Crowd Investing in Europe Alternative Finance trends and main obstacles for growth

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1 Crowd Investing in Europe Alternative Finance trends and main obstacles for growth Ronald Kleverlaan Managing Director European Centre for Alternative Finance Utrecht

2 Global market Alternative Finance - USA (12%) China (85%)

3 Alternative Finance in Europe 7,6 billion (2016) Source: Expanding Horizons, The 3rd European Alternative Finance Industry Report (2016), Cambridge Centre for Alternative Finance

4 Market volume per capita Source: Expanding Horizons, The 3rd European Alternative Finance Industry Report (2016), Cambridge Centre for Alternative Finance

5 4,58 billion UK - 73% of European Market Source: Entrenching innovation (2017), Cambridge Centre for Alternative Finance

6 3,3 billion SME funding UK (15% of total SME financing) Source: Entrenching innovation (2017), Cambridge Centre for Alternative Finance

7 Alternative Finance 20+ different new financing solutions and 100s of providers

8 Traditional Finance

9 Modern Finance P2P business lending Social Impact Bonds Equity crowdfunding Business angels Real-estate lending Leasing Debt based securities Factoring

10 P2P/Marketplace business lending

11 Funding Circle 3,4 billion bedrijven

12 Crowdfunding Community of investors

13 Crowdfunding = Community Funding An involved community providing more then money

14 Windfarm Nijmegen-Betuwe local investors for 18,5 million windfarm

15 SyndicateRoom Crowd & Business Angels co-investment

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17 Most important trends in Europe Bigger/traditional companies using alternative finance Fragmented financial landscape with specialized financial suppliers Co-funding and multiple funding rounds New independent trusted advisors support companies

18 Not just for start-ups and small companies

19 Brewdog Equity Crowdfunding 25 million in equity - 42,000 investors 5 rounds

20 BD Bacata (Colombia) $150 million by retail investors

21 Multiple funding rounds

22 Pebble watch $10,3 miljoen door 68,929 backers

23 $12,8M $20,3M $10,3M

24 Biggest obstacles for growth Fair level-playing field in SME financing market Good financial regulation for Alternative Finance Lack of knowledge about Alternative Finance at entrepreneurs and companies Lack of knowledge about Alternative Finance at SME advisors

25 Market Government Source: Current State of Crowdfunding in Europe 2016 Alternative Finance Maturity Index

26 It takes two to tango

27 Alternative Finance Maturity Model (5 phases) Maturity Consolidation Competition Growth Introduction

28 Government/regulator Investor protection vs Access to Finance Professionality of new industry players European vs National Regulation UK & German market up to 8m campaigns Experiment with sandboxes

29 Alternative Finance Maturity Model (Government) Create clear regulations + public support Investor protection + transparency on defaults Integrated completely in financial regulations Open dialogue with industry Consolidation Maturity Competition Growth Introduction

30 Industry Promotion and Education Educational programs for Entrepreneurs, Investors and Advisors. Independent Research on industry data Transparancy on defaults, risks Certification program for platforms and advisors Co-financing by government and banks

31 Alternative Finance Maturity Model (Industry) Industry roundtables and work with independent advisors Collective promotion of success stories. Regular publications of growth in industry. Training advisors. Launch industry association Support independent (academic) research, certification of advisors, transparency on defaults, several industry associations, combine AltFin with traditional finance Integration in traditional (institutional) finance industry, specialized (academic) research centre. Maturity Consolidation Competition Growth Introduction

32 Biggest obstacles for growth Fair level-playing field in SME financing market Good financial regulation for Alternative Finance Lack of knowledge about Alternative Finance at entrepreneurs and companies Lack of knowledge about Alternative Finance at SME advisors

33 Conclusions research trusted advisors - Lack of experience at traditional SME advisors - Difficult to create business-case for advising - Difficult to find reputable alternative finance providers - Difficult for companies to find a trusted advisor - Training and education for financial advisors needed

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35 Conclusions Alternative Finance in Europe is growing rapidly Fragmented financial landscape New group of independent trusted advisors Fair level-playing field for SME financing needed

36 Weekly Alternative Finance newsletter

37 Alternative Finance Research conference Utrecht University October 2,