Which barriers are fundraisers facing when they turn to alternative finance?

The Study ‘Assessing the potential for crowdfunding and other forms of alternative finance to support research and innovation’ has recently been released. The Study outlines barriers imposed by the alternative finance (AF) eco-system onto different research and innovation (R&I) players. It also presents policy recommendations about how they can be effectively addressed.

The previous blog post addressed platforms’ issues and recommendations. We will now look at barriers faced by fundraisers turning to alternative finance, and how they could be solved.

Who is using alternative finance for R&I projects?

Individual innovators and entrepreneurs along with SMEs are the main beneficiaries of alternative finance and AF for R&I (around 45-55%) . The uptake by universities is still very limited in scope as they are neither aware of AF, nor too eager to experiment with it.

The main drivers for using alternative finance by fundraisers are easier access to finance, validation of the product’s market potential, and the use of AF platforms as marketing tools. Fundraisers also aim to create a network of contacts and partnerships.

Key barriers for fundraisers

Study identified specific barriers for those willing to raise funds for research and innovation projects through alternative finance:

Fundraiser–related: lack of specific skills (creation of a business plan, development of appealing communication), lack of awareness of AF and its specific models, lack of resources.
Platform–related: credibility of platforms, transparency of a platform’s operations.
Project-related barriers: complexity of acquiring AF as compared to other financing options, disclosure/ Intellectual Property Rights issues.
Ecosystem–related: lack of sufficient integration of AF into financing pipeline.

Potential solutions addressing these barriers

The study recommended a lot of different solutions including promotion of the standard for transparency of AF operations, tax exemptions at national level for investments in AF, quality endorsement of R&I platforms and others. Let’s take a look at two fundraiser specific recommendations.

Support for AF campaign preparation: micro - grants

A quick solution to the lack of fundraiser skills would be a creation of European micro-grants to finance preparatory costs of an AF campaign. The sort of costs covered could include the costs of consulting services for the creation of a successful campaign (advisory services of an AF consultant, PR services, video and graphic communication, business plan development).

Creating a European AF information and advisory hub

One-stop shop for AF that provides information services on AF models for fundraisers and investors, and their suitability for specific projects and sectors would organise trainings and events on AF, share best practice examples with regard to AF, and connect stakeholderson national and regional level.

Are you a fundraiser? Have you had any of the issues listed above? What are your thoughts on the proposed solutions? Feel free to pitch in with your thoughts in the sections below.

Download the full Study here.
Find the accompanying annexes here.
The executive summary is available here.