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KPMG ADVISORY

Crowdfunding in Belgium –

2014

November 2014

Crowdfunding in Belgium – 20143

Table of ContentsI. Introduction 4

II. What is crowdfunding 5

III. Market overview – Crowdfunding in Belgium 7

IV. The wisdom of the crowd 14

V. Crowdfunding and Banking 16

VI. Crowdfunding and the Public Sector 18

VII. Future Outlook 20

4Crowdfunding in Belgium – 2014

I. Introduction

Crowdfunding is a hot topic in Belgium these days. Many articles in various newspapers and magazines are being written on the subject, more and more success stories are making the rounds and Belgian policy makers are conducting significant research regarding the concept. The international crowdfunding scene is evolving quickly, but what is the status of crowdfunding in Belgium?

For the Belgian crowdfunding scene 2014 has been a very interesting year. The media has been paying more attention to crowdfunding and more articles and research papers have been published on the subject. There have also seen more attempts to increase awareness of crowdfunding, for instance in early 2014 a Belgian crowdfunding umbrella association was launched, which will mainly focus on increasing awareness and knowledge sharing.

In the long term, it will develop a quality label for crowdfunding platforms.

We have also seen that the Belgian policy makers have changed the regulatory framework of crowdfunding, which resulted in an increase of the maximum funding limit for crowdfunding from €100.000 to €300.000 on condition that investors cannot donate more than €1.000 per project.

KPMG conducted an analysis on how crowdfunding in Belgium has evolved over the past year, what level of growth has been achieved and how Belgium is doing compared to neighboring countries. Specific trends were also researched, such as crowdfunding and banking and crowdfunding in the public sector. In addition a future outlook is presented together with overall conclusions.

Definition of

crowdfunding:

“Funding of a project by raising limited monetary contributions from a large number of people”

(Oxford Dictionary)


II. What is crowdfunding

In contrast to traditional financing instruments where money is raised from a limited number of (often institutional) investors, crowdfunding is a financing instrument, which appeals to a large number of people (“the crowd”) to make limited contributions in order to achieve the financing goal. Often an internet platform is used to present projects to potential investors.

Types of crowdfunding: Overall a distinction can be made between the following three main crowdfunding models:

1. Donations/reward:

� The project collects donations from the crowd, while the crowd does not receive any financial benefit in return.

� For the reward model the crowd can receive non-financial rewards in return for their donation. These rewards can be free products, tickets to events, etc. Depending on the size of the donation, the reward can be different. These rewards are often symbolic and the value is often much lower than the donation amount itself.

2. Lending

� In this model the organization or company will borrow money from the crowd. The details of the loan such as payback period, return, instrument (e.g. bond), etc. is defined by the fundraiser and the platform.

� In case of social lending no interests will be applied to the loan, this means that the lender will not receive any financial return on the loan.

3. Equity

� Equity crowdfunding is focused on providing equity financing to companies. In this model the company will attempt to raise capital from a large group of small investors (the crowd) instead of a small number of large investors. In exchange for the investment the crowd will get a portion of the shares of the company.

Commercial vs. social We can differentiate two different themes of crowdfunding projects: commercial projects and social projects.

� Commercial projects are related to business projects and often aim to achieve an economic return for the investor.

� Social projects usually do not have an economic benefit. They often target a more local crowd and aim to achieve a social benefit, such as the organization of a local event, helping a social/non-profit organization, etc.

The model of crowdfunding strongly depends on the theme of the project.


a. For the entrepreneur:

Advantages Disadvantages

� Alternative method of financing: crowdfunding gives entrepreneurs an alternative to the traditional methods of finance.

� Combined with other financing sources: crowdfunding can be combined with our sources of financing such as bank loans, business angels, grants and fund financing (BA+ Loan of BAN Vlaanderen or ARKimedes of PMV).

� Crowdfunding as a marketing tool: crowdfunding can increase brand, product or event awareness. The concept of “power of the crowd” is discussed later on.

� Feedback: next to funding the entrepreneurs can often gain valuable feedback regarding their project. Based on the feedback they can adapt their product, service or event more to the needs of the crowd.

� Inexpensive: raising money using crowdfunding is in most cases relatively inexpensive compared to most other methods of financing.

� Amount of funds that can be raised is limited: in Belgium only €100.000 (or €300.000 in case the amount per investor is limited to €1000) can be raised via crowdfunding. This might be enough to finance small to medium-sized projects, it will often not be enough to fund large projects. This disadvantage can be (partly) overcome by combining crowdfunding with other financing sources.

� A crowdfunding campaign takes time and effort: organizing a successful crowdfunding campaign requires a lot of time and effort. Without significant time investment your campaign is highly likely to fail.

� Uncertain outcome: the entrepreneur has no idea in advance if his campaign will succeed, whether he will achieve or maybe even surpass the funding goal and in what time.

� Large amount of shareholders (in case of equity funding): a large amount of (small) shareholders can increase the complexity of company decision processes.

� Your business idea exposed: the business idea of the entrepreneur is exposed to everyone (even potential competitors) and can therefore more easily be copied.

b. For the investor:

Advantages Disadvantages

� Supporting the cause: the investor can support a certain cause using crowdfunding. The cause can be related to generating economic growth by funding start-up companies or can be more social such as supporting a local charity project.

� Returns: the investor can receive relatively significant returns on its investment (in case of the equity & lending model). The returns can be relatively higher then classic investment options (savings account, bonds, etc.).

� Small investments: the investor can invest relatively small amounts compared to classic investment options (bonds, shares, funds, ..). This reduces the risk for the investor.

� High risk: investing in a crowdfunding project is a high risk investment with an uncertain outcome. There is no guarantee whether the project will succeed or fail and whether the investor will ever see his or her money again. Projects often fail which results in a loss of the investment for the investor. Next to that it could also occur that projects are malicious and fraudulent.

� Limited transparency: after the investment has been made the investors do not always have sufficient transparency on how the project is doing and what the recent evolutions are.

Advantages and disadvantages of crowdfundingJust like most financing instruments, crowdfunding has its advantages and disadvantages for both the investor and the entrepreneur. Below some general pros and cons of crowdfunding are discussed.


III. Market overview – Crowdfunding in Belgium

Growth crowdfunding in Belgium: KPMG has conducted both a quantitative1 and a qualitative analysis of the Belgian crowdfunding scene. For this, data of the different crowdfunding platforms has been analyzed and interviews were conducted with key-stakeholders in Belgium such as several crowdfunding platforms and other relevant stakeholders (VOKA, Unizo and Febelfin).

Based on this analysis crowdfunding is expected to raise more than €2Mio in Belgium in 2014. This is a growth of 80% compared to 2013 where €1.2 Mio was raised.

From this we can conclude that the crowdfunding scene is growing strongly in Belgium. All three crowdfunding models are experiencing comparable growth.

“In 2014 crowdfunding will raise more than €2Mio in Belgium “

1 For the analysis only Belgian platforms (and projects and money raised on these platforms) were taken into account. No data of foreign platforms (or projects and money raised on foreign platforms) were taken into account.

2014*: Because the crowdfunding scene is premature only data of the years 2012, 2013 and 2014 have been taken into account. For 2014, data until 1/9/2014 have been collected, this data were linearly extrapolated for the remaining four months.

FUNDS RAISED BY CROWDFUNDING

€ 500 000

€ 1 000 000

€ 1 500 000

€ 2 000 000

€ 2 500 000

Equity

2012 2013 2014*

Donations/Reward TotalLending

0,00,20,40,60,81,0


This year it is expected that more than 100 projects will successfully raise funds using crowdfunding. This is more than double compared to 2013. Most crowdfunding projects are using the donation/reward model.

A higher increase in the number of projects, compared to the increase in raised funds, is due to a strong increase in the number of donation/reward projects, which often raise lower amounts of funds per project.

Although the Belgian crowdfunding scene is growing strongly there is still a huge gap when comparing the funds raised by crowdfunding with our neighboring countries. For instance in the Netherlands over €30Mio was raised in 2013, in France over €80Mio and in the U.K. more than €100Mio was raised by crowdfunding (mainly due to a very strong lending model).

When we take into account the population of each country a huge disproportion still exists. In our neighboring countries in 2013, more than 10 times as many funds were raised per inhabitant than in Belgium.

“Belgium is heavily lagging behind compared to our neighboring countries “

“A lack of high quality projects is the main bottleneck for growth“

2014*: Because the crowdfunding scene is premature only data of the years 2012, 2013 and 2014 have been taken into account. For 2014, data until 1/9/2014 have been collected, this data were linearly extrapolated for the remaining four months.

2012 2013 2014*

NUMBER OF PROJECTS WHICH HAVE SUCCESFULLY RAISED FUNDS USING CROWDFUNDING

20

0

40

60

80

100

120

0,00,20,40,60,81,0

Equity Donations/Reward TotalLending

UK Netherlands BelgiumFrance

FUNDS RAISED BY CROWDFUNDING PER CAPITA (2013)

€ 0,50

0

€ 1,00

€ 1,50

€ 2,00

0,00,20,40,60,81,0


Why is Belgium lagging behind its neighboring countries? Based on interviews conducted by KPMG with key-stakeholders in the crowdfunding scene there are several reasons:

(1) Lack of Knowledge and experience: According to many interviewees, the most important reason is a lack of knowledge regarding crowdfunding in Belgium: both at the investors’ (the crowd) and entrepreneurs’ side.

Many Belgian entrepreneurs do not yet consider crowdfunding as a viable option to finance their project. In many cases they are not aware that the option exists, in other cases it is often deemed to be unrealistic, complex with a small chance of success. The same reasons are also valid for investors, they are often not aware or have insufficient knowledge in crowdfunding to consider it as a viable investment option.

Even Belgian crowdfunding platforms are still learning on how to handle crowdfunding projects in the most efficient way taking into account the current regulations. Therefore some platforms focus on one crowdfunding model (or one sector). For most platforms a lack of projects of high quality and with good potential is the main bottleneck for growth.

For the interviewees the main challenge for crowdfunding will be to raise more awareness and increase the knowledge of the crowd and entrepreneurs regarding the concept and possibilities of crowdfunding.

In other countries we have seen that from the moment several big crowdfunding success-stories are published (for example the Pebble Smartwatch), the growth of crowdfunding can skyrocket. In time when the Belgian crowdfunding scene matures and more and more success stories appear (such as the success story of Newsmonkey), accelerated growth could be achieved.

(2) Strict regulations Compared to our neighboring countries the Belgian regulations regarding crowdfunding can be considered rather strict. Although the main task of the regulations is to protect the investor and entrepreneur in the entire investment lifecycle, it can restrict growth in some cases.

Although the former Belgian Minister of Finance, Koen Geens, increased the maximum limit of raising capital, without being subjected to a prospectus, from €100.000 to €300.000 (providing that there is a maximum contribution of €1.000 per investor), several platforms still think this is a bottleneck for growth.

The platforms mention that in many cases investors want to invest more than €1000 per project, which means the project is still bound to the limit of €100.000. Increasing the maximum limit of raised funds would increase the potential of crowdfunding as a viable financing option and would reduce dependency on a private investor. In that case some potential risks should be taken into account for example the fact that the crowd stands to lose more money when a project fails or goes bankrupt due to a higher exposure.

If projects currently need to raise higher amounts, a potential solution would be to combine the money raised by crowdfunding with other sources of finance (such as a business angel investment, venture capital or bank loans) but this solution also has its limits.

“A few Belgian success-stories can generate a large boost in growth“

(3) Competition from foreign platforms Several platforms (such as KickStarter and Indiegogo) have evolved from a platform mainly active in their local scene to a global platform active in a large number of countries.

These platforms have a critical mass in terms of projects, as well as investors and can raise large sums of money (€10mio+). Therefore, some entrepreneurs and investors turn to a foreign platform instead of a Belgian platform.


The different crowdfunding modelsOverall we can currently observe three main crowdfunding models. In terms of raised funds, the 3 models are relatively similar. All three models are expected to raise between €600.000 and €800.000 in 2014. The different models have grown between 2012 and 2014 at slightly different rates. For the moment there is no model that dominates in Belgium.

FUNDS RAISED - 2012

Lending36%

Equity40%

Donations/Reward24%

FUNDS RAISED - 2013

Lending28%

Equity27%

Donations/Reward45%

FUNDS RAISED - 2014

Lending38%

Equity29%

Donations/Reward33%


When comparing the three crowdfunding models, we observe fundamental differences; not only with regard to the concept and vision but also regarding the types of projects, goals and themes, amount of funds raised and behavior of the investor:

• Operating method of crowdfunding platforms

A difference can be first observed when analyzing the operating methods of the crowdfunding platforms using different models.

Most platforms that offer equity and lending crowdfunding perform thorough analyses on the projects before allowing them on their platform. They analyze the potential and viability of the project and payback capability in case of lending. They will block projects from going online if they do not believe in its viability. They aim to have only a select number of approved “high potential” projects on their platform.

For the donation and reward model most platforms will not perform a thorough analyses before allowing them to go online, but they do perform a screening to verify that the project is not malicious or fraudulent. They prefer to have a broad intake of projects and to let the crowd pick the best projects.

This difference in approach partly explains why equity and lending crowdfunding platforms often have a higher success rate (funding goal reached) than donation/reward platforms.

• Funds raised

A second difference can be seen when we compare the average amount of funds raised by crowdfunding per project in Belgium. We can conclude that donations/reward projects often have the lowest funding goals: more than 49% of the Belgian projects raise less than €5000.

If we look at the lending model we observe that half of the projects raise a limited amount, while the other half raises large amounts. The reason for this phenomenon is that within the lending model there are some platforms which focus on social lending while others focus on commercial lending (to fund commercial activities). Social lending typically raises less money than commercial lending.

In the case of the equity-model mostly large amounts of money are being raised. The majority of the raised funds run between €35.000 and €70.000.

> 70k15k - 35k 35k - 70k5k - 15k< 5k

FUNDS RAISED EQUITY

FUNDS RAISEDLENDING

FUNDS RAISEDDONATIONS/REWARD

27%

73%

41%50%

9%

15%

13%

23%

49%


• Behavior of investors

A third difference between the crowdfunding models is the behavior of the investor. Regarding the donations/reward model we observe that on average only limited funds are donated by the crowd (in 95% of the cases between 1 and €300). The limited donations are due to a lack of a financial return on the funds.

In both, the lending and equity model, we observe that the average investment per person is significantly higher. The biggest investments are often made in the lending model because there is a higher financial guarantee on a return than in the equity model, where the outcome and return are more uncertain.

In both the lending and equity model many people are currently investing amounts, which are significantly higher than €1000 (which is the regulatory limit if you wish to raise up to €300.000 via crowdfunding). That is why most platforms are still bound to the maximum of €100.000 per project.

Commercial vs. Social crowdfundingThere are not only differences between the three main crowdfunding models, but the theme of the project is also a differentiating feature: does the project have a commercial purpose (business purpose) or does it have a social or local incentive (for example the organization of a local event)?


€ 500 000

€ 1 000 000

€ 1 500 000

€ 2 000 000

€ 2 500 000

2012 2013 2014*

Commercial TotalSocial


€ 500 000

€ 1 000 000

€ 1 500 000

€ 2 000 000

€ 2 500 000

2012 2013 2014*


NUMBER OF PROJECTS WHICH HAVE SUCCESFULLY

RAISED FUNDS USING CROWDFUNDING

50

100

150

2012 2013 2014*


> 1000300 - 600 600 - 1000100 - 300< 100

SIZE OF INVESTMENTEQUITY

SIZE OF INVESTMENTLENDING

SIZE OF INVESTMENTDONATIONS/REWARD

36%

55%

9%

46%18%

36%

38%

4%58%


While both the commercial- and social-themed projects are growing strongly, we notice that 85% of the money raised by crowdfunding goes to commercially-themed projects. However, when we look at the number of projects, which have been successfully funded, we notice that slightly more social projects have been funded in 2014 compared to commercially themed projects.

On average less funds per project are being raised by social-themed projects. These type of projects usually successfully raise amounts of between €100 and €15.000. Because social projects usually use the donation/reward model, they tend to have lower funding goals and the donated amounts per person are also smaller.

On average people donate or invest an amount between €1and €300 for social projects. There are however cases where more than €1000 is invested, but these are mostly social projects using the lending model (where a return for the investor is promised).

All three crowdfunding models are used to raise funds for commercially-themed projects. This type of project tends to have a higher funding need. The average investment per person is also significantly higher than

the socially-themed projects because, in the case of lending and equity, a return is promised towards the investor.

Social projects usually tend to raise money within their local network, social circle, neighborhood and from stakeholders of the project, while money raised for commercially-themed projects comes from a more broad and diverse audience, which is mainly targeted using an elaborate marketing and promotion campaign.

> 70k15k - 35k 35k - 70k5k - 15k< 5k

FUNDS RAISED COMMERCIAL THEME

FUNDS RAISEDSOCIAL THEME

2% 54%

44%

15%

10%31%

19%

25%

> 1000300 - 600 600 - 1000100 - 300< 100

AVERAGE DONATION / INVESTMENT PER PERSON

COMMERCIAL THEME

AVERAGE DONATION / INVESTMENT PER PERSON

SOCIAL THEME

18%

43%

25%1%

13%

7%

11%

68%14%


IV. The wisdom of the crowd

CrowdvotingCrowdvoting is a concept where a crowd can express their opinion regarding a project. Often during the crowdvoting process the crowd can vote whether or not they support a project or would invest in it. Some platforms have an obligatory crowdvoting phase. This means that a project needs to have a minimum number of votes from the crowd (or supporters/fans) before proceeding to the crowdfunding phase. The benefit of crowdvoting is that when a project collects the necessary votes, it already has a large support base, which in turn increases the chances to successfully raise the required funds in the crowdfunding phase. In addition, crowdvoting can also be used as a screening phase to determine whether the quality of the project is sufficient.

Can the crowd distinguish the high-potential projects from the rest? According to several platforms the concept of “the wisdom of the crowd” is not just a myth, it does really work in crowdfunding. The crowd, in most cases, is capable of distinguishing the high-potential projects from the lower-quality ones. The lower-quality projects will not reach their funding level, or if there is a crowdvoting phase, they will not get enough votes. Platforms experience that when projects barely pass the thorough analysis performed by the platform itself (if there is one), they often have more difficulty raising funds than projects which pass with flying colors.

Although it seems that the crowd is sufficiently wise to select the good projects, some platforms still perform thorough analyses before allowing a project on their platform. This is done to make sure that all projects on the platform have a certain degree of quality and thus maximize the chance to successfully raise funds.


The power of the crowdAnother not to be underestimated concept of crowdfunding is the power of the crowd. The benefit of using crowdfunding is not only that you raise funds, but also that after the funding process you have a crowd of ambassadors for your project. These ambassadors are potential customers and will promote and support your project, which significantly increases chances of project success.

A great example of the power of the crowd is the case of the Pebble Smartwatch. In this case Pebble raised significant funds using the donations/reward crowdfunding model. They promised contributors pre-order rights to the smartwatch when it was released. By offering this reward they already had their first customers secured. The crowd was very enthusiastic about the concept of the smartwatch and they strongly promoted and supported the project. This placed the Pebble Smartwatch in the spotlight which allowed Pebble to raise more funds and it resulted in more customers.


V. Crowdfunding and Banking

A potential win-winIn some countries there are cases of banks starting their own crowdfunding platforms or banks working together with existing crowdfunding platforms.

In some countries banks have started their own crowdfunding platforms (for instance ABN Amro has launched the Dutch crowdfunding platform Seeds).

The benefit for banks is that in case they cannot provide a loan to a company (for instance because there is not enough shareholder equity), they can still assist them with raising funds using crowdfunding. In certain instances if the company managed to raise funds by crowdfunding the bank could provide a bigger loan (because there is more shareholder equity).

An important attention point for banks is that investors assume that the projects on the bank’s platform are of high quality. If a project fails, the investor might blame the bank for their investment loss and the bank could lose the investors as a client. In addition the bank is providing their clients with the opportunity to invest in a company for which they are not prepared or able to provide a loan.

In September KBC announced that they will also launch their own crowdfunding platform using Bolero (an online investment platform). Using this platform they will allow Bolero users (the investors) to invest in start-up companies. The official launch of this platform is planned for December 2014.

A collaboration between crowdfunding platforms and banks is a potential win-win for both parties. This collaboration is possible for both the commercially- and the socially-themed crowdfunding projects.


There are various collaboration models from an occasional collaboration for a specific project (where a bank loan is combined with the money raised by crowdfunding) to an intensive collaboration (where the bank pledges to match a certain amount raised by crowdfunding).

� The benefit for the bank is:

• They can target and promote themselves to the segment of start-ups or non-profit/local organizations (depending on the theme). This will lead to additional visibility and increased brand awareness at the targeted segments which in turn should lead to an increase in sales and potential cross-selling of other products.

• The project risk is reduced (because the project is backed by the crowd (wisdom and power of the crowd) and in the case of equity funding, more equity would be available).

� While the benefit for the platform is that a higher funding potential can be offered to the project-owners/entrepreneurs, which will increase the popularity of the platform. This could lead to more projects and more investors.

In Belgium some crowdfunding platforms currently have limited collaboration with certain banks (mostly on a case-by-case basis). They will talk to a certain number of banks about a specific project to clarify the feasibility of combining the money raised by crowdfunding with a bank loan. This process is gaining popularity.

Nowadays, several platforms are actively investigating intensive collaboration opportunities with certain large banks and financial institutions. The banks are also examining which role they could play but at this moment no intensive collaboration has been established.

International trendThere are several cases in other countries where close and comprehensive collaboration between banks and platforms have been set up. One of the best-known collaborations is the partnership between Santander UK and the lending platform “The Funding Circle” (crowdfunding lending model). In this referral arrangement Santander will proactively refer small business customers to look for a loan on the Funding Circle platform.

There is speculation that by the end of the year this partnership will be expanded and that peer-to-peer loans will be combined with bank loans from Santander. This way it would be possible for companies to get bigger loans which the bank might otherwise not have been able to offer.


VI. Crowdfunding and the Public Sector

“The crowd thinks that it is the task of the government to finance large infrastructure projects“

Crowdfunding as a source of funding for the public and social sectorOrganizations which strongly depend on government funding often have a fixed budget from which they have to finance their operations. This means that when they want to perform new activities or investments they are not always able to acquire the additional required funding. Due to the savings in the public sector a growing number of organizations are experiencing these funding issues and often have to make hard choices in the activities and investments they want to make. In some cases they are therefore even obliged to look for alternative sources of funding.

In several sectors in Belgium such as the socio-cultural and educational sector crowdfunding is already frequently used to raise funds for specific projects or activities (for instance the purchase of a new projector for a local youth house, or renovation of a class room of a school etc.). Even in the healthcare sector there are already some cases where crowdfunding is being used to finance new projects or activities (renovation of parts of homes for the elderly, etc.). Ringland vzw is also starting an initiative to raise funds via crowdfunding to finance studies regarding the feasibility to cover the highway around Antwerp.

In our neighboring countries we see that crowdfunding is already a viable funding alternative for organizations which are dependent on government funding or have set budgets. Because in most cases the projects are socially- locally-themed, it is often easier to raise funds in a local crowd (e.g. when raising funds for a school project via crowdfunding, the parents of the children going to that school will more easily donate funds).

Over time it seems that crowdfunding will become an important alternative funding tool for the Belgian public sector, especially the cultural, educational and healthcare sectors, where there is often a fixed budget.


Can crowdfunding finance large infrastructure projects?Crowdfunding is already being used to fund smaller projects in Belgium (such as repainting classrooms in a school building) but can it also be used to finance large infrastructure projects such as the construction of an entire new school building, a bridge or even covering a highway?

There are several cases in other countries where crowdfunding was (partly) used to build a new road, walking bridge (in Rotterdam), etc. Even in the U.S.A. there is an ambitious crowdfunding project where more than $2.2Mio has been raised to build “solar roadways” where instead of asphalt, roads will be built using solar panels which generate electricity.

When analyzing the potential in Belgium, it seems that using crowdfunding to finance large Belgian infrastructure projects is less feasible.

Mainly because only limited funds can be raised (max. €100.000 or potentially €300.000 if regulatory requirements can be met). This often only covers a marginal part compared to the entire funding goal.

In addition, several stakeholders mention that it would be hard to convince the crowd to invest in infrastructure projects such as roads and bridges because the crowd has the opinion that it is the task of the government to finance these projects, not the crowd.


VII. Future Outlook

“In 2016 crowdfunding could raise €6Mio in Belgium.”

Outlook Belgian GrowthThe Belgian crowdfunding scene is expected to grow at a steady and impressive rate. Based on projections of historical data using growth models, it is expected that in 2016 up to €6 Mio could be raised using crowdfunding. Despite this strong growth rate, this amount is still meagre compared to neighboring countries such as the Netherlands and the U.K.

This growth prediction depends heavily on how the current factors hindering growth will be tackled. For instance if more awareness can be created and regulations are improved, this growth can significantly exceed the current prognosis.

If these factors are not tackled and no stimulus is given to the Belgian crowdfunding scene, less growth will be achieved and Belgium will probably fall further behind its neighboring countries.

GROWTH PROJECTIONFUNDS RAISED BY CROWDFUNDING

€ 1 000 000

€ 2 000 000

€ 3 000 000

€ 4 000 000

€ 5 000 000

Equity

2012 2013 2014*

Donations/Reward TotalLending

€ 6 000 000

€ 7 000 000

0,00,20,40,60,81,0

2015 2016


“The highest growth is expected in the lending model”

Crowdfunding modelIt is expected that all three main models will keep growing and will keep playing an important role in the Belgian crowdfunding scene.

In other countries we have seen over the years significant growth in the lending model (mainly in the commercial theme where crowd funded loans (Peer-to-peer lending) are given to companies to finance investments). In Belgium a similar trend is expected where the lending model will have the strongest growth, mainly due to the financial guarantees for the investor.

This model will be mainly used by companies (or organizations), which are more mature (but still have a limited size) and have steady cash flow, as an alternative to a bank loan (for instance for financing a new investment), whilst the equity model will in most cases be used by start-up companies (which are not yet generating cash).

Crowdfunding platformsCurrently there are eight active crowdfunding platforms in Belgium. Most of these platforms have a clear focus on one particular crowdfunding model and a specific theme or type of project. Some platforms even focus on very specific niches, such as the development of comic books or smartphone apps.

The fact that foreign platforms are becoming more active in the Belgian crowdfunding milieu poses a risk for local platforms. This foreign competition will probably only have a limited impact on platforms with a focus on a certain niche or platforms which focus on a social theme because local entrepreneurs will use a local platform to attract a local crowd for local projects.

The commercially-themed crowdfunding platforms will mainly be impacted because these types of platforms, are able to offer exposure to a large crowd, which is a critical factor. Besides that crowdfunding platforms can also only be profitable when they reach a certain size in terms of number of crowdfunding projects. Because gaining critical mass is so important for these type of crowdfunding platforms, a consolidation might take place in the Belgian scene. A similar trend has already occurred in other countries, where only the biggest platforms and niche platforms survive.


VIII. Conclusions


In 2014 Crowdfunding will raise more than €2Mio which is an increase of 80% compared to 2013. Although the Belgian crowdfunding scene is growing at an impressive rate, it’s still lagging behind the neighboring countries. The main reasons are:

1. Lack of knowledge & experience mainly on the investors’ and entrepreneurs’ side and, to lesser extent, at crowdfunding platform side.

2. Strict Belgian regulations concerning crowdfunding (maximum limit of raising capital without being subjected to a prospectus).

3. 3. Competition from foreign platforms.

Because the Belgian crowdfunding scene is still in the development stage, it has great growth potential. If the above mentioned issues are tackled over €6 Mio can be raised in 2016 using crowdfunding. However, if the Belgian crowdfunding scene cannot overcome the issues, it stands to fall even further behind or perhaps even miss the crowdfunding boat (and its benefits) completely.

A large and mature crowdfunding scene in Belgium could assist companies with attracting financing which in turn will lead to economic growth. Crowdfunding also gives social projects, which currently have limited to no options for funding, the chance to develop their undertaking.

The potential collaboration between crowdfunding and banking could further boost growth. It could lead to a win-win situation in which the platform would benefit by being able to offer a higher funding potential, while the bank would benefit from exposure and visibility created at their target segment. A successful collaboration can reduce project risk (due to wisdom of the crowd and that more equity is available in case of equity-funding) and lead to additional sales.

Crowdfunding could also grow to be a useful financing tool for organizations in the public sector, which almost exclusively depend on government funding to finance their operations. In light of the current economic situation, the budgets of these organizations are often under pressure and crowdfunding could help them to finance projects for which they currently do not have funding. Crowdfunding would however only be feasible with financing smaller and more local projects (such as funding for the renovation of a school classroom) and not for large infrastructure projects because the funds which can be raised by crowdfunding would be marginal compared to the entire funding need and because the crowd generally feels that it is the government’s job to finance such projects (for instance the building of roads or bridges) and not the crowd.

“Without action, Belgium stands to fall even further behind”

Contact us

Bart WalterusPartner KPMGT: +32 2 708 38 80E: [email protected]

Stéphanie WilliamsSenior ManagerStrategy & OperationsT: + 32 3 821 17 23 E: [email protected]

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© 2014 KPMG Support Services, a Belgian Economic Interest Grouping (“ESV/GIE”) and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Belgium.

KPMG ADVISORY Crowdfunding in Belgium – 2014static.lecho.be/upload/Crowdfunding-1440019.pdf ·...

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