EC supports “crowdfunding” as financing source for start-ups

The EC has today (3 May) published a new report which has concluded that crowdfunding, “if appropriately regulated”, has “the potential to be a key source of financing for SMEs over the long term”. In a statement about the report published on the Europa website today, the EC commented: “EU Member States have begun to put in place national frameworks to support the growth of the sector and ensure investors are appropriately protected.

“These national frameworks are broadly consistent in terms of the objectives and outcomes they seek to achieve, but are tailored to local markets and domestic regulatory approaches.

“As crowdfunding remains largely local and the sector is changing rapidly, there is no strong case for an EU level framework at this juncture.

“The Commission will keep developments in the sector under review, and meet twice per year with regulators and the sector.

“This will ensure the Commission is able to respond in a timely manner if further steps to support regulatory convergence are needed, both to promote the development of the sector and to ensure appropriate investor protection.”

The EC statement added: “Crowdfunding is still small but growing fast in Europe. 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.”

The EU Commissioner for Financial Stability, Financial Services and Capital Markets Union, Jonathan Hill, commented: “As part of our work to improve the funding conveyor belt for businesses, we are keen to support the development of crowdfunding models as a source of financing for entrepreneurs with bright ideas, start-ups and other SMEs.

Crowdfunding has been a popular financing option for a number of start-up companies that have been setting up new operations in the “on demand delivery” sector.