered to investors.
In the UK, Seedrs and NatWest have become partners, to provide access to capital to British SMEs. The NatWest CEO has stated that “sometimes traditional funding routes are not always the best option for hyper-growth startups”, and that the scheme was therefore “instrumental in offering funding solutions”. Similarly, Banco BNI Europa has joined Raize, of Portugal, through a €10 million boost targeted at increasing SME lending. Raize is the country’s largest peer to peer lender, projected to lend €15 million in 2017. Similarly, the aforementioned OurCrowd and NAB partnership, will according to Crowdfund Insider, “provide NAB clients with direct access to early stage investments listed on the OurCrowd site.” The joint interest of such ventures is the democratizing of finance, through enhanced exposure and increased involvement from a wide array of investors.
2. Evolution of Crowdfunding Platforms
Crowdfunding platforms too are implementing dynamic changes, expanding their services further. Seedrs has made a beta launch for a secondary trading platform for shares in crowdfunding businesses. Facebook has launched their own donations-based crowdunfding platform, creating an interesting hybrid between social media platforms and investment strategy that the industry as a whole will watch closely.
Similarly, NextGen has a tracking application following the progress of past and active offers under Title III Regulation Crowdfunding – educating both platforms and investors alike on the hurdles and probability of success. There is also a rewards platform that has emerged in the US, Women You Should Fund, highlighting female entrepreneurs and companies. This array of innovative platforms that seek to maximise the capabilities of crowdfunding and alternative finance is exciting.
3. Improved Government Support for Equity Crowdfunding platforms
In the UK, the Conservative Party manifesto pledged to enhance EIS and SEIS incentives for digital businesses, stating that, “When we leave the European Union, we will fund the British Business Bank with the repatriated funds from the European Investment Fund.” As the 3rd best country in the world for startups, the provision of tax relief through schemes such as these is considered very important.
Following the election of Emmanuel Macron in France, CEOs of various equity crowdfunding platforms spoke out about how his election signaled positive change for the industry – including Stéphanie Saviel, CEO of WiSeed and President of the French Crowdfunding Assocation, who stated: “The election of Emmanuel Macron as President of France raises great hopes for the future of crowdfunding and alternative finance in this country. He and his team when he was Minister of the Economy have greatly contributed to the development of our sector. I believe that crowdfunding fits perfectly with the democratic spirit of Mr. Macron’s “En Marche!” Movement.”
Similarly, in March, equity crowdfunding was finally passed in Australia, following two years of contentious and stalled debates between industry figures and the government.
This snapshot of the quickly shifting tides of equity crowdfunding globally demonstrates the varied, innovative and continued expansion of the industry. As governments and equity crowdfunding platforms continue to work together, and as the industry seeks innovative partners wherever possible, its future continues to look bright.