The European Commission has stated as its aim to support
the business environment for SME’s and promote successful
entrepreneurship. Research shows the majority of job creation comes from
small and medium sized businesses, which account for 99% of all
businesses in Europe. The vast majority of these have ten or fewer
employees.
At the same time, uncertainties resulting from the on-going squeeze on credit availability
are made worse by never-ending threats of systemic disruption in the
financial markets. For European SMEs and entrepreneurs, but also for
individuals, non-profits or creative projects, this has led to a
threatening shortage in funding.
In order to provide adequate sources of funding,
crowdfunding should be integrated into the European Commission’s aim in
support of SMEs. The disruptive nature of crowdfunding can help fill the
funding gap, but it also brings several nonfinancial benefits, such as
validation of product features, market segmentation, price and demand,
pre-sales and marketing.
The crowdfunding industry is small yet vibrant. Last year,
the Europe market raised around €300 million or one third of the world
market, considering all types of crowdfunding. At the end of 2011, there
were around 200 crowdfunding platforms active in Europe. Their number
is expected to increase by 50% by the end of 2012.
However, in its many forms, crowdfunding too often is
stalled by different European regulatory approaches to financial
intermediation and investing. This is even truer where national
regulatory interpretation have displayed a tendency to lag behind the
establishment of the common market itself.
There is no European regulation specifically designed to
support crowdfunding, but many that are applicable. For example, when
marketing equity investments, existing regulation across Europe
harmonises fundraising above €5 million and below €100,000. The gap
in-between, which is one starved for equity capital, is left to the 27
national regulators to interpret. The result does not foster
pan-European crowdfunding and does not create a level playing field
within the Union.
If Europe is to realise the true potential of
crowdfunding, there must be a collaborative and open discourse amongst
the industry, regulators, and citizens in order to generate the
necessary consent on best practices, reflecting the needs and specifics
of different crowdfunding business models. European, national and
regional legislators and policy makers should join forces to establish
crowdfunding-enabling legislation in Europe with the aim to support
entrepreneurship, innovation and job-creation.
First published at crowdfuture
