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(BRUSSELS) – The European Commission gave its backing to the use of crowdfunding as an alternative source of finance for start-ups in the EU Member States, in a report on the sector published on Tuesday.
Crowdfunding is an open call to the public to raise funds for a project. Crowdfunding platforms are websites that enable fund-raisers, be they individuals or businesses, to interact with investors and donors. Financial pledges can be made and collected through the platform.
The Commission has been looking into the crowdfunding sector as an innovative way to connect savings to growth and to diversify funding sources for European businesses in Europe.
While the sector remains relatively small, it is developing rapidly, says the report, and has the potential to be a key source of financing for SMEs over the long term.
The Commission also says that with ‘appropriate regulation’, crowdfunding could be a key source of financing for SMEs over the long term. It notes that EU Member States have begun to put in place national frameworks to support the growth of the sector and to ensure investors are appropriately protected.
The Commission says there is no real need for EU level framework at the moment, as national frameworks are “tailored to local markets and domestic regulatory approaches”.
However, it promises to keep developments in the sector under review, and to meet twice per year with regulators and the sector.
“Our focus is on promoting best practice, appropriate investor protection and consistency of national regimes. We will continue to monitor market and regulatory developments closely,” said financial services Commissioner Jonathan Hill.
Based on available data, approximately 4.2 billion was successfully raised through crowdfunding platforms in 2015 in the EU, compared with 1.6 billion in 2014. In 2015, 4.1 billion was raised through crowdfunding models that entail a possible financial return for those contributing the funds for example, through equity investments or loans. Crowdfunding projects were present in all Member States. However, activity is currently concentrated in a small number of Member States. The UK has by far the largest amount raised and number of projects funded through crowdfunding.
Further information
Commission staff working document on crowdfunding in the EU Capital Markets Union
