European Crowdinvesting – What are the next steps? Ideas for a European Crowdinvesting Share

For a long time, the European Crowdfunding Platforms were in a comfortable space:

  1. National regulators would scarcely consider Crowdinvesting an important topic, amidst the turmoil of the European Debt Crisis and the impending need to reign in the Banking Industry.
  2. Politicians of all parties would comment favorably on the innovative and creative approach to financing.
  3. National Crowdinvesting Platforms would seek their nice (both in terms of products and equity instrument) and would not be harmed much from other European competitors.
  4. The American platforms were busy building up their business model in the states, after the SEC finally allowed them to do any business in terms of Crowdinvesting at all.

Things have changed considerably.

  1. The first European platforms are actively entering each others markets,among them Fundedbyme, Kisskissbankbank (and their lending platform) and Symbid.
  2. The American Crowdinvesting platforms are growing quick because their market opens up and gives them a huge momentum.

The Crowdinvesting Platforms in Europe have no time to be lazy. I personally think that a big mistake is to stay focused on one cultural and legal domain, such as focussing on Germany only. In the short-run this might be the easiest step, but in the long run it won’t help.

However, to create a true European Crowdinvesting Space, there needs to be three things done:

  1. There needs to be a revival of the European Limited Company, so that investors across Europe know exactly the duties and privileges of entrepreneurs in this field
  2. There needs to be one unified Crowdinvesting equity instrument, such as a European Crowdinvesting Share, which could work like this:
    • A European Crowdinvesting Share can range from 1 Euro to maybe around 10000 Euro.
    • Companies using the European Crowdinvesting Share as an equity tool need to be a European Limited with a base in one of the EU member states.
    • Companies using the European Crowdinvesting Share can raise any amount up to 5 million Euro.
    • Companies using the European Crowdinvesting Share don’t need to issue a Crowdinvesting Prospectus, but need to use an accredited Crowdinvesting platform.
    • A European Crowdinvesting Share gives no voting rights for the investors.
    • A European Crowdinvesting Share has to be held for at least 1 year before being sold again.
    • The European Crowdinvesting Share allows the full participation in any further financing rounds. Dilution of the European Crowdinvesting Share in further financing rounds is forbidden
  3. National regulation should not distinguish between Crowdinvestors from other European Countries, so in other words any regulation that applies for Citizens of One Country should effectively be also valid for Crowdinvestors from other Countries.
  4. Crowdinvesting should get a tax credit of 10% so that 10% of the total crowdinvesting done via the European Crowdinvesting Share can be deducted from the income tax.
  5. The European Commission provides a Co-Financing Instrument of 10 billion Euros which allows all Crowdinvesting to get an subsidy of up to 250.000 Euros (maybe 5% of the total Crowdinvesting sum)
  6. There needs to be a European Crowdfunding Union which brings together platforms, entrepreneurs, analysts and investors

What do you think about these proposals? Any comments are welcome!

Disclaimer: this blogpost is part of an ongoing discussion inside the German Crowdfunding Net on measures to improve Crowdinvesting in Europe. It only reflects the views of the author.