Masterclass - Crowdfunding: SME Assembly 2016 © European Union, 2017 The information and views set out in this publication are those of the author(s) and do not necessarily reflect the official opinion of the European Union. Neither the European Union institutions and bodies nor any person acting on their behalf may be held responsible for the use which may be made of the information contained therein. Reproduction is authorised provided the source is acknowledged. The European Enterprise Promotion Awards is a key initiative of the European Commission's Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs. This publication is financed under the EU programme for the Competitiveness of Enterprises and Small and Medium-sized Enterprises, which is mostly managed by the Executive Agency for Small and Medium-sized Enterprises (EASME).

2. Yannig Roth
Marketing Director, WiSEED
@YannigRoth @WiSEED #SMEweek2016 #SMEassembly2016
Bratislava, November 25th 2016

3. WiSEED is a French, MIFID-compliant crowdfunding platform
• A diversified crowdfunding platform
− 2008 : start-ups (equity)
− 2011 : real estate (bonds)
− 2015 : cooperatives (bonds)
− 2016 : renewable energy (bonds)
− 2016 : agroforestry (equity)
• Founding member of European
Crowdfunding Network
• Double focus
− Start-ups, scale-ups, SMEs
− Private & institutional investors
WiSEED.com

4. Starting-up is easy, experimenting & scaling-up is not
• Every year, 200 000 SMEs file for
bankruptcy, representing a job loss of
1 700 000 jobs in Europe
• Access to capital is vital, Europe has a
solid layer already
− European Fund for Strategic
Investments
− Competitiveness of Enterprises &
SMEs programme
− Horizon 2020’s SME Instrument
− Start-up and Scale-up Initiative
(announced this Tuesday)
Source : Startup Europe Partnership (SEP)

5. Crowdfunding:
What are we looking at?

6. Crowdfunding : the only way to market & fund at the same time
• Why marketing ?
− Showcase technology, assemble
consumer communities, get
market attention & validation…
• Why finance ?
− Choice in type of financing, pitch
to investors, access to smart
money, speed & transparency…

7. Crowdfunding: Definition and taxonomy
• Generating investments or funds for
a project, cause, or enterprise by
acquiring funds from many
individuals over the internet.
• Types:
− Donation-based crowdfunding
− Reward-based crowdfunding
− Peer-to-Peer (P2P) lending
− Equity based crowdfunding

8. Donation & reward-based crowdfunding

9. Peer-to-peer (P2P) lending

10. Equity-based crowdfunding

11. Where we stand today &
how we got there

12. Crowdfunding across the globe (1)
• Global crowdfunding volume was
$34.4Bn in 2015
− North America $17.2Bn
− Asia $10.54Bn
− Europe $6.48Bn
− Oceania $68.6Mn
− South America $85.74Mn
− Africa $24.16Mn
Source : Massolution

13. Crowdfunding across the globe (2)
• Cambridge’s “Sustaining Momentum”
report shows a similar number for
Europe, but much higher in other
world regions
− Asia-Pacific €94.61Bn (mainly China)
− Americas €33.58Bn (mainly US)
− Europe €5.43Bn (mainly UK)
» UK €4.35Bm
» France €0.319Bn
» Germany €0.249Bn
» The Netherlands €0.111Bn Source : University of Cambridge

14. Crowdfunding across Europe
• In 2015, U.K. represented 81% of
Europe’s crowdfunding volume
(75% in 2014)
− Double nb of platforms than
closest follower France
» Crowdcube, Seedrs, Syndicate
Room, Funding Circle, Zopa…
− Benefit from highly attractive tax
schemes
» Seed Enterprise Investment
Scheme (SEIS)
» Enterprise Investment Scheme (EIS)
− Open-minded and voluntary
regulation by FCA
Source : University of Cambridge

15. Heterogeneous development
• Alternative Finance Maturity Index
− Captures the causes behind the
current state of crowdfunding in
Europe
− 15 areas to assess the maturity of
the alternative finance industry
» 7 general areas (volumes, platform
diversity, accessibility of data…)
» 8 related to regulation
Source : Crowdfunding Hub

16. How are Europe’s SMEs using crowdfunding? (UK excluded)
Source : University of Cambridge
• In 2015 a total of 9,442
businesses have raised €536Mn
in capital
• Debt & Equity models
accounted for €508Mn among
which…
− €159Mn in equity (up 93%)
» France > Germany > Netherlands
− €349Mn in debt (up 156%)
» Netherlands > Germany > France

17. How are Europe’s consumers / investors using crowdfunding?
• Retail investors have pioneered
crowdfunding, institutional
investors starts pouring in
− 76% of platform investments
had only retail investors in 2013
− 56% of platform investments
had only retail investors in 2015
− Most institutional money goes
into lending
• No need to be rich to invest in
crowdfunding (logarithmic
function)
Source : University of Cambridge

18. Why are consumers / investors using crowdfunding?
• Young consumers’ investment behavior
is changing
− Millennials hold approximately 52% of
their assets in cash, only 28% in stocks
− Millennials are more likely to
participate in crowdfunding
» 47% have backed or are likely to back a
crowdfunding campaign, compared to 30%
of Gen-Xers, 13% of Boomers, and 4% of
Matures
− Millennials more likely to accept a
lower ROI or higher risk if the company
has a positive impact on society & the
environment
Source : US Trust

19. Crowdfunding:
Where are we heading?

20. Continuous growth of the market, globally
• Global crowdfunding market to grow at a CAGR of
26.87% during the period 2016-2020 (Technavio)
• Global crowdfunding market has the ability to deploy
up to $96Bn a year by 2025 (World Bank)
• Questions arise :
− To what extent will the US and Asia out-grow Europe ?
» Will the UK players suffer from Brexit ?
» Will the rest of Europe catch up with the UK ?
− Will developing countries catch up ?
− How will institutional vs. retail investment be spread ?
− Will crowdfunding surpass Angel & VC investment ?
− How can Europe platforms be fostered ?
» Will we have a crowdfunding capital union ? Source : Technavio

21. Crowdfunding in Europe is encouraged but not facilitated (yet)
• National frameworks are seen as coherent :
− “National frameworks are broadly consistent in
terms of the objectives and outcomes they seek
to achieve.”
• No immediate plans to facilitate cross-border
crowdfunding :
− “Given the predominantly local nature of
crowdfunding, there is no strong case for EU
level policy intervention at this juncture. […].
Given the dynamism of crowdfunding and the
potential for future cross border expansion, it will
be important to monitor the development of the
sector.”
• Chicken & egg problem… Source : European Commission

22. Europe can be at the forefront of financial innovation
• Wealth management & robo-advisors
− Threshold to invest will keep lowering, more
investors can be reached by SMEs across
Europe
• Blockchain & smart contracts
− “Mini-bonds” issues by French SMEs on the
blockchain will be recognizes as financial
instruments
» To be issues on crowdfunding platforms & be
purchased by individuals & legal entities
» To be used by banks’ securities services in helping
small companies access capital
Source : Crowdfundinsider

23. Further reading (EU)
“Crowdfunding remains relatively small in the EU but is
developing rapidly. It has the potential to be a key source
of financing for SMEs over the long term.” (EC, 2016)
“The European alternative finance market
should have ample room for continued
growth and expansion over the coming
years” (University of Cambridge, 2016)
“The alternative finance industry is a
vibrant industry that develops very
quickly” (CrowdfundingHub, 2016)

24. “The US has the highest total online
alternative finance market volume per
capita in the world, at $ 113.43 in 2015”
(University of Cambridge, 2016)“This document explores specific strategies to drive
crowdfunding, the risks in crowdfunding and how to
mitigate them, and the potential use of crowdfunding
in the developing world” (World Bank, 2013)
Further reading (other)
“The more projects funded draw more entrepreneurs
and other creators to start campaigns on the
platform, creating a virtuous cycle of growth on both
sides of the marketplace” (Goldman Sachs, 2015)