30 September 2015 - European Commission...lending (also known as ‘P2P’, peer-to-peer, P2B,...

Crowdfunding: Mapping EU

markets and events study

Executive Summary

30 September 2015

Crowdfunding: Mapping EU markets and events study

September 2015 2

DOI: 10.2874/97125

ISBN: 978-92-79-46661-8

Citation is authorised provided the source and authors are acknowledged.

© European Union, 2015


September 2015 3

Disclaimers

EUROPEAN COMMISSION DISCLAIMER

The information and views set out in this study are those of the authors and do not

necessarily reflect the official opinion of the Commission. The Commission does not

guarantee the accuracy of the data included in this study. Neither the Commission nor

any person acting on the Commission’s behalf may be held responsible for the use

which may be made of the information contained therein.

CROWDSURFER LTD. DISCLAIMER

This report has been compiled for the European Commission by Crowdsurfer Ltd.

under the terms of a contract with the European Union responding to very specific

brief, and it should be read in that context. This report has been prepared with the

aim of providing specific information about crowdfunding markets within the European

Union, and does not constitute advice in relation to any particular situation. Where you

rely on any information or other material contained in this report, including

information about national regulatory events, you do so entirely at your own risk and

you accept that all warranties, conditions and undertakings, express or implied, in

respect of the content of this report are excluded to the fullest extent permitted by

law. Where links are provided or references made to third-party websites, Crowdsurfer

Ltd. has no responsibility for the content of such websites. The opinions expressed in

this report do not represent the official position of the European Union or the

European Commission.

ERNST & YOUNG LLP DISCLAIMER

This report has been prepared for general informational purposes under contract with

Crowdsurfer Ltd. and is not intended to be relied upon as accounting, tax, or other

professional advice by any other party (“Third Parties”). Please refer to your advisors

for specific advice. Ernst & Young LLP accepts no responsibility to update this report in

light of subsequent events or for any other reason. This report does not constitute a

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use any of the markets or companies referred to in it. Where links are provided to

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September 2015 4

Abstract

This report considers key trends in the European crowdfunding market during 2013

and 2014, encompassing a variety of funding models, including (but not limited to)

loans, equity and rewards. Data mapping platforms and the ‘projects’ supported by

these platforms was used to quantitatively plot market developments over time

throughout the European Union (EU). This data was also used to consider market

trends before and after national regulatory events in three markets within the scope

period – France, Italy, and the UK.

510 platforms were identified as operating in the EU in the scope period, of which 193

platforms contributed sufficient, eligible time-series data on project activity. The UK

had the largest number of platforms, accounting for over a quarter of the EU total,

with 143 platforms, including 45 participating platforms, and accounting for over 90%

of total capital raised or €2.0 billion. The UK market is followed by France (77

platforms and 25 participating platforms), Germany (65 total and 22 participating

platforms), the Netherlands (58 total and 25 participating platforms) and Italy (42

total and 12 participating platforms).

Crowdfunding projects were identified in every Member State in the EU during the

scope period. Eligible project-level data evidenced a total of €2.3 billion successfully

raised for 206,908 ‘projects’ in 2013 and 2014, where either the ‘project’ was located

in the EU or it was supported by a platform located in the EU (together defined as ‘in-

scope’ projects). While coverage varies significantly between Member States, the five

largest markets by total amounts raised were France, Germany, the Netherlands,

Spain, and the UK.

Analysis of trends in crowdfunding activity before and after national regulatory events

in France, Italy and the UK indicated a diversity of regulatory environments and

approaches (such as the relative development of the markets at the time of

regulation, the level of industry consultation and the nature of pre-existing regulatory

frameworks). As a result, the early effects on trends in market activity are complex

and varied. All three Member States have, however, either undertaken or proposed

further policy initiatives following the regulatory event. This suggests that regulatory

events have supported broader policy momentum in relation to crowdfunding

providers and this market.


September 2015 5

About the authors

Crowdsurfer

Crowdsurfer is an independent data utility for the crowd finance world, generating new

intelligence for those inside and outside the industry, and fuelling an emerging

ecosystem of service providers.

We harness the new source of rich and disparate data generated by thousands of

marketplaces daily to offer a comprehensive data-driven view of the crowd finance

industry at both macro and micro levels.

www.crowdsurfer.com

EY

EY is a global leader in assurance, tax, transaction and advisory services. The insights

and quality services we deliver help build trust and confidence in the capital markets and

in economies the world over. We develop outstanding leaders who team to deliver on our

promises to all of our stakeholders. In so doing, we play a critical role in building a better

working world for our people, for our clients and for our communities.

EY refers to the global organisation, and may refer to one or more, of the member firms

of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young

Global Limited, a UK company limited by guarantee, does not provide services to clients.

For more information about organisation, please visit www.ey.com

http://www.crowdsurfer.com/

http://www.ey.com/


September 2015 6

1 Executive summary

This study considers crowdfunding activity within the European Union (EU) from

1 January 2013 to 31 December 2014 (the ‘scope period’). We used two data sets: a

platforms database and a ‘projects’ database. This report comprises:

A mapping of crowdfunding markets in the EU, identifying main features and

trends, subdivided into:

a platform mapping analysis, where we identified and analysed

crowdfunding platforms operating in the EU Member States. Platforms

offering a range of funding type are included in our definition, including

lending (also known as ‘P2P’, peer-to-peer, P2B, peer-to-business, or

‘marketplace lending’), equity, donation, rewards, invoice trading and

others. This analysis considers growth in the number and type of

platforms, their location, and key activities.

a projects mapping analysis, where we analysed granular project-level

data, where a ‘project’ is a single fundraising attempt (of any funding

type). A sub-set of identified platforms contributed eligible, suitable data

for time-series analysis (these are referred to as ‘participating platforms’ in

this report). This analysis enables an exploration of trends over time.

A regulatory events study of selected national legislative intervention on

crowdfunding, including market trends before and after those events. We

considered selected regulatory events that took place during the scope period and

the mapped market trends before and after each event.

This summary sets out key findings relating to each component and key conclusions.

Note that there are important technical considerations to take into account when reading

these findings, which are set out in the report.

1.1 Market mapping

Market mapping was undertaken using two data sets. For all platform analyses we used

the platforms database. For all project analyses we used both platforms and projects

databases.


September 2015 7

1.1.1 Summary of activity

The table below summarises the data relating to platform and project mapping.

Figure 1: Summary of project and platform data gathered (Source: Platforms database, Projects database, Crowdsurfer Ltd.)

Total

Identified platforms

Participating platforms

Total Projects*

Amount raised*

Average raised*

# # # €000 €000

EU projects Equity 114 37 585 144,014 246

Loan 107 35 155,098 1,658,089 11 Rewards 152 75 24,164 163,711 7 Donation 93 35 4,262 14,970 4 Invoice trading 4 1 3,888 275,170 71 Other1 32 7 2,857 14,538 5 Total 502 190 190,854 2,270,493 12 Add non EU Non-EU platforms 8 3 n/a n/a n/a Non-EU projects n/a n/a 16,054 77,778 5 Total 510 193 206,908 2,348,271 11

Other data gathered Failed projects n/a n/a 18,885 88,814 5 Total 510 193 225,793 2,437,085 11

* For successfully ended in-scope projects in 2013 and 2014

1.1.2 Platform mapping analysis

In the platform mapping, we analysed the number and types of platforms active in the

EU in order to understand the current landscape and key trends. We analysed platform

formation rates, and platforms by funding type and location.

In total, 510 live platforms were identified as active in the EU by 31 December 2014

(Figure 2). This includes 502 EU-domiciled platforms (from 22 of the 28 EU Member

States2) and eight non-EU-domiciled platforms. Non-EU countries with platforms that are

active in the EU include the USA, Canada, New Zealand, Australia and China.

1 ‘Other’ includes funding types that do not match the characteristics of the other funding classes.

2 A platform is considered to be domiciled in the Member State in which the greatest percentage of its projects is located.


September 2015 8

Figure 2: Analysis of the number of live platforms in the EU by number per year (Source: Platforms database, Crowdsurfer Ltd.)

The total number of platforms rose by 23.2% in 2014 (from 414 platforms in 2013 to

510 in 2014), with growth in identified platforms slowing from 47.3% in 2013 (and a

peak of 74.3% in 2010). The total number of new platform launches decreased from

133 in 2013 to 96 in 2014.

The UK had the largest number of live platforms (143 platforms) that focus primarily or

solely on the UK market, accounting for 28.0% of the EU total number of platforms

(Figure 3).3 This is followed by France (77 platforms, 15.1%), Germany (65 platforms,

12.7%), the Netherlands (58 platforms, 11.4%) and Italy (42 platforms, 8.2%). Outside

of these markets, the number of identified live platforms was significantly lower

(125 platforms, 24.5%).

Figure 3: Analysis of the number of live platforms in the EU by location in 2014 (Source: Platforms database, Crowdsurfer Ltd.)

3 The number of live platforms in a given Member State is determined by the number of platforms whose

activity is predominantly in that Member State (see the definition in Section 2.4 of the report).

4770

122

188

281

414

510

48.9%

74.3%

54.1%

49.5% 47.3%

23.2%

0%

20%

40%

60%

80%

100%

0

120

240

360

480

600

2008 and prior 2009 2010 2011 2012 2013 2014

% c

hang

e

Num

ber

Number of live platforms

47

23

52

66

93

133

96

0

25

50

75

100

125

150

2008 and prior 2009 2010 2011 2012 2013 2014

Num

ber

Number of live platforms in 2014 by launch year

Total live platforms in 2014 = 510

143

7765

58

4233

168 8 7 7 7 6 6 6 5 5 4 2 2 1 1 1

0

40

80

120

160

Num

ber

Number of live platforms in 2014 by platform location

Total live platforms in the EU in 2014 = 510


September 2015 9

EU platforms provided a diverse range of funding types and there is further diversity

within each funding type. As shown in Figure 4 below, the most common funding types of

live platforms in 2014 were rewards (155 platforms) and equity (117 platforms); rewards

and equity platforms together accounted for over half of live platforms (being 272 out of

510 platforms). There were eight participating platforms that offered more than one

funding type and had successful in-scope projects.

Some platforms supported projects outside of their own country location (‘cross-border

funding’). 49 participating platforms (25.4% of a total of 193 participating platforms)

supported successfully funded projects outside their platform location in 2014.

Figure 4: Analysis of the number of live platforms in the EU by funding type per year (Source: Platforms database, Crowdsurfer Ltd.)

1.1.3 Project mapping analysis

We analysed the number and types of projects either located in the EU or undertaken by

EU platforms (together defined as ‘in-scope’ projects) in order to understand the current

landscape and key trends. We examined project data by funding type and location, cross-

border activity and multi-funding type platform projects (where the platform supported

projects of a funding type that differed from the primary funding type offered by the

platform).

Project mapping was based on an analysis of 2013 and 2014 data from 193 ‘participating’

platforms. Project data from these platforms evidenced a total of €2.3 billion successfully

raised for 206,908 in-scope projects in 2013 and 2014. This €2.3 billion represents an

approximate market coverage of 68% by amount raised, with EU loans crowdfunding

coverage estimated at 81%, and EU equity crowdfunding also at 81%. The average

amount raised per project remained broadly constant between €10,000 and €12,000

during the scope period (Figure 5).

Rewards30%

Equity23%

Loans21%

Donations18%

Other7%

Invoice trading

1%

Live platforms in 2014

78 94

93117

85107

125

1553

430

33

0

100

200

300

400

500

600

2008 and prior 2009 2010 2011 2012 2013 2014

Num

ber

Number of live platforms by funding type

Donations Equity Loans Rewards Invoice trading Other

Total in 2014 = 510


September 2015 10

Figure 5: Analysis of all successfully completed in-scope projects by participating platforms (Source: Platforms database, Projects database, Crowdsurfer Ltd.)

Coverage varies considerably between Member States due to the differences in the

number of active platforms and the collating and suitability of the detailed data required

for this analysis.

As stated above, project mapping includes both projects located in the EU (undertaken

by either EU platforms or non-EU platforms) and projects located outside of the EU but

undertaken by EU platforms:

Projects located in the EU: A total of €2.3 billion was raised for 190,854

successful projects. Of this, €2.2 billion was raised for 185,753 projects through

EU-based platforms and €85.1 million was raised for 5,101 projects on non-EU

platforms. Non-EU based platforms with EU projects include large, global US

rewards platforms and New Zealand-based donations platforms.

Projects located outside of the EU but undertaken by EU platforms: A total

of €77.8 million was raised for 16,054 successful projects. Projects based in Russia,

the US, India and Kenya accounted for the largest share of this category in terms of

the total amount raised.

For projects located in the EU, the five largest markets by total amounts raised were the

UK, France, Germany, the Netherlands, and Spain. Crowdfunding projects were identified

in every Member State in the EU during the scope period. While crowdfunding activity is

therefore an EU-wide phenomenon, there are significant differences in activity levels

between Member States. These differences in the level, and growth rates, provide a

challenge to analysis and presentation. The total amounts raised grew in excess of 100%

from 2013 to 2014 in the majority of markets, but sometimes from a low base.

-

20

40

60

80

100

120

140

160

180

€m

Amount raised

-

2

4

6

8

10

12

14

16

18

Num

ber,

thousands

Number of projects

-

2

4

6

8

10

12

14

Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14

€th

ousands

Average raised per project

-

500

1,000

1,500

2,000

2,500

3,000

€m

Cumulative amount raised

-

50

100

150

200

250

Num

ber,

thousands

Cumulative number of projects


September 2015 11

Nearly €180 million of cross-border crowdfunding projects were identified from

participating platforms in the scope period. The largest components of cross-border

activity were undertaken by non-EU platforms operating within the EU, and EU platforms

operating outside of the EU. Cross-border activity within the EU amounted to only €16.9

million of projects by participating platforms in the scope period.

In total, eight out of 193 participating platforms successfully funded in-scope projects of

more than one funding type in 2014 (compared to five in 2013). Of these, four platforms

supported some combination of equity, loans and rewards funding.

1.1.4 Regulatory events analysis

This regulatory events analysis was undertaken using desktop research into regulatory

documentation and reports, and stakeholder interviews.

We considered three national regulatory events, which occurred in Member States during

the scope period:

Italy (26 June 2013) – Regulation of equity crowdfunding by the Commissione

Nazionale per le Societa la Borsa (CONSOB) under Regulation 18592.

UK (1 April 2014) – Regulation of crowdfunding by the FCA under a new dedicated

regime

France (30 May 2014, applicable from 1 October 2014) – Regulation of

crowdfunding and introduction of two specific regulatory statuses.

It is too early to undertake an in-depth evaluation of the impacts of national regulatory

interventions, given that these interventions took place relatively recently. In this study

we conducted analyses to explore how regulation might have affected crowdfunding

activity.

Our analysis shows that activity levels and growth levels are uneven across the EU, as

are the local regulatory and legal frameworks. There is a variety of other contributing

factors that may have shaped the crowdfunding market during the scope period,

including the broader development of the “fintech” (financial technology) industry.

Notwithstanding this variety, there are some similarities between the selected national

regulatory events. In all the three markets:

Regulatory requirements prior to the event had not been specifically designed with

crowdfunding in mind. The extent of crowdfunding activity before the event

therefore depended on the ability of firms to undertake these activities using

existing regulatory permissions, or to operate outside the scope of regulation.

The regulatory event was undertaken with a view to setting out specific rules and

guidance for crowdfunding, and clarifying the broader set of rules and regulations

that would apply to these activities.

The events did not directly target philanthropic forms of crowdfunding (for

example, rewards crowdfunding).


September 2015 12

In undertaking these regulatory events, each of the three Member States responded to

local market conditions, customs and practices and has defined new rules for

crowdfunding. The differences reflect variations between regulations, laws and tax codes

between Member States, but also some important differences in the approach to

regulation (for example, the focus on the investor, the platform, and the underlying

project).

Each event has introduced local rules that support domestic platform activity, but do not,

broadly speaking, enable platforms to operate on a cross-border basis. Cross-border

operations usually require a fuller set of authorisations that are more costly and complex

than crowdfunding specific regulatory permissions (for example, those that fulfil

requirements of relevant EU law).

It is notable that each of the three Member States that adopted crowdfunding regulation

has undertaken or proposed further policy initiatives affecting the crowdfunding market.

While it is not possible in all cases to prove the causal link between these developments,

we believe that a clear and stable regulatory environment created by the events has

supported policy momentum in favour of crowdfunding providers. Therefore, a regulatory

event within crowdfunding may be seen as a catalyst for supporting broader reforms.

1.2 Conclusions

1.2.1 Market mapping

Crowdfunding is an EU-wide phenomenon with platforms identified in 22 of the 28 EU

Member States and projects identified in all Member States in 2014. However, the level

of activity and the rate of growth vary significantly across the EU likely reflecting

differences in actual market size and development and differences in data coverage.

These differences provide a significant challenge to analysis and presentation in this

report.

Diversity within the EU crowdfunding market also extends to funding types, with both a

range of funding types on offer and further diversity within each funding type. In 2014,

rewards, equity and loans were the three most common funding types based on the

number of platforms; in addition, invoice trading was a major funding type based on the

total amount raised (with a relatively large average project size given the typical client

profile). A small number of participating platforms dominate the market, with five UK-

based platforms representing over 80% of successfully ended in-scope projects by value.

Crowdfunding activity grew in 2014, compared to its level in 2013, with respect to both

projects funded and the number of platforms. The total amount raised for in-scope

successfully ended projects by participating platforms grew by 118.9% in 2014, while the

number of projects increased by 111.7%. The total number of platforms rose by 23.2%

in 2014 to 510 platforms (compared to 414 platforms in 2013). However, the total

number of new platform launches fell from 133 new platforms in 2013 to 96 in 2014.


September 2015 13

1.2.2 Events study

We did not find any observable market changes in the time-series data after national

regulatory events in France and the UK (within the scope period). Nonetheless,

stakeholder interviews suggested that it has played a role in supporting the maturing of

the industry. In Italy, however, the event may have limited the level of equity

crowdfunding activity by restricting the types of organisations eligible to use this form of

funding. In all three event study markets there have been follow on policy

announcements that appear to have built upon, or have been catalysed by, the initial

regulatory event.

The European crowdfunding market remains at an early stage of development and

continues to evolve rapidly. Further research over a longer time period is required to fully

understand trends subsequent to regulatory developments.


September 2015 14

DOI: 10.2874/97125

ISBN: 978-92-79-46661-8

EV-0

2-1

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30 September 2015 - European Commission...lending (also known as ‘P2P’, peer-to-peer, P2B,...

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