European Commission Promotes Alternative Finance for Startups Growth

Alessandro Ravanetti is co-founder and CMO of Crowd Valley, a global fintech company.

The European Commission (EC) just published a report on the European Union (EU) Crowdfunding Crowdfunding Crowdfunding is defined as funding of a project via raising smaller denominations of money across a large body of number of people.New businesses that need access to more capital may also conduct crowdfunding. Generally, crowdfunding is performed through an online community, social media, or crowdfunding websites such as Kickstarter, GoFundMe, and RocketHub. Depending upon which jurisdiction an investor resides within will dictate the sort of restrictions that are applied to the crowdfunding pro Crowdfunding is defined as funding of a project via raising smaller denominations of money across a large body of number of people.New businesses that need access to more capital may also conduct crowdfunding. Generally, crowdfunding is performed through an online community, social media, or crowdfunding websites such as Kickstarter, GoFundMe, and RocketHub. Depending upon which jurisdiction an investor resides within will dictate the sort of restrictions that are applied to the crowdfunding pro Read this Term sector, part of the Capital Markets Union Action Plan. The aim of the Capital Markets Union (CMU) initiative is to open up access to funding for European SMEs and to boost growth in the EU with the creation of a single market for capital. Basically, they are trying to break down the barriers that are blocking cross-border investments in the EU and preventing businesses from getting access to finance.

It should be said that the current environment is quite tough for European startups and SMEs, compared for example to other regions like the Silicon Valley and South-East Asia, where the venture capital markets satisfy the funding needs of the early stage companies. In Europe, despite the positive developments in the last few years, and the impressive growth that was seen for alternative finance and fintech in Europe and especially in London, the European startups are still heavily reliant on banks and traditional finance sources.

What emerges from the report just released is that the EU policy-makers decided to leave the Regulation Regulation Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Read this Term of crowdfunding to the EU’s 28 member states, saying that there is no particular reason to create an EU-level framework for the moment.

“As part of our work to improve the funding conveyor belt for businesses, we are keen to support the development of crowdfunding models as a source of financing for entrepreneurs with bright ideas, start-ups and other SMEs. Our focus is on promoting best practice, appropriate investor protection and consistency of national regimes. We will continue to monitor market and regulatory developments closely.” said Jonathan Hill, the EU’s Commissioner for Financial Stability, Financial Services and the Capital Markets Union.

About €4.2 billion was successfully raised through crowdfunding platforms last year in the EU, with a very impressive growth compared with the €1.6 billion raised in 2014.

The report finds also that while crowdfunding is currently used as an alternative source of finance in all the European states, the main activity is concentrated on just a couple of states, with the UK by far the most advanced and active region.

But it’s not only a matter of broadening access to capital, we are talking also about job creation and indirectly of economic growth of the whole region. As stated in the report, the startups that survive more than three years, which are about 60% of the total, “contribute disproportionately to job creation”, accounting for an average of 17% of employment and creating an impressive number of new jobs, as much as 42% of the total. The success of these young firms then becomes “crucial to the future of jobs and economic growth in Europe.”

The press release with the announcement can be found here.