Crowdfunding is an alternative form of financing in which large numbers of small investors invest through digital platforms. These platforms act as an interface between potential investors or lenders and businesses in need of capital – often start-ups or small and medium-sized enterprises (SMEs). Unlike traditional banking, crowdfunding enables a direct link between investors and borrowers.
Growth market with a focus on loans
According to ESMA, more than EUR 1 billion was raised through crowdfunding platforms in 2023. Loan-based projects accounted for the majority (65% of the total), followed by debt-based projects (17%) and equity-based projects (6%). The average amount of funding per loan-based project was around €15,000, significantly lower than for debt and equity-based projects.
With more than 1.7 million investors, the market is dominated by retail investors, who tend to invest smaller amounts than sophisticated and institutional investors. Professional services such as management consulting and research (33% of funds) and construction (21%) were among the main sectors targeted.
Regional differences and cross-border investment
France and the Netherlands lead the European crowdfunding landscape, both in terms of the number of platforms and the capital raised. While French platforms raised around €292 million, Lithuania led in terms of the number of investors, with almost 500,000. The high concentration of cross-border investment is striking in countries such as Austria and Estonia, where 80 per cent of funds come from foreign investors.
Regulation and harmonisation
The European Crowdfunding Service Providers Regulation (ECSPR), introduced in 2020, has created common standards for investment and loan crowdfunding to overcome the fragmentation of national regulations. Since November 2023, all providers wishing to comply with the ECSPR will need to apply for a licence. The regulation sets standards for investor information and protection against conflicts of interest.
Conclusion and outlook
Crowdfunding is increasingly establishing itself as an important financing alternative in Europe. Harmonisation through ECSPR not only promotes transparency and investor confidence, but also cross-border capital flows. The market is in a phase of consolidation, with smaller providers being acquired by larger ones.
In the future, ESMA will report annually, creating a database to analyse trends and identify risks at an early stage. This report is based on an analysis of 98 providers from 17 countries.
