Financement Participatif France (FPF), the French crowdfunding association, has partnered with Mazars to produce its 5th annual Crowdfunding Barometer – tracking the performance of online capital formation in the second-largest economy in Europe. Mazars is a global, France-based accounting and consulting agency. The report covers 112 French platforms, of which 66 were online lending providers and 25 were investments into equity and other securities.
FPF reports that crowdfunding in France declined for the first time in 2023, dropping by 11.3% but still topping €2 billion. FPF incorporates investment crowdfunding, including debt as well as donations in their numbers. Since 2015, the association reports more than €9 billion in cumulative funding. Debt capital is the majority of activity at around €1.65 billion in 2023, dropping from approximately €1.8 billion in 2022.
As for the number of projects financed during 2023, this increased by 31% from 120,107 projects in 2022 to 157,535 projects in 2023.
While individual investments into projects dominate crowdfunding at 63%, there is a growing diversification of investors, including family offices and funds. Enabling more institutional backing is a key aspect of the future of online capital formation.
Real Estate or Property Crowdfunding remains the leading sector driving the majority of funding (56.6%), but it was also the sector that experienced the greatest decline in the year as it tanked by 28%. Real estate investment struggled in France due to a challenging economic environment, which is described as the sharpest contraction in real estate in 10 years. In total, €1.161 billion was raised for real estate crowdfunding projects, dropping from €1.607 billion in 2022. The number of funded projects declined from 1,628 in 2022 to 1,237 in 2023.
Residential real estate captured 77% of all property funding activity.
Debt or lending dropped significantly, too, during the year. In 2022, lending generated €2.098 billion, but in 2023, only €1.661.2 billion was financed. The debt sector is inclusive of real estate lending as well as credit provided to private firms. FPF said top lending platform October’s announcement in February of a reduction in lending is emblematic of the sector’s struggles. As well, due to EU regulations, mini-bonds are no longer allowed.
Investment crowdfunding, including equity, royalties, etc., generated growth compared to the previous year. In 2023, €267.2 million was financed, compared to €150 million in 2022.
Donations or rewards is a small segment of the report, generating about €160 million.
The report states that energy or renewables helped to increase activity, representing 28% of volume, followed by technology at 18%.
President of FPF, Damien Guermonprez, who is also the Executive Chairman of Lemonway, said performance in 2023 is indicative of the interest in crowdfunding to finance the real economy. Guermonprez said online capital formation is very popular with individuals and meets the needs of various sectors – such as real estate – despite a challenging economy. He referenced the new EU regulation, ECSPR [European Crowdfunding Service Provider Regulation], which should impact the activity of lending and securities platforms.
Bertrand Desportes, Partner at Mazars, described 2023 as a year full of contrasts for crowdfunding.
“… sticking to real estate figures, marked by a decline in collections and an increase in delays, would be reductive and unfair for crowdfunding as a whole, which has once again demonstrated its usefulness to more than 150,000 project leaders and has convinced more than 3 million French people. 2023 is a year of reconfiguration around [ECSPR]: the sector can now move forward in France and in Europe and continue to innovate with the structuring of a secondary market, the development of fractional real estate, or even tokenization .”
As the industry transitions to EU rules, it will change. Under ECSPR, issuers may raise money from across all EU member states. An issuer may raise up to €5 million a year. A platform must first be approved by a national regulator to pursue offerings under ECSPR. While it remains to be seen how pan-European rules will impact online capital formation in the EU, expectations are for it to fuel sector growth, boost innovation, and improve the overall funding environment for private firms, property, and other asset classes.
