Crowdfunding for innovation: how can Europe grasp the opportunity?
Access to finance remains one of the main barriers to growth for EU companies, in particular for innovative SMEs. Over the past few years, we have seen a potential solution in the emergence of crowdfunding and alternative finance. Actually, in 2015, in Europe more money was raised through Alternative Finance than through Venture Capital (4.2 B EUR versus 3.8 B EUR). Today, many early stage investors regularly use crowdfunding platforms to manage their deals.
But to what extent this money helps to fund innovation rather than, for instance, cultural events or personal causes?
To answer this question, the Crowdfunding4innovation study analysed 263.000 projects launched between 2009 and 2016, for a total amount worth more than 2 billion Euros from 9 platforms (reward, equity, donation), and triangulated these findings with a survey of platforms and in depth interviews.
The results show that in Europe, 9,4% of projects and 28,7% of raised funding went to R&I activities. This may seem like a lot, but there is a big margin for improvement. The crowdfunding market remains much larger in the US and in Asia, and they are only growing.
How can we ensure that crowdfunding creates real opportunities for European entrepreneurs?
The study identifies several challenges to be addressed, such as:
- Addressing the issue of fragmentation: there is no united crowdfunding market. There are still barriers to investing across borders, and most of the investment remains national.
- Ensuring transparency and protection for investors and equip them with the necessary skills.
- Improving the awareness for researchers, small companies and individuals that too often lack the communication skills and entrepreneurial attitude.
- Providing incentives to investment, such as tax deductions.
- Better integration among different financial instruments and innovation support measures, such as private and public co-funding of crowdfunded R&I projects.
Are these the main challenges to be addressed?
We need your help to build strong, evidence based policy recommendations that can make a difference in the impact that crowdfunding has on the EU innovation ecosystem.
Add your thoughts and ideas below or send an email to email@example.com. We will make sure that your voice is heard!
Over the next days, we will publish the first results from the study, with some initial ideas on policy interventions to address them, so let’s get started!