The French Crowdfunding Association (Financement Participatif France) and the French team of auditing firm Mazars just released the French 2019 Crowdfunding Barometer. This annual report analyzes the alternative financing facilitated by 58 marketplace platforms which represent the bulk to the French market.
The report focuses on crowdfunding in the stricter sense, i.e. funding provided by individual investors, excluding institutional investors and family offices.
In 2019, the platforms surveyed collected in total €1.4 billion across all categories of alternative finance, including crowdfunding, institutionally financed SME lending and factoring, online gifting, and roundup donations, a +33% growth from 2018. In just five years, the amounts collected through alternative finance platforms have been multiplied by more than eight.
Out of the total alternative financing raised, €962 million, or more than two thirds, went to business/SME financing, a 40% growth from 2018.
Real Estate and Renewable Energy Funding Drive Crowdfunding Growth
Crowdfunding by individual investors, retail and qualified investors, picked up again after a few years of slower growth. It reached €629 million in value, a 56% growth from 2018.
The market is largely driven by real estate crowdfunding which experienced a 100% growth and now represents more than €320 million, i.e. more than half of all crowdfunding. The sector benefited from the delayed impact of the increase of the maximum funding by project from €1 million to €2.5 million that came into force in 2016. But its main driving force is its high interest rates and low default rate. In 2019, real estate crowdfunding returned a gross interest rate of 9.2%, and an IRR of 8%.
Funding of the energy transition to renewable energies by the crowd also grew at a healthy +75% rate in 2019. The sector’s growth is driven by consumers’ growing engagement with renewable energies as well as by local authorities’ support and regulatory incentives. It now represents 16% of total crowdfunding and returns an average 5.25% interest rate.
Equity Crowdfunding Stagnates and Rewards-Based Shrinks
Start-ups represent only 13% of all business/SME projects funded, that is €126 million euros. One of their favored sources of financing, equity crowdfunding, is stagnating at €40 million euros.
The number of online gifting projects (birthdays, wedding, going-away party, etc.) on group gifting/money pots sites such as Leetchi or Le Pot Commun, is impressive: 768,728 in 2019. These sites are eating away at the market share of rewards-based crowdfunding, a more expensive way of raising money for very small projects. The rewards-based crowdfunding sector shrunk by 20% in 2019.
New Regulations Will Comfort Positive Outlook
Overall, with nearly 20,000 projects funded and a significant increase in average project size, the French crowdfunding sector plays an increasingly important role in how French project owners raise money and how French individual investors allocate their savings.
Bertrand Desportes, partner and manager of the FinExp platform at Mazars, declared:
“Crowdfunding continues to grow and confirms its role as a financing alternative. The three types of financing sources, banks, investment funds, and crowdfunding, complement each other. Crowdfunding provides innovative solutions that attract project owners from all sectors, in particular those concerned with corporate social responsibility, as well as individual investors looking for responsible ways to allocate their savings.”
For Jeremie Benmoussa, President of the French Crowdfunding Association and Chairman of the real estate crowdfunding platform Fundimmo, new regulations will comfort the positive outlook for crowdfunding in France.
“Crowdfunding is in very good shape in France, driven in particular by the real estate and renewable energy sectors in which more and more investors are ready to support increasingly ambitious projects… The new opportunities offered by the French PACTE law and the upcoming European regulation that will allow platforms to go cross-border should strengthen the growth of the sector in the coming years.”
Therese Torris, PhD, is a Senior Contributing Editor to Crowdfund Insider. She is an entrepreneur and consultant in eFinance and eCommerce based in Paris. She has covered crowdfunding and P2P lending since the early days when Zopa was created in the United Kingdom. She was a director of research and consulting at Gartner Group Europe, Senior VP at Forrester Research and Content VP at Twenga. She publishes a French personal finance blog, Le Blog Finance Pratique. Torris is also a graduate of INSEAD.