Crowdfunding is an alternative way of raising money - be it for the realization of a cultural project, the implementation of a business idea or the financing of a private investment. Initiators of such campaigns try to reach as many potential investors as possible via the Internet. Fourteen crowdfunding platforms are currently active in Germany. For the first time, experts from the Institute of Financial Services Zug IFZ at Lucerne University of Applied Sciences and Arts have now compiled and analyzed figures from thirteen1 market participants and recorded them in "Crowdfunding Monitoring Switzerland 2014". The analysis distinguishes between four different forms of crowdfunding (see also box): Crowdinvesting (money in return for a stake in the company), crowdlending (money in return for interest), crowdsupporting (money in return for goods/services) and crowddonating (no direct consideration).
Crowdinvesting generates the most money
In Switzerland, around CHF 11.6 million was raised via crowdfunding in 2013, which corresponds to a doubling compared to the previous year and almost a quadrupling compared to 2011. "We assume that the total volume will also double in the current year," says finance professor Andreas Dietrich, who wrote the study with co-author Simon Amrein. Crowdlending accounted for 15 percent of the total volume in 2013 and crowdsupporting/crowddonating for 37 percent. Crowdinvesting accounted for the largest share at 48 percent. Last year, 1,125 campaigns were launched and 720 were successful. Depending on the platform, a campaign is also considered successful if the amount sought was not reached in full but money was still raised. The majority of the successful campaigns were in the area of crowdsupporting/crowddonating, where 594 projects raised money; in the area of crowdlending, 116 projects were crowned with success. Crowdinvesting produced 10 successful campaigns, which corresponds to one percent of all successful campaigns. However, this one percent was responsible for 5.6 million francs, i.e. 48 percent of the total volume.
On average, around 560ʼ000 francs were invested per crowdinvesting campaign. This is a multiple of what was achieved elsewhere (crowdlending: CHF 15,000; crowdsupporting/crowddonating: CHF 7,000). Crowdinvesting also recorded the greatest growth in 2013: the volume rose by almost 200% compared to 2012. "Young entrepreneurs are often unable to obtain a bank loan due to a lack of collateral. Crowdinvesting is an alternative for them in their search for venture capital," says Dietrich. "At the same time, this is where investors take the greatest risk. Experience shows that only one in ten start-ups survives."
Despite growth, crowdfunding serves a niche market
Crowdlending and crowdsupporting/crowddonating are also growing significantly. Nevertheless, the market share of crowdfunding in Switzerland is still low. As 1 100-days, 7Crowd, c-crowd, cashare, direct-lending, feinfunding, Ibelieveinyou, investiere, Kickstarter, Moboo, ProjektStarter, Sosense and Wemakeit. The funds raised by venture capital funds in Switzerland, for example, serve as a benchmark for crowdinvesting (volume: CHF 5.6 million). This amounted to CHF 407.5 million in 2012 (European Private Equity & Venture Capital Association, 2013). The crowdlending volume of CHF 1.8 million (2013) is currently only marginal in relation to the CHF 7.5 billion of the overall consumer credit market. And while Zewo-certified organizations received donations amounting to around one billion francs in 2012, only 2.52 million francs were collected via crowddonating (including crowdsupporting). "Crowdfunding platforms will hardly compete with existing institutions in the coming years. But the importance of internet-based financing will increase and will certainly benefit innovation activity in Switzerland in some cases," says Andreas Dietrich. "Because this is how projects come about for which the necessary funds could probably not have been raised without the 'crowd'."
The figures on crowdfunding in Switzerland are now collected annually by the Institute of Financial Services Zug IFZ at Lucerne University of Applied Sciences and Arts. The current study is under this link (PDF) or on Hslu.ch/crowdfunding to download.
The four forms of crowdfunding
Crowdfunding is made up of the English words "crowd" and "funding". With this type of financing, capital is sought for a wide variety of projects. The phase of collecting money is called a campaign. Internet users act as investors. The majority of platforms work according to the "all or nothing" principle, i.e. money is only paid out if a certain target amount is reached. A distinction is made between four forms of crowdfunding, depending on the consideration that the investor receives for their investment:
Crowddonating: In particular, social, charitable and cultural projects (e.g. orchestra concert, aid project of a non-profit organization) can be financed in this way. The support contributions are pure donations that are not linked to anything in return.
Crowdsupporting: This category often includes cultural projects and projects in the field of sport. Investors receive a one-off reward for their contribution: for example, if you want to co-finance a band's album, you will receive the CD free of charge once it has been produced.
Crowdinvesting: In this way, a start-up raises capital for the implementation of its business idea. In return, the investors receive shares in the company.
Crowdlending: This form involves arranging loans to finance companies or private individuals. In return, the lenders expect a risk-adjusted return. The projects that are financed in this way are very diverse: a family car, wedding preparations, braces or a start-up.