ESMA, or the European Securities and Markets Authority, has published a report on crowdfunding in the EU.
In recent years, online capital formation has been operating under ECSPR or European Crowdfunding Service Provider regulation. This allows a platform to solicit investors across all member states. Issuers may raise up to €5 million in a securities sale. While fairly straightforward, the industry has encountered challenges as different member states end up having varied regulatory requirements.
According to the ESMA report, 181 crowdfunding platforms have raised over €4 billion in funding during 2024.
- 58% of crowdfunding in 2024 was in loan-based projects, followed by
- 23% came from debt-based projects
- 12% was derived from equity-based offerings
- 88% were retail investors
The top five countries in terms of capital raised were France with €1.45 billion, the Netherlands with €1 billion, Spain with €0.45 billion, Italy with €0.29 billion, and Lithuania with €0.28 billion. These countries raised over 80% of the total across the EU € 4.25bn). Most funding is for debt and loan-based. Debt-based crowdfunding differs from loan-based crowdfunding in that only the former involves a transferable security.
Loan-based crowdfunding projects were the most popular and numerous, with over 10 000 such projects offered in 2024, backed by over 5.5 million investors.
Across all projects, 46% raised less than €1 million.
There is a movement to alter ECSPR to improve the ecosystem. One issue is the possibility of raising the funding cap.
While raising the amount an issuer can raise makes much sense, other strategies, such as pairing professional/institutional investors with retail money and providing tax exemptions for investors, could also boost activity in online capital formation.
For years, Europe has sought to improve access to capital for early-stage firms to generate more innovation and entrepreneurship. Online capital formation could support these ambitions.
