Crowd Investing in Europe Alternative Finance trends and main obstacles for growth Ronald Kleverlaan Managing Director European Centre for Alternative Finance Utrecht University ronald@kleverlaan.com @kleverlaan http://www.altfinance.eu http://www.uu.nl/ecaf
Global market Alternative Finance - USA (12%) China (85%)
Alternative Finance in Europe 7,6 billion (2016) Source: Expanding Horizons, The 3rd European Alternative Finance Industry Report (2016), Cambridge Centre for Alternative Finance
Market volume per capita Source: Expanding Horizons, The 3rd European Alternative Finance Industry Report (2016), Cambridge Centre for Alternative Finance
4,58 billion UK - 73% of European Market Source: Entrenching innovation (2017), Cambridge Centre for Alternative Finance
3,3 billion SME funding UK (15% of total SME financing) Source: Entrenching innovation (2017), Cambridge Centre for Alternative Finance
Alternative Finance 20+ different new financing solutions and 100s of providers
Traditional Finance
Modern Finance P2P business lending Social Impact Bonds Equity crowdfunding Business angels Real-estate lending Leasing Debt based securities Factoring
P2P/Marketplace business lending
Funding Circle 3,4 billion 35.000+ bedrijven
Crowdfunding Community of investors
Crowdfunding = Community Funding An involved community providing more then money
Windfarm Nijmegen-Betuwe 1.076 local investors for 18,5 million windfarm
SyndicateRoom Crowd & Business Angels co-investment
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
Not just for start-ups and small companies
Brewdog Equity Crowdfunding 25 million in equity - 42,000 investors 5 rounds
BD Bacata (Colombia) $150 million by 3.000 retail investors
Multiple funding rounds
Pebble watch $10,3 miljoen door 68,929 backers
$12,8M $20,3M $10,3M
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
Market Government Source: Current State of Crowdfunding in Europe 2016 Alternative Finance Maturity Index
It takes two to tango
Alternative Finance Maturity Model (5 phases) Maturity Consolidation Competition Growth Introduction
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
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
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
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
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
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
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
Weekly Alternative Finance newsletter http://www.altfinance.eu
Alternative Finance Research conference Utrecht University October 2, 2018 www.uu.nl/ecaf