Last year, a total of CHF 11.6 million was raised in Switzerland through crowdfunding. Around half of this amount went to new companies that sold shares via the internet. This segment also posted the biggest growth in 2013. In absolute terms, the Swiss crowdfunding market is still small. The growth rates, however, are impressive. We expect market size to double in 2014. These are the conclusions of the first “Crowdfunding Monitoring Switzerland” report published by the Lucerne University of Applied Sciences and Arts. The industry can be downloaded here.
Crowdinvesting generates the most money
In Switzerland, around CHF 11.6 million was raised through crowdfunding in 2013, which is twice as much as in 2012 and almost four times as much as in 2011. “We’re expecting the total volume to double again this year,” says Andreas Dietrich, Professor of Finance, who co-authored the study with Simon Amrein. 15% of the total volume for 2013 was raised through crowdlending and 37% through crowdsupporting/crowddonating. At 48%, most of the money was raised through crowdinvesting. 720 of the 1,125 campaigns launched last year were successful. Depending on the platform, and respectively the crowdfunding model (keep-it-all vs. all-or-nothing), a campaign is also classed as successful if the full target amount was not reached but money was still transferred. The crowdsupporting/crowddonating category boasts the biggest number of successful campaigns, where funds were raised for 594 projects. In the crowdlending category, 116 projects were successful. There were 10 successful crowdinvesting campaigns, which equals one percent of all successful campaigns. However, as this one percent accounted for CHF 5.6 million or 48% of the total funding volume, each crowdinvesting campaign raised around CHF 560,000 on average. This is substantially higher than elsewhere (crowdlending: CHF 15,000; crowdsupporting/crowddonating: CHF 7,000). Crowdinvesting also posted the biggest growth in 2013 with funding volume rising by almost 200 percent on 2012. “Because they lack collateral, young entrepreneurs often can’t get a loan from the bank. For them, crowdinvesting is a viable alternative when looking for venture or risk capital,” says Dietrich. “In this case, the people who provide the money bear the biggest risk, as experience has shown that only one out of ten start-ups will survive.”
In spite of its growth, crowdfunding serves a niche market
Although crowdlending and crowdsupporting/crowddonating are also on a path of growth, crowdfunding’s share of the Swiss market remains small. The funding volume for crowdinvesting (CHF 5.6 million) for example can be compared to the money raised by venture capital funds in Switzerland. This amounted to CHF 407.5 million in 2012 (European Private Equity & Venture Capital Association, 2013). The CHF 1.8 million (2013) generated by crowdlending of is marginal compared to the total amount of CHF 7.5 billion from the consumer loan market. While the ZEWO-certified organisations received donations totalling CHF 1.04 billion in 2012, only CHF 2.52 million was raised through crowddonating and crowdsupporting. “Although crowdfunding platforms aren’t yet able to compete with existing institutions, in the coming years the importance of internet-based financing will grow and in some instances will certainly benefit innovative activities in Switzerland,” says Andreas Dietrich. “With this type of campaign, projects can be realised for which there wouldn’t have been enough money without the support of the crowd.”
The Institute of Financial Services Zug IFZ of the Lucerne University of Applied Sciences and Arts will in future collect the data on crowdfunding in Switzerland annually. The most recent study can be downloaded at www.hslu.ch/crowdfunding.
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