The phenomenon of „Crowdinvesting“ – a new online means of financing for start-ups and small companies – developed in the USA and is now increasingly taking hold also in Europe and particularly in Germany. By exploiting what is known as the „collective intelligence“ of the crowd of internet users, companies seeking capital are provided with the needed funds. As a return for their monetary contribution, the so-called crowd investors are promised interests and a share in the future value of the company. Throughout 2013, only in Germany about EUR 15 million have been invested via crowdinvesting in a total of 66 business projects. This represents a 250% increase compared with the previous year 2012 . With only a few excep-tions, the projects financed so far via crowdinvesting have been mostly start-ups, mainly in the fields of E-commerce, Commerce and Creative Economy. Whether this form of financing will keep the momentum going and develop into a sustainable and viable funding source de-pends on many different factors. Among those, there is also the future attitude of the banking sector and the State towards granting credits, i.e. funds. Moreover, it remains to be seen, whether crowdinvesting can be a suitable source of funding also for already-established com-panies of the SME sector. A survey carried out by the author in 2013 revealed that the majori-ty of companies already established on the market are not familiar at all with this new online form of financing, yet show interest in it and would be willing to raise capital through this alternative funding method. Still, they would rather use it as a complementary financing com-ponent within a traditional financing mix. Crowdinvesting presents both opportunities and risks. Given the gaps in the current German regulation, companies have the possibility to raise considerably high sums via the internet . The majority of crowdinvesting platforms currently operating on the German market are start-ups themselves and their providers are mostly inex-perienced and do not hold any qualification in the field of Corporate Finance. Furthermore, the platforms’ suboptimal workflows and structures, along with a lack of compliance policies, do not offer crowd investors the necessary basis to make a safe investment decision. Given the platforms’ inadequate organizational structures and their unidirectional focus on start-ups, there is a substantial risk that the financed projects will fail already during the crowdinvesting co
Inhaltsverzeichnis (Table of Contents)
- Introduction
- Crowdinvesting State of the Art
- Reactions and Measures on the Political and State Level
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This essay aims to outline the current state of crowdinvesting in Germany, examining its potential and challenges. It explores the legal framework surrounding crowdinvesting, the role of the banking sector, and potential alternative applications beyond start-up financing.
- The current state and future potential of crowdinvesting in Germany.
- The legal and regulatory environment surrounding crowdinvesting.
- The role of the banking sector and its relationship with crowdinvesting.
- Alternative applications of crowdinvesting, including renewable energy projects and community initiatives.
- The risks and opportunities associated with crowdinvesting for both investors and businesses.
Zusammenfassung der Kapitel (Chapter Summaries)
Introduction: This introductory chapter establishes the context of crowdinvesting in Germany, highlighting its rapid growth and the lack of comprehensive regulation. It discusses the potential of crowdinvesting to leverage "collective intelligence" and addresses the banking sector's response to this emerging form of finance. The author emphasizes the limited academic literature on crowdinvesting and the significance of this essay within a nascent field of research. A comparison between crowdinvesting and the cooperative banking system is presented, suggesting potential synergies and innovative applications. The chapter concludes by pointing out the lack of extensive academic literature on crowdinvesting and collective intelligence, positioning the essay as a contribution to a novel research area.
Crowdinvesting State of the Art: This chapter traces the evolution of crowdinvesting from its origins in supporting artistic projects to its current use as a corporate financing tool. It distinguishes between crowdsourcing and crowdinvesting, emphasizing the latter's focus on financial contributions. The chapter analyzes the needs of both companies seeking funding (primarily small businesses and start-ups) and investors, highlighting the limitations faced by small enterprises in accessing traditional financing due to bank reluctance and the impending Basel III regulations. The role of online platforms in connecting these two groups is also discussed.
Reactions and Measures on the Political and State Level: This chapter focuses on the regulatory environment surrounding crowdinvesting in Germany. It examines the German capital markets law, emphasizing the existing investor protection measures and their limitations in addressing the specific challenges posed by crowdinvesting. The chapter highlights the 2012 reform of the German capital markets law and the introduction of the Capital Investment Act, which imposes new obligations on offerors and issuers. The role of BaFin (the German banking supervisory authority) and its limited engagement with crowdinvesting are discussed. The chapter also addresses the legal grey areas that have emerged, particularly concerning the use of subordinated loans, and the risks these pose to investors due to the lack of adequate vetting and evaluation processes by platforms. Finally, the chapter mentions an inquiry from the German Green Party to the government concerning investor protection in crowdinvesting.
Schlüsselwörter (Keywords)
Crowdinvesting, crowdfunding, online financing, collective intelligence, renewable energy technology, alternative financing, employee participation, agriculture cooperative society, regulatory framework, investor protection, banking sector.
FAQ: Crowdinvesting in Germany - A Comprehensive Analysis
What is the main focus of this essay?
This essay analyzes the current state of crowdinvesting in Germany, exploring its potential, challenges, and the existing legal framework. It examines the roles of the banking sector and explores alternative applications beyond startup financing, including renewable energy and community initiatives. The essay also considers the risks and opportunities for both investors and businesses involved in crowdinvesting.
What are the key themes explored in the essay?
Key themes include the current state and future potential of crowdinvesting in Germany; the legal and regulatory environment; the banking sector's role and relationship with crowdinvesting; alternative applications like renewable energy projects and community initiatives; and the risks and opportunities for investors and businesses.
What is covered in the "Introduction" chapter?
The introduction sets the context of crowdinvesting in Germany, emphasizing its rapid growth and the lack of comprehensive regulation. It discusses the potential of leveraging "collective intelligence," the banking sector's response, and the limited academic literature on the subject. A comparison between crowdinvesting and cooperative banking is also presented, along with the essay's contribution to this nascent research area.
What does the chapter on "Crowdinvesting State of the Art" cover?
This chapter traces crowdinvesting's evolution from artistic projects to corporate financing. It distinguishes between crowdsourcing and crowdinvesting, analyzing the needs of businesses (especially small businesses and startups) and investors. It highlights the limitations faced by small enterprises in accessing traditional financing and the role of online platforms in connecting investors and businesses.
What is discussed in the chapter on "Reactions and Measures on the Political and State Level"?
This chapter focuses on Germany's regulatory environment, examining German capital markets law, investor protection measures, and the 2012 reform. It discusses the role of BaFin (German banking supervisory authority), legal grey areas (particularly concerning subordinated loans), and the risks these pose to investors due to a lack of adequate vetting. An inquiry from the German Green Party concerning investor protection is also mentioned.
What are the keywords associated with this essay?
Keywords include Crowdinvesting, crowdfunding, online financing, collective intelligence, renewable energy technology, alternative financing, employee participation, agriculture cooperative society, regulatory framework, investor protection, and banking sector.
What is the overall objective of this essay?
The essay aims to provide a comprehensive overview of crowdinvesting in Germany, addressing its current state, future potential, and the associated legal and regulatory challenges. It seeks to contribute to the limited existing academic research on this topic.
What types of alternative applications of crowdinvesting are explored?
The essay explores alternative applications of crowdinvesting beyond startup financing, including renewable energy projects and community initiatives.
What is the significance of this essay within the field of research?
The essay highlights the lack of extensive academic literature on crowdinvesting and positions itself as a significant contribution to a novel research area.
Who would benefit from reading this essay?
Researchers, academics, policymakers, investors, and businesses interested in crowdinvesting in Germany would benefit from reading this essay.
- Quote paper
- Rainer Schenk (Author), 2014, The Future of Digital Financing by Crowdinvesting, Munich, GRIN Verlag, https://www.grin.com/document/270727
