The Impact of ECSPR on European Crowdfunding with Oliver Gajda | GECA Podcast
The Impact of ECSPR on European Crowdfunding with Oliver Gajda | GECA Podcast
In this landmark episode of Crowdfunding Chronicles, we explore one of the most significant regulatory achievements in crowdfunding history with Oliver Gajda, Executive Director of Eurocrowd. The European Crowdfunding Service Providers Regulation (ECSPR) represents a groundbreaking shift from fragmented national rules to a unified framework that enables true cross-border crowdfunding across all EU member states. Oliver takes us behind the scenes of this remarkable six-year advocacy journey, revealing how a small NGO representing an emerging market successfully influenced European policy through persistent research, strategic partnerships, and unwavering commitment to the vision of borderless crowdfunding. From the initial white paper in 2012 through the final implementation in 2023, this episode uncovers the challenges, milestones, and unexpected support that made ECSPR possible. Learn how this regulation has already begun transforming the landscape for entrepreneurs seeking funding, investors looking for opportunities, and platforms expanding their reach. Oliver also shares insights on the practical implications for stakeholders, the professionalization requirements for platforms, and whether this European model could serve as a blueprint for other regions worldwide. This is essential listening for anyone seeking to understand how regulatory advocacy works, the future of European fintech, and the potential for truly global crowdfunding frameworks.
ALSO AVAILABLE ON
Share this article
Andy Field: Hello, everybody. Welcome to the GECA podcast brought to you by the Global Equity Crowdfunding Alliance. We’ve termed the series the Crowdfunding Chronicles, and I’m your host, Andy Field. I lead the GECA steering committee. And this podcast series is your go to source for insights into the world of crowdfunding, from policy changes to global trends and everything in between.
Today’s episode is particularly interesting. As we dive into the story behind a significant milestone for crowdfunding in Europe, and that’s the introduction of the European Crowdfunding Service Providers Regulation or ECSPR. This regulatory framework has essentially created a unified set of rules for crowdfunding platforms across Europe and our guest, our special guest today, has been instrumental [00:01:00] in making this happen.
So joining me is Oliver Gajda. Oliver is the executive director of Eurocrowd, and Eurocrowd played a key role in the ECSPR. We’re going to explore how Eurocrowd influenced this historic regulation, the process that led to its development, and what it means not only for Europe, but potentially for the global crowdfunding ecosystem.
And Oliver, welcome to the podcast. It’s a pleasure to have you here.
Oliver Gajda: Andrew, thank you very much. I hope I can fit the shoes that you, , laid out in your introduction.
Andy Field: It’s always a good introduction.
Andy Field: Okay, so yeah, so let’s, let’s jump right in. So for many in our audience, ECSPR represents a turning point for the company.
for the crowdfunding sector in Europe. , so to start with, can you share how Eurocrowd became involved in the process of developing what is essentially a unified regulatory framework? What was the starting point?
Oliver Gajda: Yeah, it’s actually a really good question because, , I don’t think there’s necessarily a starting point.
You know, when we started, that was in back in [00:02:00] 2011, 12, the first ideas of somehow creating a network and didn’t quite know which way to go. And at some point we put out a white paper that basically came out of, you know, different interactions, different stakeholders, and then crowdsourced with, I think, more than 50 people providing input.
That, at that time, you know, we had the financial crisis 2008 2009, , basically address the key issues that the economy was facing, you know, job creation, innovation, funding of small companies, at a time where policy was, let’s say a bit, a little bit disappointed about the way banking and another financial instruments had worked.
in and after the financial crisis. And so there was some some hope for innovation, I think, on their level. And that just started a discussion, right? So there was no real interest in creating a law at the point. But we were able to kickstart this discussion, [00:03:00] following on some other kind of general policy discussions on the idea of climating SME’s at the time. And we kept on it, we had some members that were very active at the time that had started into this market with the idea of being pan European rather than French or German or whatever.
And so that, that had a lot in, in basically creating drive and over from 2012 on over the next. for years, repeatedly putting forward small studies, data, engaging with individual discussions with policymakers in Brussels to keep this alive. And at the same time, we were very lucky that we had an outgoing commission that, you know, within the last year of their, them being in, in office, they wanted to do something innovative and quick results.
So we were quite interesting, at least to be looked at. And so crowdfunding became one of the first kind of [00:04:00] aspects of what we would now call the broader fintech area that actually achieved in the political discussion and crowdfunding in Europe.
Andy Field: Wow. So, yeah, I mean, so, I mean, that’s fascinating. Could, can you walk us through the process of getting from those sort of initial ideas to the actual legislation coming into force?
I mean, how long has it taken? I think we’ve got a rough idea from the dates you’ve mentioned, and what were some of the key steps that Eurocrowd took along the way to make this happen?
Oliver Gajda: Yeah, I, I mean, , it’s really good. I don’t know, of course, all the details either, but I have a, an idea. And so from, from our end, it was just really, The interest of a small number of crowdfunding platforms to operate Pan European.
And we, we drift this drove this idea home, but you know, we have the experience from venture capital market, which is nationally regulated under European directive. You always have the shortcomings of, you know, company law and tax law. You know, [00:05:00] investment funds often are, you know, national structures that like to operate in their languages.
And so here we had the digital aspect, the possibility to keep money flowing through, you know, an online service. So this was really one of our arguments. And that was one thing that the commission liked as well. But initially the market wasn’t big enough. So for us, that meant really nonstop studies. We did.
together with a number of law firms in partnership with Osborne Clark at the time, three times an analysis of all EU regulatory frameworks regarding crowdfunding. , and we, we shared this free of charge to policymakers. So this, this was a really good discussion point for them. , these were huge documents.
we did market studies. We, shared the data. And so we, had a number of people in different directed journals at the commission that were interested in crowdfunding that, that thought the idea was good, [00:06:00] but low level policymakers, mostly, you know, the initial push from the commission came from the top level.
When the outgoing commission left back then, famously, Michel Barnier, who then later negotiated Brexit, was in charge of the financial market and created a big conference in Brussels in 2013, which now out of nowhere on an industry that didn’t really existed because that was something that potentially could change how, you know, small companies are being financed.
So with this kind of in mind, we had a lot of policy level people in the European Commission that worked on this, even though the top level in the commission within the next commission had no interest in crowdfunding. that, that happens as well. So you could say that the big movement stored for a long time, but we were able to feed information into the lower levels.
And , with Brexit, we had a change in certain, high level positions within the [00:07:00] commission and afterwards found a much more open commission to this topic, which then had identified by that time through the information they gathered and studies they received from us and other people, had identified that.
What crowdfunding is nothing really particularly new, right, other than you collect money from individuals and distribute it to the internet, that the cross border issue was really a hurdle that could be addressed within crowdfunding because it was a digital service. So it was not about whether the platform is located.
And that is what the commission used to draft an idea for a new law. And so they asked us to do a study to deliver on that. aspect, especially specifically on operational and legal challenges, which we did again, together with some partners, provide to the commission on that basis, they were able to argue for the need for a new directive or law.
[00:08:00] Yeah. at the beginning, that was something they would, would still decide. And that was put forward. I mean, they decided 2017. So five years after we published our first white paper. And then published as a proposal in 2018. So for us, this is a five to six year journey of not knowing if something would come out of it, repeatedly working, persevering, you know, relying on members to share knowledge and help us to finance ourselves.
Yes.
Andy Field: Wow. I mean, a monumental effort. I think it could be said any, any particular milestones in that time period or challenges along the way that, that particularly stood out to you?
Oliver Gajda: Yeah, I think really, I mean a monumental effort at it was, you know, it was fun at the time. It was also challenging to sustain as an organization.
but as a small NGO representing a market that was at that time. not [00:09:00] relevant. It was quite interesting to see that we had a lot of support from the established financial market players. So, so the associations for venture capital, private equity, banking, we’re actually happy to discuss and exchange ideas.
And that was a really fruitful time and be, you know, engaged in this, was very important for us to, to have them buy in and, and their expertise as well. So that I think, helped us to keep going for a long time. and on the other side, it’s, I think it’s maybe underestimated in this, these whole discussions, but the low level policy.
officers at the commission that worked on the case basically kept believing that this was interesting. we would have given up if we wouldn’t have had these people within the commission. at the time where we had the change of commissioner and the topic was moved from the [00:10:00] kind of basically the main agenda and fintech was rolled into it became far more important.
Soon we had crypto coming and you know, all areas that to skate much faster than crowdfunding. Sure. And we would never have had any, any success if we wouldn’t have had the people in the commission that would have sought the connections with us, would have worked with us and, and, you know, encouraged us basically to continue.
Continue. So I think that that’s the, these two things, the support from basically, areas that we didn’t really expect support from at the time really, really helped us to keep going for the first six years. Yes.
Andy Field: Yeah, really stand out positives, actually. thank you for sharing that. So, so, ECSPR has now been in place for some time.
What do you think has been the sort of the looking, looking back over the last couple of years? What’s been the sort of the immediate implications for crowdfunding in Europe? And then maybe looking beyond Europe. Do you feel that it could serve as a model for other regions globally? [00:11:00]
Oliver Gajda: So good question. The first question is, so what has changed?
you know, what, what we had before is what you basically have probably everywhere else in the world, you have a regulatory framework that is written or not written for crowdfunding or partly written for crowdfunding in every member state in the European Union or in other, in the other country. And, But ECSPR has brought to this is that it largely harmonizes the way crowdfunding platforms operate.
Andy Field: Yeah,
Oliver Gajda: it doesn’t harmonize tax law or company law and so on. But of course, you know, how does a platform operate? How’s the supervision working? And it even carries the notion that a platform is you know, removed from national border. So it doesn’t matter where you are located. That is where your oversight happening as a platform.
And you can operate across Europe without interference from any other regulator, [00:12:00] which is, it’s really quite unusual. It’s I think one of the, if not the only financial service that has this kind of freedom. In the regulation. So this is a huge, huge step forward. What I think we may be overestimated was the willingness and the ability of platforms to take advantage of that.
Andy Field: Right.
Oliver Gajda: So what I mean is that most crowdfunding platforms in the, the 10 years before this law was basically published and came into effect, had established national presence, national market, national expertise. And we’re quite happy operating in the markets. And so for them now to move to a new regulatory regime that is definitely more costly, partly more rigorous.
So you need to have more compliance and feed without necessarily wanting to change the business model that I think has been a quite a big challenge [00:13:00] for many of them, but we need to see. on the other hand, and that’s what we’re still waiting for. It creates opportunities for every new player, downscaling from other financial services.
And I think that is what we are going to see more and more over the next few years. Players that want to exploit the pan European opportunities and maybe bring different professional backgrounds into the market. And that will create competition and more scale and more, more transactions.
Andy Field: Yeah. Yeah. That, that makes perfect sense.
Do, and, and just to, to that, the second point, do, do you think, I realize it’s personal opinion, but do you think that looking beyond Europe, you know, this model could, you know, this could serve as a model for, for other regions?
Oliver Gajda: True. , so at the time when it was negotiated between the European Commission, the parliament and the council, was the time when we also had Brexit happening.
Sure. , and [00:14:00] therefore the rule setting was basically a little bit protective. So we, we don’t have this third country regime where, you know, countries that are friendly with Europe can also apply this. And I believe, for a platform that wants to operate in Europe, it’s easily enough to come here, but it’s still, you know, an investment and it’s time and effort.
for other countries to replicate the law. I don’t know if it makes sense, because the framework here is really on the cross border activities. But if you scale it down and say, okay, you know, we look at the supervisory way and, you know, what the requirements for platforms, I think that that indeed could be something that, you know, can be used.
We were involved in, in some studies for non EU countries where they actually looked at exactly this and where, [00:15:00] you know, from the regulatory side, there wasn’t that much difference in how they wanted to approach it anyway. So this, this could have been used as a blueprint. It hasn’t in that case in hindsight.
So I think that that for sure is something that will happen anyway, if the market here in Europe skates a bit more. And I think this is where we are right now waiting for platforms to really make use of it and to become significantly bigger so that they can be showcased as an example abroad. And then, you know, the positive aspects of that will spill over for now, I don’t think that is going to happen.
I mean, not, not in the short term. Certainly not in the short term,
Andy Field: yeah, yeah. Okay, yeah, that, that makes perfect sense, thank you. , so for any of our listeners who may be entrepreneurs or investors, what do you think this has meant for them? How will the, well, how has the regulation, how potentially will it change the landscape for people who are looking to raise funds or invest in crowdfunding [00:16:00] campaigns?
Oliver Gajda: now this is my personal opinion. You have different, had different regimes and, you know you may have actually felt that they were better than the new one. Yeah. That, that can, can personally be the case. what you have here now is as, both as an investor or as a, an SME that looks funding is that you’re no longer restricted on your national market.
Yeah. So you can. invest across Europe on any platform. Okay. That’s language. You may have to, you know, you know, refrain from investing through platforms that don’t offer a language. You, understand that you speak, but in theory you can, and there is quite a few options already that, you know, you can feel happy with.
the same goes for, for any SME. , if, if you find that in, in your, you know, European member state, there is no crowdfunding platform or none that you do trust or want to work with. it’s possible to [00:17:00] go abroad and find a platform as well. So that is incredibly positive. what has to come with that is of course, that the platforms that now have basically since November last year, they are forced to apply the new rules.
and many have waited until the last few months to make the transition. What is really missing is that they professionally apply the new rules. There’s, of course, some time where, you know, also the regulators need to get behind it and platforms need to get used to it. But in one or two years, I think the prudential rules and the transparency rules will be fully applied and platforms will be Comparable across member states and so for an investor or for an SME looking funding, you should then be able to expect the same level of, you know, disclosure on platforms, the same level of clarity where you find information and what type of information.
And I think that will make it, much, much better. [00:18:00] But even without that, the security that you should feel as an investor or as a company to raise funding and knowing that your partners are supervised by a financial service authority, that they are, you know, required to have certain credential safeguards in place, including insurance and so on, is a huge step from every national set of rules that we had before.
And so that alone should basically give an impetus. To, be positive and, and be more active on the market. , and it should also for platforms be, you know, a marketing label. But I know from, from practice of speaking to platforms that it becomes. complicated to explain this to investors or to SMEs because they never cared about regulation, right?
They, they didn’t know the law before. They don’t know there’s a new law. They, they don’t really dive into this. So there’s a lot of I think, educational efforts necessary in the next one to two years for [00:19:00] platforms to really take advantage of that.
Andy Field: Yeah. Yeah. Yeah. Well, that’s, I mean, it’s really encouraging to hear from a, from an investor and from a business who’s looking to, to, you know, to gain investment that I think that’s really encouraging to hear.
So thank you for that. before we wrap up, we’re nearly at the, we’re nearly at our time limit here. have you got any practical tips for crowdfunding platforms, entrepreneurs, or investors, or any, indeed anybody, any stakeholder industry to navigate the, the regulatory landscape in Europe? Is there anything in particular that you’d point out there?
Oliver Gajda: no, I, look, I, it’s, I mean, even though it’s a really nice piece of law, I assume it’s also very complicated. And what I know is that, platforms all really without exception had to spend a lot of time in adjusting to the legal requirements. You know, involves sandboxes with regulators, discussions. If you don’t have an in house lawyer, it really requires [00:20:00] a dedicated law firm that is quite expensive.
Yeah. And so for the investor, this should be actually very promising because there’s a significant effort into the professionalization and the safeguarding of your interest as an investors being put into these platforms. so that, that I think is, is that, otherwise I’m not sure you need to understand legal issues as an investor, but you should of course make sure that the platform also does a good job as you had to do before, right?
How do they communicate? How do they source ideas? What type of due diligence, what are the, what are the structures of their investments? You know, we need to assume that regulators are not yet. fully on top of this market and that there are still some practices that, you know, over the time will kind of improve.
But, but for platforms, I think as long as you, as they are regulated under ECSPR, that is an absolute positive. There are in some countries still national markets outside of this regulation. [00:21:00] It’s largely Germany and Austria. I cannot see this, survive for much longer. But it depends on the, the national legislator, so it might continue one or two years.
But here you would have basically a choice between ECSPR and nationally, you know, regulated crowdfunding platforms in all other member states, it doesn’t actually make a difference. You only have this. And as a small retail investor, it is the only way to invest directly into startups that stay on an efficient.
And scalable way. Yeah. So that’s, that’s really, really good.
Andy Field: Fantastic. Oliver, thank you so much for sharing your valuable insights, your opinions with us today. It’s clear that ECSPR represents a big step forward for crowdfunding in Europe. And it’s actually exciting to think about how that could ripple into the, you know, the effects of that could ripple globally as well.
So, for those listening, if you’re involved in the crowdfunding space, whether it’s a platform operator, [00:22:00] entrepreneur, an investor, the changes we’ve discussed today that are already in place, they will have had a significant impact on the way you do business. , just be sure to keep an eye on how ECSPR is implementing itself and, and how it can benefit you.
And Oliver, thank you so much again for joining us. it’s been a pleasure having you on and thanks for taking the time to speak to us.
Oliver Gajda: Thank you very much, Andy.
Andy Field: Pleasure. No problem. And thank you to everyone for listening, for tuning into the GECA podcast. , stay tuned for future episodes. We’ve got several coming up in the near future.
We’ll continue exploring the evolving world of crowdfunding and the innovations that are shaping its future. So thanks very much. And we’ll speak to you soon.
Marketing to Unlock Crowdfunding Success for Startups and Platforms | GECA Podcast
Marketing to Unlock Crowdfunding Success for Startups and Platforms | GECA Podcast
Join Andy Field as he interviews Claudio Grimoldi, the dynamic founder of TurboCrowd, a specialist marketing agency that has achieved an impressive 96% success rate across 70+ equity crowdfunding campaigns, raising over €50 million. Fresh from captivating audiences at CrowdCon Brussels, Claudio shares his unconventional journey from event promoter to crowdfunding marketing expert, revealing the powerful analogy between running events and crowdfunding campaigns. In this must-listen episode, discover why crowdfunding is fundamentally a marketing operation, not a financial one, and learn the critical “pre-crowd” phase that 90% of startups skip to their detriment. Claudio exposes the four biggest mistakes that kill crowdfunding campaigns, explains why platforms can’t provide investors (and shouldn’t be expected to), and reveals his innovative reward schemes that make investors pledge before campaigns even launch. Whether you’re a startup preparing for crowdfunding, a platform seeking better clients, or an entrepreneur curious about European regulations, this episode provides actionable insights from someone who truly understands that without the crowd, there can be no funding. Packed with practical advice, real-world examples, and frank discussions about what really works in the competitive crowdfunding landscape.
ALSO AVAILABLE ON
Share this article
Andy Field: [00:00:00]Hello, everybody. I’m Andy Field. It’s great to be back hosting the crowdfunding Chronicles, the podcast series from GECA. I was recently attending CrowdCon in Brussels. This was a really interesting event for the industry. It was jointly hosted this year by EuroCrowd and Fintics. But while I was there, I couldn’t help to be impressed by the knowledge and enthusiasm of our special guest today.
He was speaking and he was presenting at the event, and he was talking to a whole room of equity crowdfunding stakeholders, And he had the audience totally captivated by what he had to say. And I kind of knew straight away that it would be great for him to come along and speak to our community here at GECA.
So I’m delighted to welcome Claudio Grimoldi. I hope I’ve pronounced that correctly, Claudio, from Turbocrowd.
Claudio Grimoldi:That’s perfect. Thank you very much. Yeah, better than the average Italian one, eh? Better than the average Italian one.
Andy Field:So Claudio is based in Milan in Italy. Um, Turbocrowd are a specialist marketing company. focusing on helping startups and crowdfunding platforms with their their overall [00:01:00] marketing strategies. And what we’re going to do today is we’re hopefully going to provide some, some insights and practical advice on how businesses can use their marketing tactics to succeed in the equity crowdfunding space.
So we’re going to touch on how a startup business can effectively prepare for an equity crowdfunding campaign. And how crowdfunding platforms can start to understand a little bit about how to market themselves so that they can attract the really high quality startups that they love to have on their platform.
So effectively offering some tips on how both startups and platforms can position themselves for long term success in what is, let’s be honest, a never increasingly competitive crowdfunding landscape. So welcome again, Claudio, and thanks for joining me today. I just wanted to start off by asking you to tell us a little bit about you, your background. How you came to start TurboCrowd.
Claudio Grimoldi:Andy, thank you very much. I will try to follow your hype, the hype you created before. And so trying to do my best. So I came here and it was like a roller coaster, I [00:02:00] would say, because, uh, I had, um, physical education degree. And before it, every time I’m, uh, I starting with a new work every time from scratch, never had a single day as an employee somewhere else.
So I was, a ticket seller, an, event promoter starting as a kid that was 18 years old, more or less. And then I was organizing, transports for, uh, the biggest, uh, international events and festivals in Europe. And, uh, a lot of people from Italy were coming from. So I starting the company, uh, which was, uh, ticketing one.
And at the moment we need, it was 2018. Uh, I was 21 or 22 at the moment when I started. And then some, some years later, We were like, okay, we need to boost it. So we need to raise money and how we can do it. And then, um, I saw completely randomly something about equity crowdfunding. And that was like, yeah, maybe crowdfunding at the beginning.
Sorry, because we saw about the reward. And then another guy told us, uh, you can run an equity crowdfunding, uh, instead of a reward [00:03:00] one, because, uh, you, you guys are offering a service and reward crowdfunding is more for, uh, products. Uh, so you, you need to think about equity. So I started to contact every platform in Italy and it was, uh, middle, , 2018.
And then we started it and we raised the 250, 000 euros. Uh, and I did it by myself and everyone was like, wow, that’s impressive. Because at the moment, Uh, like no one was raising, uh, lots of money, just, uh, just one startup, which was a startup Italia, which raises something like 1 million, but nothing more.
And they, everyone was like, how was it possible before starting an equity crowdfunding campaign? My only work was, uh, uh, uh, calling other people who already run one and asking her what was working and what wasn’t. And, uh, I learned something from it. And I was like, Hey guys, I’m from the marketing side [00:04:00] for events.
I was talking about before, um, and we, I recreated the same idea because if you think about it, crowdfunding, it’s a sort of event because, uh, it, it, it lasts, uh, two months for less and, uh, an event, uh, as a predeterminate, uh, duration. And then, uh, the, the event can host, uh, uh, a maximum of, um, attendees. And in the crowdfunding, you can see the same because it’s not about 18 days.
It’s about the capital you can raise, but it’s the same idea. So it’s something it’s limited by the offer and the time. And if you use the same ideas, you can recreate the same leverages. You can use it even in the events for marketing. And, uh, we started like this. And I was like, it’s pretty simple because it’s called crowdfunding.
So without the crowd, you cannot get any type of funding. So I was not waiting for any type of help from the crowdfunding platform. And I was pushing so much, [00:05:00] even without the crowdfunding platform. And I was the only one. I remember, I clearly remember when, uh, in that period we had some, you know, the startups, uh, competitions, startups, events, uh, something like that.
And lots of them were running, uh, equity crowdfunding, uh, operation, but I was the only one keep pushing and selling stuff. I was, I remember I was. I came from the streets for real. So for me, it was, I was like, if you don’t sell, you cannot eat. So it’s very easy for me. It’s a average day at work, but for others, they were like more into the fashionable stuff, startups, something like, I need my money because my startup will be the best one on a standard and poor 500, something like, and I was like, no, no, no guys.
That’s, that’s not the topic. We did it. And then after, after it, the, uh, crowdfunding platform told me, I think you have the skills, uh, to help others in order to raise money, uh, as you already did. So we started Turbo crowd. I started Turbo Crown in 2019. [00:06:00] So like I, I will not say one year later, some months later.
And it was a smart and clever idea because after we had a problem with the ticketing project, so we closed it. But then I will, I was already in with the crowdfunding, um, marketing. And we started from the equity because just to share with you in the South of Europe, we are more into equity crowdfunding, uh, compared to the North.
Where people are more into the lending crowdfunding and the UK, it’s completely another level when I say about the north, I’m talking about Finland, uh, uh, Oh, um, Netherland, uh, in the looks, the minor looks in general and something like, and, uh, right now we already followed something like 70, uh, campaigns.
Uh, who raised more than 50 million by equity crowdfunding. And I think we are the only one doing this with this track record. And, uh, also I’m very glad and happy to share with you that our success rate is 96 percent [00:07:00] just because equity crowdfunding is not the And do you think, uh, any, any different between just a process?
I would say it’s just a process. And if you can handle the process, you can get money. It’s something, uh, uh, which demand, um, it’s super demanding for you. But you can get a very big results if you put a lot of, a very good execution on it.
Andy Field:And really interesting, uh, actually how you make the analogy between the crowdfunding campaign and, um, an event, you know, and I, and I find myself, um, I have a marketing background too.
And I found a lot of the, the skills and strategies are very transferable between industries. There’s a lot of alignment between different industries and the tactics you employ. And, and that’s a really interesting one. I hadn’t thought of that before. So yeah, thank you for that. So, so that’s, that’s brilliant.
So in a nutshell, What, what does your business do? I mean, you’re a marketing company, right? I get that. But how, how do you position yourself as, as a specialist that helps startups prepare for, for crowdfunding? [00:08:00] Do you use a storytelling yourself? Do you explain your background and, and how you did it yourself, actually?
And, and, Yeah. How does that work?
Claudio Grimoldi:Yeah. At the beginning it was like this because they were like, uh, how can I raise money? And I was like, yeah, I already did it. So you can trust me. But right now they don’t care. And I’m not talking about this. It’s not about any, anything about storytelling. It’s just about the track record.
Because equity crowdfunding is, uh, especially it’s very, it’s something super impacting for your company just because you need to share your company with someone else. So you need to raise money. Every time I’m saying, You will be naked in the middle of the square because everyone can see what you’re raising, how much your data, everything.
Um, and it’s pretty difficult for someone else. So they need to trust you, uh, so much and more than furthermore, um, it’s very important to underline how usually when people are thinking about crowdfunding, they are going directly to, uh, obviously to a crowdfunding platform. Because they were like, I need to do a, uh, to raise a money with [00:09:00] crowdfunding.
So we contact the crowdfunding platform. So in order to get people before they went to a crowdfunding platform, we need to be very skilled and very, and very, um, well organized, uh, to convince them, uh, how can marketing can help them. So for us, it’s just about, uh, showing the track record. Still improving it and furthermore, um, giving for free a lot of advices.
Because every time I’m saying, well, just starting from the first meeting, I will never talk about TurboCrowd. At the end, if you want, I will send you the offer. Yeah, because it’s just but I don’t want to talk about this every time, because you need to understand how crowdfunding works. And when you start understanding how it works, you can see the pattern and the process.
And then you will understand by yourself that you can use [00:10:00] turbo crowd or not, but if it doesn’t start like this, just giving a lot of advices. And also you can see our website, it’s full of material free one.
And, uh, you can, we have almost 200 articles about crowdfunding. Uh, we have the 20 percent of our total. Our traffic from, uh, USA, because we already starting because we started one year ago, directly writing in English. And then we are translating everything in French, German, Dutch, and Spanish, uh, because we are promoting a lot of information on how to do it correctly and how you can raise money for your company.
So it’s just about this. And people will trust you because they were like, okay, I found, I already found, uh, Very good advices and good information from what you told me before. So we can come back to you when we decide to do it. And this is how we get clients.
Andy Field:Yeah, that makes sense. Yeah. And so, so a key focus of what you do then is obviously preparing the, the, the startup business for their crowdfunding venture with a crowdfunding platform.
And that [00:11:00] obviously a key part of that is to grow their own crowd. I mean, obviously, um, most crowdfunding platforms will require a business to have their own crowd before they even enter the process of, of listing on their platform. So an integral part. So yeah, that, that’s great. That, that all makes sense.
Um, so do you get involved in helping crowdfunding platforms attract startups as well?
Claudio Grimoldi:At the beginning, some, uh, a couple of, uh, pla crowdfunding platforms asked me about, uh, following their own marketing, but it was not working at all because we are more good into doing crowdfunding operation. So it’s something you can start and something you can close.
But, uh, the crowdfunding platform itself. Can ask for something very specific because we are more tech guys, uh, doing a CRM, marketing automation, data analysis, everything like this. So sometimes they are just asking for something, something in particular, but they created their own marketing team. So just when they started, they are like, can you help [00:12:00] me doing something or better than this, another indirect way, um, to do it, it’s, uh, providing us potential clients as a startups or companies and following them directly.
Because if they. Company at the start of the entrepreneur is doing a very good marketing. The platform itself is getting a lot of good traffic and potential investors. So they are like, I cannot pay, I can just focus on getting the best clients and best companies for raising money in order to get the best potential investors provided by the other company itself, who is already raising.
Uh, here and I want, I want also to underline what you were saying before you’re saying, uh, yeah, cloud funding platforms are looking for someone who already has a crowd or something like, and it’s super important. Remember the, uh, the, the business for a crowdfunding platforms, it’s raising money. It’s not about the launching campaigns.
That’s super important. So if you go to a crowdfunding platform and saying, okay, this is my pitch, this is my boring business plan. This is my boring business. This is everything like this. And what about crowdfunding? [00:13:00] They will reject you 100, not 100, but 90 percent of times. That’s because maybe you just need to prove something about your business and you can execute it in the best way.
But if you came to there saying, okay, I have something like, I’m just sharing with you an example, 50k pre committed, the pre commitment is someone else who already pledged money for your crowdfunding campaign, they will accept you. They are not looking for any type of, they are not looking so much into pre money valuation, something like, because the, the point is not about your, uh, financial stuff.
And so with equity, you’re not finding everyone. It’s misleading. These it’s incredible. Uh, they are someone who is preparing the best pitch or the best business business plan. As you can see, it’s not raising any money. Someone else who is doing it on Excel with a, with a, just a, just a single sheet, you can see, you can see is going to raise a lot of, a lot of million with it.
And trust me, every time I can see it, I can see the pattern.
Andy Field: [00:14:00]Great. Yeah. And I’m sure that happens quite a lot with our, um, I mean, we’ve got several, uh, platforms who are members of GECA or supporters of GECA. And I know from speaking to them that they will, they will reject many applications because there is simply no marketing and no crowd.
Yeah. So in that instance, is that, is that a scenario where, um, platforms could go to you or another specialist marketing company and sort of say, look, these guys have got what looks like a great, a great business. The potential is there, but they need some help in getting ready for, for launching on a crowdfunding platform.
Do you, do you get clients in that way as in almost referrals almost from, from crowdfunding platforms?
Claudio Grimoldi:Yeah, it’s always about this. It’s, uh, I would say 50, 50. So 50 percent are coming from our marketing and 50 percent as a referrals, uh, directly from a business advisors, financial advisors, platform itself, and something like, and, uh, we were, sometimes they are, uh, uh, speaking about us like the pre crowd [00:15:00] guys, because it’s always about doing the marketing before the campaign starts.
That’s the, that’s the real point. That’s the real point. Every time for, uh, For explaining it and the best I’m saying, because you’re from UK. Okay. And what, what, uh, what, what, um, football team do you support?
Andy Field:Oh, you don’t want to know that, but I’ll tell you, uh, Leicester City.
Claudio Grimoldi:Oh, Leicester. Yeah. Come on. Uh, we know Claudio Ranieri. Someone like, okay. So, uh, think about, um, Leicester. Uh, before going every Sunday, uh, play to play somewhere else, it’s, uh, doing a lot of trainings and that, that people are already, uh, doing a lot of trainings even before that weekend, because the, the, the week, because they are training for years and they are the best doing this and why someone is, wants to do a crowdfunding operation without doing the trainings.
So, and the training for crowdfunding is pre crowd. If you’re skipping the pre crowd is the worst mistake you can ever [00:16:00] do. Don’t skip it. And it’s very simple how to manage it. You need to raise the 90 percent of the minimum goal you set with the equity crowdfunding operation, nothing more. And you got them just using pledges.
So you’re, you’re getting out saying, okay, guys, I will, I will have this business or I already have this type of business. I’m running it and I want to improve it. And when I want to grow and something like want to be my shareholders in this case, and if you want to do it, you can pledge your money here.
And then, then I will share with you how you can, you can doing it a very smart and, um, efficient way. If you want to do it, uh, just let me know how many heroes you want to pledge or something like 100, 500, 1k, whatever you want. The sum of the every from, from, from every pledges must do the 90 percent of the minimum goal.
Then you can start doing campaign.
Andy Field:Yeah.
Claudio Grimoldi:You raise money and then you will come back. That’s the reason why we have the 96 percent of times succeeding that if someone is [00:17:00] complaining about the experience, the crowdfunding experience, it’s not about not getting the point. It’s about, it was too expensive or, and, or it was too slow.
So they thought about it was a cheaper and maybe faster, but it’s about your business and how you, what type of, um, Has assets you already build, uh, what type of, uh, people are you already committed to your businesses? It’s nothing, it’s not related just with the crowdfunding. It’s, it’s with your business because doing marketing means going to the market and you will see what, uh, what type of feed, the feedback the market will give you.
Andy Field:Yeah, that makes sense. Preparation is what you’re saying is, is absolutely key and cannot
Claudio Grimoldi:be missed. 99%.
Andy Field:Yeah, yeah, absolutely.
Claudio Grimoldi:99%.
Andy Field:So, something else that just springs to mind, our mission at GECA is to ultimately make equity crowdfunding borderless. You know, there’s lots of, there’s lots of things that are, um, that are going to need to be addressed to make that happen.
Um, but we’re, we’re starting to do that by building our community and, and asking people to essentially say that they, they agree to that, um, to that mission. So with that in [00:18:00] mind, how. Are you able to work with businesses? I mean, obviously you’re based in Italy, but I’m assuming you work with businesses outside of Italy and perhaps platforms outside of Italy as well.
Is that correct? Am I right in making that assumption?
Claudio Grimoldi:Yeah, yeah, I’m, I’m fighting against it because usually, um, people from every time I’m saying people from Germany, uh, France, Spain, and Italy as well are too much tied up with their own countries because we have big countries in Italy, uh, 62 million people living here.
And so, And I saw how people from, for example, the Netherlands or maybe someone from Ireland, for example, people from Luxembourg, people from little countries, for them, it’s clearly they need to start cross borders. So even for us, we have a problem more. You can hear my English, it’s stuck. Still something it’s very bad.
And for the Italians, every time it’s a nightmare going outside. And I was in, uh, in the [00:19:00] Netherlands, uh, started since, um, yesterday and three weeks before we, we met in, uh, Brussels in Belgium. So, yeah, we started to do it, uh, even outside of Europe. It’s just about business. Because for us, we don’t have to follow any type of compliance.
That’s super important. When I was, uh, speaking about crowdfunding, even, even, uh, equity crowdfunding before ACS PR. So the, the new regulation, uh, we have in Europe, I was like, I don’t care about compliance because it’s just about crowdfunding, about how to do it in the best way, but we don’t have to follow it.
The company has, so we don’t have any type of, uh, limit about our going, um, cross border. So it’s very important right now with the same, uh, regulation, it’s very easy, easy. Just you need to get in the trust by other companies, but it’s something you need to do. Likewise, it’s very important to underline how it’s forbidden.
So it’s illegal for the platforms to promote [00:20:00] a single crowdfunding operation. It’s very important to underline this one, because it’s a very, it’s a, it’s a gold asset for us, because the ESMA, uh, the regulator in Europe, say, says you cannot promote. a single campaign until they are going to close something like in the, in the, in the, in the last week.
Andy Field:Yeah.
Claudio Grimoldi:But before it, you need to promote everyone in the same way. So they cannot sell any type of promote and any type of marketing. They can promote everyone in a very big way, but they cannot promote someone in particular. And it’s very important. And they cannot sell anything like this. And it’s very important because they need to ask to someone else like turbo crowd, for example.
Andy Field:That’s very interesting. And that’s part of the European regulation, the one that’s been established since 2021, I believe.
Claudio Grimoldi:The European, no, no, no. In 2023. In the 10th of November, they started, they started in the 2021. It depends on which country. Uh, starting to, giving out to give out the license. I think the, the first one was in, I, [00:21:00] I can, I can check it out in the meanwhile.
Uh, uh, because you can see it’s, uh, on, uh, asthma, uh, registers do asthma au. Uh, you can see European crowdfunding service provider and the first one who had a, um, legal entity and authorization. Okay. 2021 Lit one. Yeah. The first one was, uh, in lit one. Yeah. The second one was in 2022 was Crowdcube in Spain, but we, we came in, in Italy, for example, was, uh.
It was a pain for real, because, uh, at, at the last day, we were not having sound, uh, anyone, uh, uh, had any type of, uh, license. So no one can, was not able to work.
Andy Field:Yeah.
Claudio Grimoldi:Uh, it was a very, very big problem. So we stopped for something like one month and then we’re starting again. But yeah. Yeah, someone already started.
Yeah, yeah, right now it’s it’s already done. It’s already about last year was a nightmare for everyone.
Andy Field:Yeah, right. Okay. Um, we
Claudio Grimoldi:don’t have any, we don’t, [00:22:00] we don’t need to get it. But you know, if someone else is not getting the license, we cannot work so much. That’s it. You’re working with people who must have the license.
Andy Field:Yeah, yeah, yeah.
Andy Field:Now that makes sense. Brilliant. Okay. So, um, So are there any trends or commonalities that you see on a typical basis without going into sort of specifics, but but just generally when you’re working with startups, anything that the platforms and we’ve got, we’ve got plenty of platforms that that support Gekko will be listening to this, that they should be aware of when they’re working with their clients that comes up time after time after time.
Is there anything that you could maybe pinpoint there?
Claudio Grimoldi:But from the sorry, I don’t get from the startup or company perspective or from the platform one.
Andy Field:So any commonalities and trends that are happening with startups that are very common, that may be mistakes that they’re making, or maybe things that they’re missing?
Ah, yeah, yeah, yeah. That kind of thing. Yeah, that platform should do well.
Claudio Grimoldi:Yeah, sure. Um, usually platform don’t have to be in a rush for raising money. [00:23:00] Uh, because, or they already get a very good, very good clients. I’m sorry for promoting it indirectly, but for example, Crowdcube, people are talking about, uh, Versailles Collective, but Versailles Collective is already a unicorn.
It’s a very big brand, very famous one and so on. So it clearly can raise money like everywhere because it’s, uh, It’s already an established business, like Revolut when he did it on Cedars was the same. Because Revolut Come on guys. It’s revolution. Uh, it’s like BrewDog at the end. BrewDog was BrewDog. I, this, it’s very simple for the crowdfunding platforms, but, but from the, uh, companies, the biggest problem, it’s thinking about crowdfunding as a standalone operation.
That’s, that’s every time I, and getting angry about this, it’s not about. It’s not about a standalone operation. It’s a part of your marketing investments, because thinking about if you’re, uh, if your business is already running, you can easily, uh, raise money, [00:24:00] maybe you need to think about something bigger, uh, in order to get more money thinking about like, um, uh, a restaurant who want to open a chains.
A chain of restaurants, uh, you need to do something bigger, but you already have people coming there. Maybe it’s a, it’s the best restaurant in the city and you can, you can use it even in others, but you need to think about, okay, I’m already doing it and I need to improve my own marketing. But if you didn’t start with about this, also, you need to, you need to start from the marketing side because otherwise you’re not going to raise any type of money.
But sometimes people are just, um. Showing off, uh, business plans and something like, and 99 percent of times startups are failing and they are dying. So why? People need to trust you because you’re not, others, others, it’s not about you, but others already, uh, did it very, very bad. So you need to think about something else.
And starting from the marketing side means, uh, having, can handling, having the possibility [00:25:00] to handle, uh, investments and potential clients and investors and so on. And just to auto, uh, uh, assist myself, I want to share with you that the best investor as you can get, it’s your client or potential one that’s super important.
Uh, I don’t know how out of Italy, but I know Italy very well as a, every type of assets here. It’s impressive. Uh, if you look at the Politecnico di Milano. It’s the best university in Italy, probably. And they are doing a report each year and you can see how much the investments are, uh, splitted by one, a single investor, a two time investor, three time investor, and so on till, uh, 10 times or more investor.
Um, the, it’s several investors are the 1. 18 percent of the world population who already done an investment. The 75 percent is, is a one time investor. And the 15 percent it’s a two time investors. So it means the 90 percent of the market it’s [00:26:00] already done. It means technically, if you go on a crowdfunding and more or less, it’s the same in, in the Europe, but these are, these are the number in it, numbers in Italy.
So it means if you’re starting with a crowdfunding operation, you need to think about, okay, technically the 90 percent of investors will came from me. And then we will understand how to interact with the company, with the platform. So from the platform perspective, uh, it means, uh, get someone who is already skilled with marketing or someone who wants to be committed in marketing and we will prove it before the campaign starts from the company perspective.
It means, uh, um, Proof you have a track record with your clients and so on. It means having also digital assets like something like I will send out a lot of marketing, uh, marketing stuff. I will promote myself with the articles. I already did paid advertising. I have a clean and CRM and processes with marketing, with sales and something like, and you will see it will go, it will work very well.
Andy Field: And I guess they’re the things, one of the questions I was going to ask you [00:27:00] actually was, is there anything that startup businesses can do to help themselves before they even engage working with a specialist marketing company like you? And I suppose you’ve just outlined some of the things there that actually they should be doing anyway, the specialist marketing person, you know, the CRM, managing a good CRM, um, that kind of thing.
Is there anything that, that maybe platforms can do to help them in, in, in that sense, or is that, or is kind of the advice then is to say, well, actually you probably do need specialist marketing support and working with a, with a firm like yours.
Claudio Grimoldi:I will, I will be stick with my own idea about, uh, speaking with TurboCrowd means, uh, getting a lot of good advice is more or less, and we will try to, not about how we can do our stuff.
So yeah, I will show you, uh, usually every time I’m speaking about four. biggest mistake, big, big mistakes people are doing when they raise money. So the first one about equity crowdfunding is thinking about the crowdfunding platform will provide you investors.
Andy Field:Yeah.
Claudio Grimoldi:That’s not the point. The crowdfunding platform is a, it’s a platform.
It’s [00:28:00] a software, um, um, able to monetize people. Yep. And it’s, uh, already, um, uh, our, how can we say it’s following the, the, the, the local law we, for you in, uh, in uk in, in Europe, it means they have a license, uh, in order to work in something like, and, uh, why you think about crowdfund, uh, crowdfunding platforms will provide you a lot of investors, uh, compared to YouTube.
Because if you record this video and we will put it is on YouTube, we are not expecting to be millionaire tomorrow, but YouTube beats, come on, it’s YouTube. And with a billion of people, uh, visiting it each year. And there is no, any type of crowdfunding platform who can even think about something like the 1 percent of YouTube, but people are still thinking about, yeah, I will, I will list my crowdfunding operation.
Then they will provide me investors. Why this is not happening. This is not happening. That’s the, that’s one of the biggest mistake. The first one, the second one. [00:29:00] Um, it’s about the thinking about these as a financial operation instead of a marketing one. Remember there is a reason why crowdfunding it’s called crowd breathe.
Again, a lot of and then funding without the crowd, you can, you cannot get any type of funding. So you need to get the crowd in order to get the funding. If you don’t want to do marketing, there is a, there are other ways to raise money. Crowdfunding means marketing. If you don’t want to do marketing, you can go to banks, you can go to VCs, you can do national grants.
There are plenty of other solutions in order to do it, but don’t do crowdfunding without it. That’s super important. Just to be clear and do something more. If you’re running a lending crowdfunding or real estate crowdfunding operation, because of real estate and because in Italy, in Italy, sorry, in Europe, equity and lending are still the same regulation.
And also real estate could be lending or equity as well. Um, It’s, it’s a bit different [00:30:00] because the platform will provide you, uh, the investors, but you need to work with the, uh, um, marketing in order to get, uh, get addressed by that or get accepted by the, the best platforms you’re, uh, you’re doing. But when you’re, when you’re starting a campaign, you’re already doing it.
It’s, it’s a bit different in this case, just for real estate and lending crowdfunding. Yeah. So third, the third error, which is the biggest one, it’s skipping the pre crowd phase where this, uh, spoke about this. So getting the 90 percent is the minimum goal. Yeah. It’s, it’s about pledging. And then there is the biggest, uh, the biggest question, how I can get pledges.
Uh, because if you think about this, uh, Andy will start the pre crowd phase and then we’ll ask Claudio. Hello, Claudio. Yeah. You want to put you, uh, do you want to pledge money for my crowdfunding operation? Um, And I will turn off the phone, probably I will close it. And it was like, yeah, but why? And I will start again.
And it wasn’t working again, again, again. And [00:31:00] people are like, when you will start the campaign, I will decide if I’m well invested or not. Okay. How to do it? How to do it? This is the second biggest mistake. And I want to, I want to be super clear about this. People are investing only because of your rewards.
If you think about, uh, running a equity crowdfunding operation, just giving out shares, you are probably, I would say just crazy. Yeah. Nothing more because everyone is giving out shares.
Andy Field:Yeah.
Claudio Grimoldi:Crowd equity crowdfunding means smart money. It’s not just about raising money. It’s about smart money. So people can provide something more than money.
And what, which one is the best investors as we already did before? Uh, we spoke before it’s the client or the potential one, and how we can interact with the client or potential one. Let’s. Uh, talk about someone who is doing helmets for, uh, you know, the [00:32:00] motorbikes and something like, my grandmother, we will, we will, we’ll be not interested in any type of helmets because she doesn’t have any type of motorbikes, obviously, but someone who is already, uh, in, Could be very interested in buying shares of someone else who is giving out something like the 10 percent lifetime discount of the helmets and a limited edition of their helmet based on how many they are investing, something like.
So every time we are creating the metric scheme for the rewards. Uh, so you need to mix the, Uh, product or service, uh, reward, the experience one and the financial one. When you sum everything like this, you will start promoting them, promoting them with a, uh, pre crowd phase. And you will say, Hey, Andy, we’ll say, uh, Claudio, uh, we’ll say to Claudio, Claudio, don’t turn off the phone, please.
One moment. Just one moment. Uh, if you pledge money, I will give you, when will you, when you will invest later, I will give you a better reward. Okay. Okay. That’s going to be a strategy. So you can get easy. You can get easily, uh, [00:33:00] rewards, uh, sorry. You can get easily, uh, pledges before using rewards and then you will increase the, uh, the speed of your pre crowd phase.
And then you will send to the campaign in very easy way, still using the, uh, the rewards and the metric scheme.
Andy Field:Yeah. Oh, yeah. That that’s really interesting. Really interesting way of looking at it. Thank you. Look, we’ve got about two minutes left. Um, yeah, I’m sure we can go on and talk about these. You’ve kindly agreed to come on and talk to us again in a bit more detail.
Some of the some of the other aspects of my best. Just to show you
Claudio Grimoldi:the last mantra.
Andy Field:Yes, I was just going to say that. The
Claudio Grimoldi:capital gain, yeah, the capital gain is potential, future, and taxed. So if someone else is giving you a capital gain, it will be in the future. Maybe they will give you out, and then you will pay taxes on it.
But the rewards are secure, are immediate, and they are, you don’t have to pay any type of taxes. So thinking about that, you will get, you will get [00:34:00] the 10 percent discount lifetime. It’s after the campaign, it’s secure, and you don’t have to be taxed on it. Just done.
Andy Field:Amazing. Thank you. That was a really, really interesting summary.
Um, and listen, I think those four things actually, which you’ve just ended with there, we could go into each of those in future episodes. It’s so interesting to discuss them. So thank you so much. Um, yeah, it’s been great. Like I said, we’ll go into things in a little bit more detail in future, future episodes.
Thanks everybody for listening today. Um, I’d like to thank everyone for listening, whether you’re streaming, whether you’re downloading, whatever, and We’ll be having more episodes, um, in the near future. We’re recording, uh, three episodes in the next few days, actually. So they’ll be coming out thick and fast.
So thanks everybody for listening to us. And thanks again, Claudio, for joining us today. Thank you.
Claudio Grimoldi:Thank you to us. Thanks everyone who listened to this podcast.
Andy Field:Thanks.
Welcoming Konstantin Boyko to the GECA Steering Committee
We are excited to announce that Konstantin Boyko, CEO/Co-founder of LenderKit and Crowdspace, has joined the Steering Committee of the Global Equity Crowdfunding Alliance (GECA). Konstantin brings a robust background with over 15 years in the FinTech and crowdfunding sectors, enhancing our collective expertise.
Profile of Konstantin Boyko
Konstantin's contributions to the crowdfunding world through LenderKit— software that facilitates the launch of capital-raising and crowdlending platforms—are well-recognized. His work has influenced crowdfunding operations in regions including MENA, USA, Europe, and Asia, reflecting his global outlook and commitment to financial technology innovations. Additionally, his involvement with CrowdSpace, an educational hub for the crowdfunding community, demonstrates his commitment to fostering industry growth and collaboration.
His engagement in substantial industry research and analysis, particularly in collaboration with the Crowdfunding Research Center in Adger, Norway, underscores his commitment to the crowdfunding community's growth and learning. Konstantin's academic pursuits, including an advanced study in Mathematics, equip him with a unique analytical approach to solving complex FinTech challenges.
As a new member of GECA's Steering Committee, Konstantin will help guide our strategic direction, particularly in enhancing technological adoption across global markets. His vision for integrating advanced digital tools aligns with GECA's goals of fostering accessible and efficient crowdfunding platforms worldwide.
Konstantin's involvement is set to be instrumental in our ongoing initiatives, contributing to our mission of shaping a seamless and inclusive framework for global equity crowdfunding. Welcome, Konstantin! We look forward to the innovation and leadership you bring to our alliance.
For further information on Konstantin’s initiatives, please visit Lenderkit and Crowdspace
CrowdCon 2024: Strategic Insights for GECA as We Work Towards a Unified Future for Equity Crowdfunding
The 13th edition of CrowdCon, held on September 26-27, 2024, in Brussels, served as a significant forum for the European crowdfunding sector. Co-hosted by Eurocrowd and Fintics, the conference brought together industry leaders to address complex issues around regulatory alignment and the evolution of digital finance. Established in 2013, Eurocrowd has positioned CrowdCon as a central event for shaping the future of crowdfunding through rigorous policy discussions and cross-sector collaboration.
GECA’s Strategic Engagement at CrowdCon 2024
At CrowdCon, the Global Equity Crowdfunding Alliance (GECA) took a dedicated approach, taking part in key discussions on regulatory convergence within a growing and often challenging digital finance ecosystem. This year’s event presented GECA with an invaluable chance to expand its network and learn from those who have previous experience in navigating regulatory complexities. In a landscape where EU crowdfunding has often been constrained by fragmented regulations, GECA’s involvement at CrowdCon represents an important step in positioning itself as a committed industry partner, focused on progressing sustainably on a Global level within this rapidly evolving field.
EU Market Challenges and the Evolution of Crowdfunding Regulations
The EU’s crowdfunding sector has historically trailed other global markets, largely due to regulatory fragmentation, which has hampered cross-border operations and elevated compliance costs. It could be said that this complexity has inhibited platform growth and limited financing diversity for small businesses and investors.
In November 2021, after years of advocacy and foundational work by Eurocrowd, the EU introduced harmonized crowdfunding regulations, granting platforms the ability to apply for an “EU passport” to operate across member states under one set of rules. This regulatory milestone reduces entry barriers, streamlines platform operations, and expands cross-border investment opportunities, all while enhancing investor protections. The framework is seen as a crucial, albeit challenging, pathway to transforming the European crowdfunding landscape.
GECA’s Mission and Approach at CrowdCon
For GECA, CrowdCon 2024 was an essential opportunity to contribute meaningfully to industry dialogue on regulatory and operational change in crowdfunding. Andrew Field, Executive Lead of GECA’s Steering Committee, led the alliance’s efforts, emphasizing that GECA aims to advance regulatory conversations and build a robust network of industry supporters while remaining acutely aware of the task’s magnitude. GECA’s objectives for CrowdCon included:
- Knowledge Exchange: Engaging with stakeholders to understand the practical impacts of EU regulations and learn from early implementation successes and challenges.
- Visibility and Advocacy: Communicating GECA’s commitment to data-driven policy-making, with an emphasis on working collaboratively to gather insights from across the sector.
- Networking and Learning: Learning from industry veterans and peers, particularly leveraging Eurocrowd’s substantial experience, and fostering best practices for regulatory engagement.
This involvement underscored GECA’s commitment to achieving an investment ecosystem that promotes innovation—one that will require a collective and sustained effort from all stakeholders. GECA’s dedication to bringing meaningful change was articulated but it was also emphasized that this journey is an incremental process requiring both collaboration and a profound understanding of the complexities involved.
Key Takeaways from CrowdCon 2024: Progress and Future Challenges for Crowdfunding
- Regulatory Developments and Progress:
Mindaugas Valiulis from the European Commission led a discussion on the European Crowdfunding Service Providers Regulation (ECSPR). Three years into its implementation, ECSPR has achieved considerable progress. However, as Valiulis noted, unifying Europe’s crowdfunding landscape remains a work in progress. Joachim Schwerin echoed this, emphasizing the importance of ECSPR in creating a cohesive, cross-border environment for innovation but acknowledging the challenges that persist. - The Global Expansion Debate:
A panel discussion explored the complexities of international crowdfunding expansion, with Dacxi Chain providing insights into the potential of blockchain to bridge European and international markets. Ed Ludbrook - founder of Dacxi Chain, discussed the role of distributed ledger technology in facilitating large-scale investment from North America and Asia-Pacific into European projects, which, while promising, requires careful regulatory navigation to succeed globally. - Blockchain Innovations in Crowdfunding:
The potential of Distributed Ledger Technology (DLT) in equity crowdfunding was highlighted by Andreas Knopf from Invesdor and Dr. Johannes Schmitt of Nyala, who discussed blockchain’s role in simplifying bond registry processes. These advances are part of an emerging trend where digital innovation supports increased transparency and efficiency in financial products, though substantial regulatory groundwork will be needed for widespread adoption. - Crowdfunding for Social Good:
In a session led by Giselle Borg Olivier of Zaar Crowdfunding, discussions focused on the societal impact of crowdfunding, with leaders such as Charlotte Brandsma of Growfunding and Nuno Jorge of Goparity emphasizing the importance of public trust and engagement. These discussions highlighted crowdfunding’s capacity to fund community-centered initiatives, revealing its broader role as a social tool as well as a financial mechanism.
Key Insights and Emerging Trends in Global Equity Crowdfunding
- EU as a Global Benchmark:
CrowdCon discussions affirmed that Europe’s approach to regulatory harmonization could serve as a model for other regions. However, adapting this framework on a global scale will require substantial, coordinated efforts from regions worldwide to accommodate diverse financial ecosystems. - The Vision for a Global Crowdfunding Framework:
Attendees were optimistic about Europe’s progress and recognized the potential for similar frameworks in other regions to unlock international crowdfunding opportunities. Yet, these frameworks will need careful customization and collaboration to support meaningful cross-border investment. - Pathway to a Globalized Equity Crowdfunding Market:
Europe’s regulatory advances provide a promising foundation, but achieving a truly unified, global crowdfunding landscape will demand sustained collaboration and a deep understanding of regulatory constraints across regions.
Reflecting on GECA’s Growing Role and Future Directions
GECA’s Strategic Vision
Andrew Field’s session on “Innovation in a Borderless Investment Landscape” encapsulated GECA’s commitment to fostering a unified crowdfunding environment. During this discussion, Andrew outlined GECA’s strategy: a steady, multi-step approach toward becoming a trusted industry partner to help promote (where necessary to facilitate innovation) positive regulatory change. His insights conveyed GECA’s commitment to working alongside stakeholders, learning from the challenges they have faced, and positioning GECA as a practical, adaptable ally in a complex industry.
The positive feedback received from other delegates underscores GECA’s potential as a contributor to industry-wide change. However, Andrew was keen to stress that the journey toward a borderless investment ecosystem requires not only ambition but also a readiness to listen, learn, and refine strategies as GECA grows within the field.
Feedback and Growing Influence of GECA
Participant Reactions and Expanding Global Engagement
Attendees appreciated GECA’s constructive, solution-oriented approach to regulatory harmonization and were encouraged by the alliance’s commitment to engaging with complex industry issues. Notably, GECA’s network of supporters now extends beyond Europe, reaching regions such as the U.S., New Zealand, UAE, and Africa. This expanding international presence highlights GECA’s resonance in diverse markets, reinforcing its potential to build a harmonized framework for equity crowdfunding.
Increasing Relevance and Strategic Path Forward
The insights gained at CrowdCon validate GECA’s mission and reflect an increasing openness within the global crowdfunding community to align on best practices. As GECA grows its network and continues to engage with key stakeholders, its role as a catalyst for harmonization in equity crowdfunding becomes more attainable yet remains anchored in the need for sustained, collaborative effort.
Next Steps: GECA’s Strategic Vision and Planned Actions
- Building on CrowdCon Insights:
The conference provided GECA with valuable input, which will be instrumental in refining its strategic initiatives. The alliance is committed to making incremental changes that reflect both the needs of its members and the broader crowdfunding landscape. - Actionable Next Steps:
GECA will prioritize translating CrowdCon insights into tangible initiatives, ensuring that its approach aligns with the practical requirements of stakeholders and supports sustainable industry growth. - Continued Research, Engagement and Dialogue:
Looking ahead, GECA will host events that foster ongoing dialogue, helping members stay current with global trends and challenges in the equity crowdfunding sector. These sessions are designed to nurture collaboration, promote shared learning, and empower stakeholders to shape the future of equity crowdfunding. GECA will utilize it’s growing connection to conduct high quality primary research that will identify and capture the true needs and desires of start up businesses, investors and equity crowdfunding platforms on a Global basis.
Conclusion: Moving Towards a Unified Equity Crowdfunding Future
CrowdCon 2024 offered GECA critical insights into the current and future state of equity crowdfunding, with discussions underscoring a shift towards regulatory harmonization. However, achieving this vision will demand dedication, cooperation, and strategic adaptability. The industry’s support of GECA’s mission reflects a collective readiness to address regulatory challenges, but the path to a unified crowdfunding ecosystem requires both ambitious goals and a grounded understanding of the work required.
Invitation to Join the Mission
As GECA advances its efforts, it invites current and prospective supporters to join this journey, contributing to the development of a global crowdfunding framework. The insights from CrowdCon 2024 mark an important milestone, setting the stage for a future where cross-border investment can flourish through collaboration and informed, deliberate action.
Welcoming Aaron Shafton to the GECA Steering Committee
We are thrilled to announce that Aaron Shafton, Senior Director at DealMaker Securities (an affiliate of DealMaker.tech), has joined the Global Equity Crowdfunding Alliance (GECA) Steering Committee. Aaron brings a wealth of experience, passion, and strategic vision to the table, and we are thrilled to have him on board as we continue to strive to shape the future of global equity crowdfunding.
Aaron Shafton: An Innovative Leader in Capital Markets
Aaron’s career spans various industries, including fintech, e-commerce, and finance. Prior to joining DealMaker, he held positions at companies such as Shopify, Capital One, and Procter & Gamble. His diverse experience has provided him with deep insights into online capital raising and strategic business growth.
Joining DealMaker in 2019 as an early team member, Aaron played an important role in the company's impressive growth, and helped scale the team to over 100 employees. He has contributed in transforming DealMaker into a powerhouse in the equity crowdfunding industry. At DealMaker, Aaron leads a team focused on compliance, strategic partnerships, and capital markets innovation. His role is critical in guiding companies through sophisticated, large-scale transactions, ensuring they leverage DealMaker's cutting-edge technology to raise capital efficiently and effectively.
Aaron Shafton’s Role on the GECA Steering Committee
As part of the GECA Steering Committee, Aaron brings his deep expertise in capital markets and his innovative approach to equity crowdfunding. His insights will be invaluable as GECA works to create a truly borderless ecosystem where companies can raise capital from a global audience. Aaron’s commitment to community-building aligns perfectly with GECA’s mission to foster cross-border collaboration in equity crowdfunding, making investment opportunities accessible to everyone, regardless of geographical location.
We are excited about the impact Aaron will have as we work together to shape the future of equity crowdfunding. His leadership and forward-thinking approach will be critical in driving our collective vision forward, ensuring that equity crowdfunding becomes a mainstream avenue for companies and investors alike.
Welcome, Aaron, to the GECA Steering Committee! We look forward to collaborating with you and learning from your expertise as we continue on this journey toward a global equity crowdfunding future.
For more information on DealMaker, visit the DealMaker.tech website.
The Motivations and Implications of Retail Investors Investing Across Borders
As financial technology continues to evolve, the rise of cross-border crowdfunding and investment opportunities has opened a new frontier for retail investors. Historically, angel investors and venture capitalists were the primary sources of early-stage funding for startups, with geographical proximity playing a significant role in investment decisions. However, today’s retail investors can now participate in cross-border equity crowdfunding (ECF) with the click of a button, diversifying their portfolios with international ventures. But what motivates these investors to take on the added complexities of foreign markets, and what implications does this trend have on the global funding landscape?
Fragmented Capital Markets: Barriers and Opportunities
Cross-border investments have long been constrained by fragmented capital markets, particularly within regions like the European Union (EU). Each country in the EU operates under distinct tax regimes, legal frameworks, and regulatory standards, which limit the ease with which retail investors can support ventures in neighboring countries. While regulatory initiatives, such as the EU’s Capital Markets Union (CMU), aim to create a more integrated financial ecosystem, significant hurdles remain.
For instance, tax incentives that encourage local investing often disincentivize cross-border participation. The UK's Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) offer generous tax breaks to investors, but these benefits are restricted to domestic investments. As a result, retail investors may be less motivated to invest internationally, where such financial advantages are unavailable.
This fragmentation has led to a preference for local investment opportunities among angels and retail investors alike. Many cite ease of access, lower risks due to proximity, and the ability to personally monitor and engage with investee companies as reasons for their home-country bias. In many cases, information asymmetry—a lack of sufficient, reliable data about foreign ventures—also plays a role in this localized approach.
However, as crowdfunding platforms mature and scale, they are offering retail investors an alternative route to international markets, facilitating greater transparency and making investment opportunities more accessible. These platforms present a solution to the fragmented capital market by leveraging technology to bridge gaps in information and communication across borders.
Crowdfunding as a Bridge to Cross-Border Investment
Crowdfunding has emerged as a popular mechanism for overcoming traditional barriers to early-stage financing, particularly for retail investors. Equity crowdfunding (ECF) allows individuals to buy shares in startups or growing businesses, often with smaller ticket sizes compared to venture capital or angel investments. Retail investors, once sidelined in these early rounds of financing, can now contribute to global ventures via platforms that transcend borders.
This has led to a significant scaling of the audience for early-stage investments. The global crowdfunding market, particularly strong in Europe with the UK leading, has demonstrated rapid expansion. According to Polaris Market Research, from a valuation of USD 19.86 billion in 2023, the market is projected to grow to USD 22.12 billion in 2024 and is expected to reach USD 72.88 billion by 2032. During the forecast period from 2024 to 2032, the industry is anticipated to record a compound annual growth rate (CAGR) of 16.1%. This substantial growth underscores the increasing appetite for alternative investment vehicles. As crowdfunding platforms continue to expand internationally, they bring together a diverse pool of investors and startups from different regions, enabling cross-border participation in ways previously unimaginable.
Investor Motivations: More than Just Financial Returns
Research into the motivations of retail investors in equity crowdfunding reveals that financial returns are often not the primary driver for participation. In fact, studies show that intrinsic factors—such as emotional engagement, novelty, and a desire to support innovative ventures—play a crucial role in motivating cross-border investments.
In emerging markets like Malaysia, for instance, non-financial motivators such as trust, aesthetic appeal, and the emotional value of supporting a project outweigh traditional investment incentives like risk-adjusted returns. This trend aligns with the broader behavior of millennial investors globally, who are increasingly interested in investments that resonate with their values, whether that’s social impact, environmental sustainability, or technological innovation.
A study by M. Rajeswari and R. Magesh in India further highlights this trend, showing that younger, lower-middle-income investors are drawn to the equity crowdfunding model despite its higher risks, because they see it as a way to participate in the entrepreneurial ecosystem and make a difference, even if financial returns are not guaranteed.
Cross-Border Crowdfunding: The Role of Investor Attention
While crowdfunding platforms can scale their audience globally, attracting cross-border investments requires capturing investor attention. The "Attention Across Borders" study by Markku V.J. Maula and Anna Lukkarinen highlights the importance of investor attention in securing cross-border investments. Their research found that campaigns receiving international attention are significantly more likely to attract foreign investments.
This attention is often driven by targeted marketing efforts and the involvement of team members who share a nationality with potential investors, a factor known as co-nationality. For example, ventures with diverse teams may have an easier time attracting international backers because their team composition resonates with a broader audience.
However, once attention is captured, traditional barriers like geographic, cultural, and institutional distance become less relevant. Instead, platforms and ventures must focus on maintaining this attention through sustained engagement, transparency, and effective communication. Digital platforms like Invesdor, a European equity crowdfunding platform, have shown that with the right marketing and visibility, ventures can successfully secure cross-border investments despite the complexities of distance.
Policy Interventions and the Path Forward
As retail investors become more involved in cross-border crowdfunding, policy interventions are essential to ensure a level playing field and protect investors from the risks associated with international ventures. Harmonized regulatory frameworks, such as those being pursued by the EU under its CMU initiative, are crucial for scaling cross-border investment opportunities. These regulations aim to reduce the friction caused by legal, fiscal, and governance disparities between countries, making it easier for retail investors to participate in foreign ventures.
Platforms must also play a key role in educating retail investors about the risks and opportunities of cross-border investments. Tools that facilitate automated portfolio diversification, along with secondary markets to exit investments early, can help reduce risk and increase investor confidence. Furthermore, robust risk-assessment tools and transparent reporting mechanisms are necessary to mitigate the information asymmetry that continues to plague cross-border investments.
In addition to policy support, there is a growing recognition that angel networks and syndicates could help retail investors navigate cross-border deals. These networks could serve as intermediaries, building trust between investors and foreign ventures, while offering local expertise and due diligence that retail investors may lack. Angel groups that operate internationally, like Keiretsu Forum, have demonstrated that a chapter model—where networks in different countries operate under the same umbrella—can facilitate cross-border collaboration and investment more efficiently.
Scaling the Audience for Cross-Border Crowdfunding
The scaling of crowdfunding platforms into the international arena marks a pivotal shift in the global investment landscape. Cross-border crowdfunding not only democratizes access to high-potential ventures but also opens the door to greater financial inclusion. By allowing retail investors to participate in early-stage financing across borders, these platforms provide an alternative to the traditionally exclusionary world of venture capital and angel investing.
For entrepreneurs, the implications are profound. Successful crowdfunding campaigns often rely on a mix of domestic and foreign investments, with studies indicating that 40% of successful campaigns in Europe depend on cross-border capital to meet their funding goals. For startups seeking to scale globally, attracting international investors through equity crowdfunding can be the first step toward entering new markets and expanding their business beyond local borders.
For retail investors, the opportunity to participate in cross-border crowdfunding offers a chance to diversify portfolios and support ventures that align with personal values, but it also comes with challenges. Navigating regulatory environments, understanding foreign markets, and managing currency fluctuations are just a few of the hurdles that investors face. However, with the right tools and support from platforms and policy-makers, these barriers can be mitigated.
The Future of Cross-Border Investing
As crowdfunding continues to mature and expand across borders, it is reshaping the way retail investors think about early-stage financing. No longer bound by geography, investors can now engage with ventures around the world, motivated not only by the prospect of financial returns but also by emotional and social factors.
The implications for the global funding ecosystem are significant. Cross-border crowdfunding is democratizing finance, enabling retail investors to play a more active role in the entrepreneurial landscape and offering startups a new avenue for raising capital. For policymakers and platforms alike, the challenge lies in creating the right infrastructure—harmonized regulations, investor education, and risk management tools—that allows cross-border investing to thrive, while protecting the interests of retail investors and ensuring the long-term sustainability of this new financial model.
As the global crowdfunding ecosystem evolves, the next decade could see retail investors become major players in cross-border venture funding, potentially transforming how startups raise capital and scale globally. The future of cross-border equity crowdfunding will depend on the ability of platforms, policymakers, and investors to adapt to this new reality, embracing both the opportunities and the risks that come with investing across borders.
Closing Thoughts and Upcoming GECA Initiatives
In addition to exploring the current dynamics of cross-border crowdfunding, GECA (Global Equity Crowdfunding Alliance) is currently undertaking its own research among UK investors to delve deeper into their attitudes towards overseas investments. This research aims to uncover the motivations, apprehensions, and preferences of investors when considering funding opportunities beyond their domestic borders. Stay tuned for the revealing findings and insights from this study, which promise to enrich our understanding and strategies in the ever-evolving landscape of global equity crowdfunding.
GECA to Present at CrowdCon 2024: The Future of Borderless Equity Crowdfunding
The upcoming 13th CrowdCon & 4th Fintics Joint Conference in Brussels, on 26th & 27th September 2024, promises to be a pivotal event for the European crowdfunding ecosystem. This year's theme, "Financial Fusion: Bridging Gaps, Embracing Innovation, and Shaping the Future," highlights the growing importance of cross-border financial solutions. As a key player in the sector, the Global Equity Crowdfunding Alliance (GECA) will play a central role in shaping the conversation around borderless equity crowdfunding globally.
We are thrilled to announce that on day one, Andrew Field, Executive Lead of GECA’s Steering Committee, will be hosting Breakout Session 2: Global Equity Crowdfunding Alliance (GECA): Innovation in a Borderless Investment Landscape (15:40 on 26th September). The session will introduce attendees to GECA, explain our mission and vision and touch on the challenges and opportunities of expanding crowdfunding beyond borders, to create a unified global equity crowdfunding ecosystem.
Hosted by EuroCrowd, CrowdCon is the only event in Europe dedicated exclusively to crowdfunding, bringing together the most influential actors, policymakers, and advisors in the industry. With over 10 years of history, this conference has become a breeding ground for major deals, policy discussions, and transformative collaborations.
The Global Equity Crowdfunding Alliance (GECA) was founded with a singular vision: to unlock the potential of global, borderless equity crowdfunding. We are building a community where platforms, technology providers, and other key stakeholders can collaborate to overcome the challenges in enabling a truly global marketplace for equity crowdfunding.
What We Offer:
- Global Networking: GECA connects platforms and stakeholders across the world, fostering partnerships and opportunities for growth.
- Educational Resources and research: Through our exclusive workshops, members gain valuable insights into the complexities of cross-border operations.
- Industry Influence: As a GECA member, you’ll have the opportunity to participate in policy discussions that will help to shape and influence the future of global equity crowdfunding.
If you're attending CrowdCon, don’t miss the opportunity to talk to Andrew Field and other key leaders from GECA. Learn how you can be part of a transformative movement that’s breaking down borders and revolutionizing the way businesses raise capital.
Be sure to attend Breakout Session 2: Global Equity Crowdfunding Alliance (GECA): Innovation in a Borderless Investment Landscape at 15:40 on 26th September (day one), where Andrew will discuss how GECA is driving the future of cross-border investments.
Ready to Join GECA? GECA offers free membership for equity crowdfunding platforms and stakeholders. It’s simple to join – just fill out our membership form and become part of a network that’s shaping the future of global equity crowdfunding.
Click here or scan the QR code to join GECA and begin your journey toward a borderless crowdfunding future.
Contact Information: Andrew Field
Head of the Steering Committee, GECA
Email: andy.field@thegeca.org
Website: www.thegeca.org
Welcoming Bruce Virga to the GECA Steering Committee: A Visionary Leader in Equity Crowdfunding
We are thrilled to announce the addition of Bruce Virga, CEO and Co-Founder of Title3Funds, to the Steering Committee of the Global Equity Crowdfunding Alliance (GECA). Bruce's journey through multiple industries, including fintech, software, and insurance, has been marked by his relentless pursuit of innovation, value creation, and democratizing access to private markets. His extensive experience, from scaling Design Science into an international success to founding a leading wholesale insurance company, has solidified his reputation as a forward-thinking leader.
Bruce’s leadership at Title3Funds embodies the mission of borderless equity crowdfunding. Under his guidance, Title3Funds has become a trusted resource for retail investors, connecting them with promising private company opportunities through a platform that emphasizes integrity, transparency, and regulatory compliance. His passion for making investment opportunities accessible to everyone aligns perfectly with GECA’s vision of creating a truly global investment community.
In joining GECA’s Steering Committee, Bruce brings his deep expertise and innovative mindset to our collective efforts to shape the future of equity crowdfunding on a global scale. His insights will be invaluable as we work towards building a borderless ecosystem where investment opportunities transcend geographical boundaries.
As Bruce continues to champion the cause of democratizing private markets, we look forward to his contributions in driving GECA’s mission forward. His vision of empowering retail investors and fostering a culture of trust and excellence within the crowdfunding space will undoubtedly help GECA achieve its goals.
Welcome, Bruce, to the GECA Steering Committee. We are excited to have you on board and look forward to the impact we will make together in advancing global equity crowdfunding.
Equity Crowdfunding: Global Trends, Strategic Scaling, and the Path to a Borderless Future
Equity crowdfunding (ECF) has emerged as a significant alternative financing method, particularly for small and medium enterprises (SMEs) and startups that struggle to access traditional venture capital or bank financing. The global landscape of ECF is shaped by various factors, including regulatory environments, competition among platforms, and macroeconomic events such as Brexit and the COVID-19 pandemic. This report examines the current state of equity crowdfunding globally, explores the challenges and opportunities for individual portals in different jurisdictions, and discusses the technological advancements that could enable a borderless equity crowdfunding ecosystem.
The Global Landscape of Equity Crowdfunding
1. Regional Overview
- United States: The U.S. has one of the most mature equity crowdfunding markets, thanks to the JOBS Act, which allowed for broader participation in equity crowdfunding. Platforms like SeedInvest and Wefunder have capitalized on this regulatory framework to become leaders in the market.
- Europe: The European equity crowdfunding market is fragmented, with different regulations across countries. The European Crowdfunding Service Providers Regulation (ECSPR), implemented in November 2021, aims to harmonize the rules across EU member states, making it easier for platforms to operate across borders. The UK, particularly, has seen significant growth in ECF, with platforms like Crowdcube and Seedrs leading the market. However, Brexit has introduced uncertainties, particularly concerning cross-border investments.
- Asia: In Asia, the equity crowdfunding market is still in its nascent stages, with varying levels of development across countries. Countries like Singapore and Malaysia have established regulatory frameworks that support ECF, while others are still developing their markets.
- Rest of the World: In regions like Latin America and Africa, equity crowdfunding is still emerging. Regulatory frameworks are being developed to support the growth of this financing method, but the market remains small compared to more developed regions.
2. Impact of Macro-Economic Events
- Brexit: The Brexit referendum has had a mixed impact on the UK's equity crowdfunding market. While it introduced uncertainties and reduced access to European funding, platforms have also seen opportunities as domestic investors turned to local projects. SMEs in the UK are likely to face increased challenges in accessing finance post-Brexit, necessitating stronger domestic crowdfunding ecosystems.
- COVID-19 Pandemic: The COVID-19 pandemic led to increased activity in equity crowdfunding, particularly in essential sectors like healthcare, financial services, and renewable energy. The pandemic highlighted the resilience of the equity crowdfunding model, as investors sought alternative investment opportunities during economic uncertainty.
3. Competition and Market Dynamics
Competition among equity crowdfunding platforms can be both a challenge and an opportunity. While increased competition can lead to fragmentation and investor fatigue, it can also drive innovation and market growth. The "blockbuster effect" observed in some markets, where popular campaigns boost overall investor activity, demonstrates the potential positive impact of competition.
The Way Forward for Individual Portals in Different Jurisdictions
1. Regulatory Navigation and Compliance
For individual equity crowdfunding portals to scale and succeed, navigating the regulatory landscape is crucial. Platforms must:
- Understand Local Regulations: Each jurisdiction has its regulatory framework, and platforms must ensure compliance to avoid legal challenges. For example, in the EU, compliance with the ECSPR is essential for platforms looking to operate across multiple countries.
- Advocate for Supportive Regulation: Platforms should engage with regulators to advocate for rules that support the growth of equity crowdfunding, such as tax incentives for investors and streamlined processes for SMEs.
- Adapt to Changes: As seen with Brexit and the introduction of ECSPR in the EU, regulatory environments can change rapidly. Platforms need to be agile and ready to adapt their operations to new rules.
2. Differentiation and Niche Focus
To stand out in a competitive market, platforms should consider:
- Specializing in Specific Sectors: Platforms that focus on niche markets, such as green energy, fintech, or social enterprises, can attract dedicated investor communities and build a strong brand identity.
- Offering Value-Added Services: Beyond facilitating investments, platforms can offer additional services such as due diligence, investor relations management, and post-funding support to attract both entrepreneurs and investors.
3. Scaling Operations
To scale successfully, equity crowdfunding platforms must:
- Leverage Technology: Automation, AI, and machine learning can streamline operations, reduce costs, and enhance the user experience for both investors and entrepreneurs.
- Expand Geographically: Platforms can explore opportunities to expand into new jurisdictions, particularly in regions with emerging equity crowdfunding markets. Strategic partnerships with local entities can ease entry into these markets.
- Focus on User Experience: A seamless and engaging user experience is crucial for attracting and retaining users. Platforms should invest in intuitive design, easy navigation, and efficient processes to enhance user satisfaction.
The Technological Future of Borderless Equity Crowdfunding
The future of equity crowdfunding lies in its ability to transcend borders, creating a truly global marketplace where investors can support projects regardless of their location. Several technological advancements will drive this evolution:
1. Blockchain and Smart Contracts
- Enhanced Transparency and Security: Blockchain technology can provide transparent and immutable records of transactions, enhancing trust between investors and entrepreneurs. Smart contracts can automate the execution of funding agreements, reducing the need for intermediaries and lowering costs.
- Tokenization of Equity: Tokenization allows shares of a company to be represented as digital tokens on a blockchain, enabling fractional ownership and easier transfer of shares. This could make equity crowdfunding more accessible to a broader range of investors globally.
2. Artificial Intelligence and Big Data
- Improved Due Diligence: AI and big data analytics can enhance the due diligence process by analyzing vast amounts of data to assess the viability of projects and the credibility of entrepreneurs. This can reduce the risk for investors and improve the overall quality of projects on crowdfunding platforms.
- Personalized Investment Recommendations: AI can also be used to provide personalized investment recommendations to investors based on their risk tolerance, investment history, and market trends, enhancing their experience and increasing their engagement.
3. Cross-Border Payment Solutions
- Seamless Transactions: The development of cross-border payment solutions, including cryptocurrencies and digital wallets, can facilitate seamless transactions across different jurisdictions, reducing currency exchange risks and transaction fees.
- Regulatory Compliance: Technology can also help platforms navigate the complex regulatory requirements for cross-border transactions, ensuring compliance with anti-money laundering (AML) and know your customer (KYC) regulations.
4. Global Investor Networks
- Crowdsourced Wisdom: Platforms can leverage global investor networks to create communities where investors share insights, discuss potential projects, and collectively decide on investment opportunities. This crowdsourced wisdom can lead to better investment decisions and greater success rates for campaigns.
- Cultural and Market Adaptation: By understanding the cultural and market differences in various regions, platforms can tailor their offerings to meet the needs of global investors, fostering a truly inclusive and borderless crowdfunding ecosystem.
Conclusion
The global landscape of equity crowdfunding is rapidly evolving, driven by regulatory changes, technological advancements, and shifts in investor behavior. For individual portals, the way forward lies in navigating regulatory challenges, differentiating themselves in a competitive market, and leveraging technology to scale and reach a global audience. The future of equity crowdfunding is borderless, with technology enabling platforms to transcend geographical boundaries and create a global marketplace where anyone can invest in promising ventures anywhere in the world. As the industry matures, platforms that embrace these trends and adapt to the changing landscape will be best positioned to thrive in this dynamic market.
The Inaugural 'GECA Leadership Exchange' Series Kicks Off
On August 19, 2024, leaders from across the global equity crowdfunding (ECF) landscape convened for the inaugural GECA Leadership Exchange. Organized by the Global Equity Crowdfunding Alliance (GECA), this session was not merely a meeting but a symposium of ideas aimed at sculpting the future of borderless equity crowdfunding. Under the guidance of Andy Field, participants embarked on a exploration of collaborative opportunities and challenges in the crowdfunding domain, particularly focusing on the area of cross-border equity crowdfunding.
The Essence of GECA's Leadership Exchange
The Leadership Exchange series was designed as a selective, invitation-only gathering, bringing together a geographically diverse group of industry leaders. This assembly was reflective of GECA’s commitment to fostering deep cooperation rather than just conventional networking. The format encouraged an open dialogue, moving away from presentations to a more dynamic and participatory discussion model.
Cross-Border Collaboration Takes Center Stage
One of the themes of the discussion was the potential and complexity of cross-border deal structures within the equity crowdfunding sphere. As countries and platforms grapple with varied regulations and market practices, the conversation illuminated the pressing need for a unified approach to facilitate international crowdfunding ventures effectively.
Participants shared their experiences and insights, underscoring the necessity for regulatory flexibility that could accommodate the rapidly evolving landscape of global crowdfunding. The diversity of the participants, including supporters from North America and Europe, brought a variety of perspectives to the table, highlighting both challenges and potential solutions in navigating different regulatory environments.
Current Landscape and Challenges
The dialogue examined the existing challenges that platforms face, including the need for robust technological solutions to support seamless cross-border operations. Ian Lowe, a member of the GECA steering committee and a prominent figure in the discussion, emphasised the importance of leveraging technology to build a network of crowdfunding platforms that could operate on a global scale without compromising their operational independence.
Envisioning the Path Forward
Looking ahead, the conversation transitioned into strategic planning. The participants discussed the potential pathways to overcome current limitations through collective action and technological innovation. The concept of a collaborative ecosystem, where platforms could share growth while maintaining their autonomy, was widely advocated.
Could IOSCO play a Role in Harmonizing Global Efforts
A significant portion of the discussion was dedicated to understanding how international regulatory bodies, like the International Organization of Securities Commissions (IOSCO), could play a crucial role in harmonizing financial regulations across borders. Ian Lowe’s insights into how engaging with IOSCO could lower barriers for global investor participation were particularly enlightening, offering a glimpse into the potential for creating a more interconnected and efficient global crowdfunding environment.
The Outcome and Future Steps
The GECA Leadership Exchange concluded on a note of optimistic commitment to ongoing dialogue and action. Participants agreed on the importance of continued collaboration, regular follow-up meetings, and strategic initiatives aimed at realising the potential of borderless equity crowdfunding.
Conclusion: A Call to Action for Future Collaboration
The inaugural GECA Leadership Exchange was just the first in a series of gatherings where stakeholders in the crowdfunding ecosystem can embrace the future of investment with open arms and interconnected strategies. The discussions underscored the alliance's commitment to not only understanding the current landscape but actively shaping its evolution.
For platforms and investors worldwide, the outcomes of this meeting signal a promising horizon for equity crowdfunding—one where innovation, cooperation, and collective growth are at the forefront. As GECA continues to pave the way for these transformations, its doors remain open to new members who are eager to be part of this exciting journey towards a truly global investment community.
This blog is not just a recap but an invitation: join GECA, engage with pioneers, and contribute to the reshaping of global equity crowdfunding. Together, we can turn the challenges of today into the achievements of tomorrow.
