Recently there have been rumblings from the German crowdfunding industry regarding proposed rules pertaining to investor protection that may impact the growing investment crowdfunding industry. The German government has a stated objective of fostering digital and tech growth. Of course streamlining access to capital, via equity crowdfunding, can help this objective. While engendering an environment where tech startups can grow makes sense, German regulators appear poised to undermine their very own competitiveness with newly crafted investor protection laws.
Never Fear .. The Regulators are Here.
Companisto, one of the leading equity crowdfunding platforms based in Germany, has been pounding the table on this subject. Management recently published an update on the status of things, stating;
“The law on the protection of small investors contradicts not only the recently presented digital agenda, but also the investment subsidy initiated by the federal government. The affected investors firmly reject the actions proposed by the federal government, and the German Crowdfunding Network has also commented on the draft of the law. Moreover, the unsatisfactory access to venture capital in Germany influences the country’s international compatibility.”
The author points out that competitiveness in the most vibrant European economy has declined. According to the World Economic Forum in Davos, Germany ranked 28th out of 144 countries. Regarding access to capital, Germany ranked a dismal 28th. Companisto states the obvious: “Equity based crowdfunding was originally introduced to improve this situation”.
The German Crowdfunding Network has put together a position paper that, hopefully, some influential folks over at the Finance Ministry will take to heart. Companisto has put together a quick summary of the recommendations:
- an increase of the threshold below which a prospectus for investment projects is required to at least five million euros
- the abolition of the maximum investment per investor of 10,000 euros or a significant increase of this amount for natural persons and the introduction of opening clauses for legal persons and for investors who are particularly wealthy and able to bear risks
- a complete abolition of the prohibition of advertising outside of business media
- no requirement to manually sign and mail an investor information sheet
- an extension of transitional periods after the law has been passed
Germany has recently experienced some pretty impressive growth for the crowdfunding industry. Crowdfund Insider just reported on the largest investment crowdfunding campaign ever – Weissenhaus – that has raised over €4.29 million – and still going strong. We would hate to see this type of progress crushed by misdirected regulators – a sentiment that we imagine more German startups would share.