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
Table of Contents
1. Introduction
2. Crowdinvesting State of the Art
3. Reactions and Measures on the Political and State Level
4. Alternative Applications of Crowdinvesting
4.1 Investments in Energy Efficiency and Renewable Energy Sources
4.2 Exploiting the Co-operative Concept and its Structures
4.3 Funding Agriculture Co-operative Societies
4.4 Symbiosis between Employee Participation and Crowdinvesting
5. Summary and Conclusions
Objectives and Topics
This work explores the potential of crowdinvesting as a sustainable financing tool for small and medium-sized enterprises (SME) in Germany, moving beyond its traditional role of funding start-ups to encompass broader economic applications and strategic integrations.
- The current regulatory environment and legal challenges of crowdinvesting in Germany.
- Potential of crowdinvesting for energy efficiency projects and sustainable infrastructure.
- Integration of crowdinvesting models into existing co-operative banking structures.
- Synergies between employee financial participation and crowd-based funding models.
Excerpt from the Book
4.2 Exploiting the Co-operative Concept and its Structures
Given its ideological approach, the German (but also the Austrian) co-operative system of credit unions and agricultural credit banks (Volksbanken and Raiffeisenbanken) would have the quality to serve as a nationwide platform for crowdinvesting in the future. In fact, the idea behind co-operative associations has a lot in common with the philosophy of crowdinvesting. Just like in crowdinvesting, a co-operative is based on the voluntary co-operation of each member within its community. The members of co-operatives work together towards a common commercial goal, because one single member alone would not be able to reach it. The term „members“ refers not only to the single banks that make up the system, but also to the members of each one of these banks, in other terms to every ordinary person that decides to acquire shares in the co-operative bank. Once again, this is another feature that we find also in crowdinvesting. Another principle on which co-operatives are based is the openness of their membership. In other terms, anyone who wants to become engaged in the co-operative may join and become member by simply contributing with a small amount of money.
Summary of Chapters
1. Introduction: Discusses the emergence of crowdinvesting as a modern, internet-based financing tool that addresses the gaps in the traditional, post-crisis financial sector.
2. Crowdinvesting State of the Art: Traces the evolution of crowdfunding and crowdinvesting from a tool for the creative economy to a structured form of corporate financing for start-ups.
3. Reactions and Measures on the Political and State Level: Analyzes the German legal framework, specifically the Capital Investment Act, and the challenges posed by current regulatory gaps and "grey areas".
4. Alternative Applications of Crowdinvesting: Investigates how crowdinvesting can be extended to established SMEs, energy efficiency projects, agricultural co-operatives, and employee participation schemes.
5. Summary and Conclusions: Provides an outlook on the future of crowdinvesting, highlighting the need for higher professional standards and the potential strategic benefits of integrating with banking and corporate structures.
Keywords
Crowdinvesting, crowdfunding, online financing, collective intelligence, renewable energy technology, alternative financing, employee participation, agriculture co-operative society, start-ups, SME sector, investor protection, Basel III, co-operative banking, financial innovation.
Frequently Asked Questions
What is the primary focus of this research?
The research examines the development and potential of crowdinvesting in Germany, analyzing its current state and proposing ways to integrate it into broader economic sectors like SMEs and co-operatives.
What is the core research question?
The work seeks to determine whether crowdinvesting can evolve from a niche tool for start-ups into a sustainable and professional alternative financing source for established companies and societal projects.
What scientific method does the author employ?
The author utilizes a qualitative analytical approach, combining an overview of existing legal frameworks, economic data, industry surveys, and a conceptual exploration of business model integration.
Which central topics are addressed in the main body?
Key topics include the legal "grey areas" of the current market, the potential for energy efficiency funding, the transferability of co-operative banking structures, and the combination of crowdinvesting with employee participation plans.
What are the main risks identified for the current crowdinvesting scene?
The author identifies a lack of professionalism among platforms, potential conflicts with regulatory requirements, and the financial risks posed to investors due to the absence of rigorous vetting processes.
How does the author suggest improving crowdinvesting?
By increasing professionalization, better integrating it with established banking structures (such as co-operative banks), and creating synergies with other financial instruments like employee participation.
Why is the "wolf in sheep's clothing" metaphor used?
It describes the banking sector's contradictory behavior: appearing to favor innovation while simultaneously seeking to protect traditional, inefficient structures and control market competition.
How can energy efficiency projects benefit from this financing model?
Crowdinvesting can provide the necessary capital for schools and municipalities to implement heating or insulation upgrades when public funds are unavailable, creating a win-win for the environment and investors.
What is the significance of the "co-operative" concept for the author?
The author views the ideological and structural principles of co-operative banks as an ideal blueprint for making crowdinvesting more stable, trustworthy, and accessible to the wider SME sector.
- Citation du texte
- Rainer Schenk (Auteur), 2014, The Future of Digital Financing by Crowdinvesting, Munich, GRIN Verlag, https://www.grin.com/document/270727
