ALTERNATIVE FINANCING FORMS
FOR ENTREPRENEURS AND INVESTORS

3 questions to smart minds

Crowdfunding also for medium-sized businesses?

For this 3 questions to D. Littig

bankless24
Photo: D. Littig | bankless24
26. Novem­ber 2013

The idea of crowd funding origi­na­ted in the USA and was initi­ally used prima­rily to finance music produc­tions. Crowd (’swarm’) funding repres­ents an inte­res­ting alter­na­tive for finan­cing projects, start-ups and compa­nies. In Germany, there are about half a dozen crowd­fun­ding plat­forms, such as Berg­fürst or compa­nisto, with a focus on star­tups. — SMEs in parti­cu­lar are finding it incre­a­singly diffi­cult to obtain finan­cing from banks. Future-orien­­ted finan­cing solu­ti­ons are in demand. Can equity or debt capi­tal also be mobi­li­zed for SMEs with the help of the ’swarm’?


For this 3 ques­ti­ons to Mana­ging Direc­tor bankless24, Weiterstadt.

1. The USA was a pioneer for crowd­fun­ding. There are now around half a dozen crowd­fun­ding plat­forms for star­tups in Germany. What trends can be seen in Germany and Europe?

Indeed, the U.S. was and is a pioneer in crowd­fun­ding. For the year 2013, a global market volume of approx. 5 billion is expec­ted, the lion’s share of which will be in the USA. A distinc­tion is now made between dona­tion- or reward-based crowd­fun­ding (also a gene­ric term) and equity-based crowd­fun­ding, which is also called crowd­in­ves­ting in German. In the German market, there has so far been a clear focus on crowd­in­ves­ting plat­forms for star­tups. Here, the first movers Seed­match, Compa­nisto and Inno­ve­st­ment share a large part of the market segment. Howe­ver, there is still signi­fi­cant catch-up poten­tial here compa­red to the global market: in the first three quar­ters of 2013, a volume of EUR 11.7 million was achie­ved, which corre­sponds to an incre­ase of 89% compa­red to the full year 2012.

The Berg­fürst plat­form, which success­fully conclu­ded its first finan­cing project with a volume of EUR 3 million in Novem­ber, is at a some­what later stage of the company’s deve­lo­p­ment. Unlike on the other plat­forms, shares are issued here, which on the one hand enab­les a secon­dary market, among other things, but on the other hand also requi­res a certain mini­mum size of the compa­nies due to the issuing costs.

While a large number of plat­forms have ente­red the startup segment, some of which have already disap­peared from the market, the much larger segment of small and medium-sized enter­pri­ses has so far been addres­sed by very few plat­forms. The only plat­form that focu­ses exclu­si­vely on SMEs is bankless24.

Over­all, a very diverse crowd­fun­ding market is curr­ently deve­lo­ping in Germany and in Europe. In the coming years, we will see conso­li­da­tion in segments with a strong presence, while in segments that have not been worked on much, such as SME finan­cing, we will see the entry of further plat­forms and strong market growth. On a Euro­pean basis, we will see an inter­na­tio­na­liz­a­tion of success­ful plat­forms. A first example is Funded­byme, a Swedish plat­form that is already active in 7 coun­tries and will enter the German market in early 2014. A recent study by the World Bank expects the global market volume for crowd­fun­ding to reach USD 100 billion by 2025.

2. When was bankless24 foun­ded. How much compe­ti­tion can the German-spea­king crowd­fun­ding market take? What prospects does bankless24 have in mind?

bankless24 has been on the market since the end of 2012 and has success­fully comple­ted four finan­cing projects to date. On our plat­form, medium-sized compa­nies can issue stan­dar­di­zed profit parti­ci­pa­tion rights. Inves­tors — private and insti­tu­tio­nal — get access to mezza­nine invest­ment instru­ments of small and medium-sized compa­nies on bankless24 — a new asset class that was not indi­vi­du­ally investa­ble so far.

In terms of the compe­ti­tion that the German-spea­king market can tole­rate, a clear distinc­tion must be made between segments. I believe that the startup segment has now produ­ced enough plat­forms in the German market. In other segments, such as real estate, rene­wa­bles or local plat­forms, we will have to wait and see how things deve­lop. There will certainly be justi­fi­ca­tion for niche models here in the future. With regard to our segment, the midmar­ket, I expect a strong incre­ase in the number of provi­ders. The market segment is very large, it is charac­te­ri­zed by struc­tu­ral defi­cits in the finan­cing land­s­cape now and in the future, and it offers inves­tors attrac­tive returns with often more trans­pa­rent risks than, for example, the market. in the startup segment. A highly attrac­tive market, in other words.

The prospects for bankless24 clearly lie in larger finan­cing volu­mes. We already have a consi­derable number of finan­cing requests in the range of EUR 1 — 5 million. This is precisely where there is a struc­tu­ral defi­cit in the market. In this area, we offer medium-sized compa­nies a finan­cing alter­na­tive and inte­rest-orien­ted inves­tors access to this new asset class.

3. Is crowd­fun­ding a suita­ble finan­cing tool for German SMEs? Also in terms of funding scope and timeframe?

The crowd­fun­ding market is still a very young market over­all. But it is also a market with extre­mely dyna­mic growth. The first finan­cing projects in the 7‑digit range have now been comple­ted and there will be nume­rous other projects of this size in the near future — also and espe­cially in the SME sector. Crowd­in­ves­ting closes a struc­tu­ral finan­cing gap for SMEs. In the range up to EUR 5 million, there are hardly any alter­na­ti­ves to tradi­tio­nal bank finan­cing. The capi­tal market, e.g. the SME bond markets, requi­res sizes from min. EUR 10 million; the same applies to indi­vi­dual equity or mezza­nine offerings.

It should not be over­loo­ked that crowd­in­ves­ting is able to provide commer­cial balance sheet equity. This is comple­men­tary to banking products and impro­ves the credit­wort­hi­ness of SMEs.

The time needed for a finan­cing project is about 3 — 4 months. This is a period that can certainly be mapped in the plan­ning of medium-sized companies.

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