Equity crowdfunding

Equity crowdfunding is the online offering of private company securities to a group of people for investment and therefore it is a part of the capital markets. Because equity crowdfunding involves investment into a commercial enterprise, it is often subject to securities and financial regulation. Equity crowdfunding is also referred to as crowd-investing, investment crowdfunding, or crowd equity.

The Australian federal government's now dissolved Corporations and Markets Advisory Committee (CAMAC) released its report on equity crowdfunding in May 2014. The report proposed a regulatory regime specifically designed for and to facilitate crowd sourced equity funding (CSEF) in Australia. The CAMAC report recommended Australia introduce legislation allowing retail investors to invest up to $10,000 a year in start-ups via equity crowdfunding, with a maximum of $2,500 in each company. It suggested companies be allowed to raise up to $2 million per year on such platforms.

Through 2016 and 2017 proposed amendments to the Corporations Act were debated and finally passed on 22 March 2017 in the form of the Corporations Amendment (Crowd-sourced Funding) Bill 2016 (Bill). The Bill provided 6 months for the Australian Securities and Investment Commission (ASIC) to enable the legislation and a further delay for licensing to occur.

Austria introduced a new law in August 2015 which specifically regulates crowdfunding and other alternative forms of investment. The law is meant to set a clear legal framework for crowdfunding to not only make this form of investment more accessible to entrepreneurs, but also to protect the investors better and prevent misuse.

On November 19, 2014 in the State Council address, prime minister Li Keqiang endorsed equity crowdinvesting as part of financial innovation to solve financing difficulties for small and medium enterprises. On January 20, 2015, the China Security Regulatory Commission (CSRC) approved the first eight equity crowdinvesting platforms.

After two smaller projects in 2010, 2011 can be considered the first successful year for crowdfunding in Germany. The largest crowdfunding project was launched by the company Brainpool in December 2011. For the movie of the successful TV series Stromberg, the company wanted to collect one million euros by March 2012, and the total amount was reached within one week. Since then, various national, but also regional, platforms were founded, such as Crowd Berlin, Nordstarter for Hamburg and Dresden Durchstarter.

The crowdfunding activities in Portugal had not been targeted by legislation until 2015. The first equity crowdfunding platform to receive the regulatory approval from the UK Financial Services Authority was Seedrs, co-founded by Portuguese Carlos Silva. SyndicateRoom another online UK-based equity crowdfunding was also co-funded by Portuguese Goncalo de Vasconcelo. Some of Portugal's crowdfunding platforms are PPL, a donation and reward-based crowdfunding platform for funding every kind of projects, MassiveMov, founded in 2011 aiming to be a funding alternative for innovative projects and Raize, a debt-based crowdfunding platform. Novo Banco Crowdfunding is another initiative in partnership with PPL which aims to raise money for social projects promoted by NGOs and charities and are 10% co-financed by NOVO BANCO, founded in 2011 aiming to be a funding alternative for innovative projects. The Portuguese crowdfunding legislation, Lei 102/2015 de 24 de agosto Regime juridico do financiamento colaborativo states that from now on crowdfunding will be monitored by CMVM(Securities Market Commission) and every platform needs to be registered at DGC (General Consumer Office). It recognizes four types of crowdfunding: donation, reward, equity and debt. According to the law, the investors can receive the money back if the announced conditions are not complied. CMVM is given 3 months to create the supervision norms and regulations to be applied in this area but the new rules apply only to projects that start after the publication of the law.

Crowdfunding portals have also launched in Scandinavia supporting both local language crowdfunding and English language crowdfunding. The oldest active crowdfunding platform in Sweden today is crowdculture launched in 2010. The system works with a unique hybrid mechanism where crowdfunding works as abase to crowdsource public investment decisions. The donation-based CrowdFunding portal FundedByMe has been active in Sweden and Norway since 2011, and Swedish crowdfunding activity is evolving in parallel to Crowdfunding in the USA with Equity-Based CrowdFunding becoming active in Sweden late in 2012. Invesdor also started operating in Sweden in February 2013.

On 6 July 2012, Seedrs Limited was launched as the first equity crowdfunding platform to receive regulatory approval from the Financial Services Authority. In August 2012, Richard Branson announced his support for crowdfunding, crowdinvesting and crowdlending platform BankToTheFuture.com in the Telegraph newspaper. In February 2013, the CrowdCube equity crowdfunding platform, which was launched in 2011, was authorised by the FSA. On 18 March 2014, the first investor-led equity crowdfunding platform, SyndicateRoom, was authorised by the FCA. In May 2014, Crowd for Angels, which is considered the first debt and equity crowdfunding platform authorised by the Financial Conduct Authority (FCA), launched. In March 2015, Eureeca was the first international platform to receive regulatory approval from the United Kingdom's Financial Conduct Authority. In April 2017, Capital Cell, a specialist platform for biotech and life sciences crowdfunding from Spain, launched its subsidiary in the United Kingdom and received regulatory approval from the Financial Conduct Authority in September 2017.



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