The Largest European Crowdfunding Report Has Been Released
By: Kiss Péter
Date: 2024.03.05
According to the report, a total of 594 platforms were operating in Europe as of March 2023. Most of these are found in Germany, the United Kingdom, and France, which is unsurprising given that these are the largest economies on the continent. However, when looking at the number of platforms per capita, the Baltic states (Estonia, Latvia, Lithuania) lead the way, with a very advanced startup ecosystem.
In terms of models (the four basic models being equity, lending, product, and donation), lending platforms handled the largest volume and showed the most significant growth. The surveyed platforms managed EUR 19 million in 2021 and EUR 24 million in 2022, far surpassing the other models in both growth and volume. 60% of responding platforms offer only one model, 25% offer two, 10% three, and 4% four.
Crowdfunding service providers often collaborate with traditional financial players. The proportion of platforms involved in such collaborations is notably high at 686% among equity platforms, primarily in the form of lead exchanges and strategic partnerships. The correlation also shows that the larger the volume of a platform, the closer and more multifaceted its cooperation with traditional financial institutions.
Distribution of Cooperation Types Among Equity Platforms
Source: Crowdspace.com (European Crowdfunding Market Report 2023)
Internationally, more than 82% of platforms operate in only one country, with these platforms most prevalent in Southern Europe, while the most significant cross-border activity is found in Eastern Europe. The international volume of lending platforms was 12% in 2022, whereas for equity platforms, this figure more than doubled to 54% from 23% in 2021, thanks to ECSPR regulation. The most platforms operate in Northern Europe, while Southern Europe has the fewest.
The number of newly established platforms annually shows a significant decrease, indicating that the market is entering a more mature phase. Interestingly, there is no significant correlation between the age of platforms and the volume they handle, suggesting that early platforms do not have a considerable advantage and newer entrants can still find a market. However, as the market matures, many respondents believe that acquisitions will accelerate. So far, only a small percentage of platforms have participated in M&As (mergers and acquisitions), but 42% of equity platforms and 53% of lending platforms expect to be involved in such transactions in the coming years.
About Campaigns and Campaign Owners
In equity crowdfunding, the number of successful campaigns grew by 431% from 2021 to 2022. Researchers attribute this growth significantly to the development of legal regulations in the market, specifically the implementation of the ECSPR regulation. By platform breakdown, platforms that conducted between 0 and 50 campaigns in one year accounted for 795% of all equity platforms in both years. A positive development is that the proportion of those conducting between 101 and 200 campaigns rose from 38% to 64%, and those with more than 500 campaigns grew from 51% to 64%. Meanwhile, the proportion of those conducting between 51 and 100 campaigns fell from 103% to 51%. This suggests that medium-sized platforms have significantly grown larger, but smaller platforms have not been able to become medium-sized.
The research also highlights the critical role of crowdfunding platforms in filtering campaigns, protecting both investors and companies seeking funding. In 2022, European equity platforms approved only 97% of applicants to start a campaign on their platform, yet 926% of these were able to successfully close their campaigns.
From a regional comparison of the age distribution of campaign owners in 2022, it is observed that while the 46-55 age group dominates in Western and Southern Europe with 74% and 988% respectively, there are no campaign owners in this age group in Northern and Eastern Europe. In these latter regions, the 36-45 age group is predominant, and in Eastern Europe, exclusively this age group initiates campaigns.
In terms of gender distribution, the proportion of female campaign owners is 20% in both Eastern and Northern Europe, while it is 32% in Western Europe and only 35% in Southern Europe. The research also shows a weak but statistically significant positive correlation between the proportion of female campaign owners and the amount of funding collected on the platform.
About Investors
Despite the growth in the number of successful campaigns, the number of investors in equity crowdfunding decreased by 187%. Meanwhile, the total funding volume grew from EUR 149 million in 2021 to EUR 156 million in 2022, indicating an increase in the average investment per investor.
Examining the number of investors per platform, it is clear that 645% and 597% of all platforms had fewer than 500 investors in 2021 and 2022 respectively, which aligns well with the high number of platforms conducting few campaigns.
Age Group Distribution of Investors by Region in the Equity Model in 2022
Source: Crowdspace.com (European Crowdfunding Market Report 2023)
On the investor side, the age distribution shows strong regional differences. In Eastern Europe, investors were split between the 36-45 and 46-55 age groups in 2021 at 889% and 111% respectively, but by 2022, this had shifted further towards the former group, representing 97% of the total sample. It is noteworthy that while the 26-35 age group did not appear among equity crowdfunding investors in Eastern Europe, this age group represented 137%, 262%, and 73% of investors in Western, Southern, and Northern Europe respectively in 2022.
Gender distribution among investors shows a similar picture across all four regions: the highest proportion of female investors in equity crowdfunding is in Northern Europe at 267%, and the lowest in Southern Europe at 181%, with Eastern Europe reaching 216%. The lower participation of women is mostly explained by a generally lower willingness to take risks.
About Technology Used in Crowdfunding
For platforms, the way the investment platform itself is created is a crucial issue for business operations and future development opportunities. In Europe, 60% of equity platforms were developed in-house, 22% outsourced the development to a third party, 16% used a SaaS solution (also known as white label), and only 2% purchased fully ready software.
Platforms differentiate themselves from others through various additional features. According to the research, 22% of the surveyed equity platforms operate a secondary trading option on their platform and 26% plan to introduce it. Additionally, 16% already provide automated investment options (auto-investing) and 26% plan to introduce them, while 32% have a referral system and 12% plan such a solution.
To operate more efficiently, platforms try to automate various operational processes either partially or entirely. Based on the survey, platforms would most prefer to automate the following processes:
- Processing payment transactions
- Credit rating (for lending-based financing)
- Credit risk measurement (for lending-based financing)
- Company valuation
- Due diligence
- Customer validation (KYC)
- Data analysis and reporting
*KORÁBBI ADÁSAINK
