Crowdfunding quickly gained popularity around the world. It is estimated that in 2019 alone, there were nearly 6.5 million crowdfunding campaigns that raised over US $ 34 billion. This total value is expected to reach US $ 300 billion by 2030.
Across emerging Europe, despite constant growth, this alternative method of financing a project or business by raising small sums of money from large numbers of people is still far from reaching its full potential. potential.
In Slovenia, the FlyKly smart bicycle wheel raised US $ 700,000 (€ 594,821) on Kickstarter in 2016, a banner year for crowdfunding in the country when its projects raised a total of € 1 million.
More recently, in 2020, the Croatian start-up CircuitMess carried out a successful campaign to the tune of 400,000 US dollars (339,934 euros). Also, in 2020, a Polish hemp company, Kombinat Konopny, managed to raise 950,000 euros on Crowdplay, a platform based in the country.
When it comes to the types of crowdfunding in the region, just like in the world, two forms predominate: donation-based funding (on platforms such as Kickstarter where individuals donate money to receive various rewards) and equity-based (where the “reward” is equity).
Romanian start-up SeedBlink is an emerging player in the field of equity-based crowdfunding. Founded in 2019, the company has already garnered a lot of interest from retail investors who want to invest in start-ups but don’t have the kind of money that large venture capital funds have.
“The field of investing in technology start-ups is particularly attractive to ‘retail’ investors, those who are willing to invest smaller amounts than the hundreds of thousands minimum required by a venture capital investment fund or to the tens of thousands who call you a business angel. Says Andrei Dudoiu, co-founder and managing partner of SeedBlink.
Proof of this call can be found in the company’s statistics to date. During the 19 months of operation, SeedBlink saw more than 6,000 investors from fifteen countries who participated in 47 campaigns.
In May, SeedBlink wrapped up its € 3 million Series A round. Catalyst Romania led the round with € 1.2 million, but an impressive € 1.1 million of the round amount came from SeedBlink’s crowdfunding campaign on its own platform.
Elsewhere in the region, alternative financing and crowdfunding are also taking root. According to data from Crowdfunding Hub, in 2019 the size of the alternative finance and crowdfunding market in Bulgaria was 50 million euros, and in the same year, that of Lithuania was 300 million euros.
In Estonia, EvoEstate, a Tallinn-based fintech and crowdfunding start-up, offers the possibility of investing in real estate projects from as low as 50 euros.
“The general advantage of real estate crowdfunding is that you can invest in real estate with very small amounts, and it’s very simple,” says Gustas Germanavičius, CEO of EvoEstate.
Whether it’s reward-based or equity-based, crowdfunding holds great promise for those looking to fund their projects and visions.
According to Dudoiu, when it comes to start-ups, crowdfunding can offer more than just capital.
“It introduces companies to a large audience, enables market validation and generates sales,” he says. Emerging europe.
“Some key advantages would be access to capital and investors, risk minimization, the constitution of a network of lawyers who will become ambassadors of start-ups for the future, acting as a marketing tool, offering a valuable feedback and efficiency; and the initiation of founders and their teams in corporate governance and communication behavior from the start of the business, thus better preparing them for their future growth path.
But as with any new method of funding, the regulatory landscape has been a challenge, both for the platforms themselves and for the companies that use them.
“The absence of specific legislation has been a major obstacle; it also demotivated other players to tackle this universe ”, explains Dudoiu.
For emerging European countries that are members of the EU, the regulatory landscape should improve as early as November of this year, when the European crowdfunding regulation comes into force. It should create a uniform framework in European countries and protect investors, among others.
According to Germanavičius, the Baltic states are in a good position to take advantage of the coming regulatory change.
“Emerging countries in Europe, especially the Baltic States, have already established a sort of hub for real estate crowdfunding. We have two of the biggest real estate crowdfunding platforms here, we have a booming P2P (peer-to-peer) lending industry here, and what I see coming in the next few years with regulations across the board. EU, these companies will naturally go international much easier, ”he explains to Emerging Europe.
For countries outside the EU, for example in the Western Balkans, the growth and future of crowdfunding are a little less certain. Early successes in places like Serbia are now being offset as the two largest crowdfunding platforms – Kickstarter and IndieGoGo – are officially no longer doing business in any Western Balkan country, as the payment systems used by the platforms are no longer doing business. not work in the area.
“On the one hand, our market is too small, so there is no point in starting to serve it, and on the other hand, there are burdens associated with trading in foreign currencies, fears of a possible money laundering ”, explains Luka Božovi of Crowdfunding.rs.
Yet campaigns from Serbia are arriving on the platforms, either by registering their business abroad or by using the services of an intermediary.
“Serbia lags behind Europe in the availability of this type of funding, but not the quality of projects that have raised funds in this way,” said Božović.
He adds that although the current legal framework allows for rewards-based crowdfunding, it is too complicated and vague as actors such as banks and other institutions are unfamiliar with the field. Additionally, equity crowdfunding is not possible under current laws, but crowdfunding where backers receive interest on the money they lend is possible.
In Serbia, crowdfunding is also present in the non-profit sector, mainly through the donacije.rs platform, where individuals can donate money to various charitable causes.
This may all change soon, as the National Bank of Serbia formed a working group to produce a model crowdfunding law that would be in line with EU regulations.
In emerging Europe, there is clearly a great interest in the different types of crowdfunding and the benefits they can bring to businesses and start-ups. Promising platforms are emerging in the region, as more start-ups choose to use them, but there is still a lot of room to develop before this alternative financing model really takes off.
But Germanavičius is optimistic about the future of crowdfunding in the region.
“We see some really interesting models coming up where the crowdfunding model is applied for investments, for example, works of art and renewable energy. Recently, there are already new businesses; a Lithuanian company applies crowdfunding for heavy machinery. In the years to come we will see more, especially in the Baltic States where regulation and crowdfunding activities are very progressive. “
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