In Europe, more than 200 crowdfunding platforms have helped many small businesses raise funds of up to €450 million in 2011. The funds are spread out to about 600,000 different fundraising campaigns via different crowdfunding platforms.
Small and medium sized businesses are said to be the lifeblood of the economy as they represent about 99% of businesses. SMEs are also responsible for economic growth, innovation and job creation. The problem however is that funding sources for these businesses are very limited.
There are only a few number of venture capitalists that support SMEs. In fact only 0.5% of small businesses have gotten support in the form of risk carrying equity investment from capitalists.
Access to capital and a shortage of funding tools have been the primary problem of SMEs and these factors essentially delays economic growth, innovation and job creation. Crowdfunding is said to be the solution to this problem.
Crowdfunding is not exactly a new concept but with the internet, especially mobile technology and social media, it has offered an environment where businesses and people can collaborate and exchange resources.
Although it is necessarily not going to change the way businesses seek funding but it can be an alternative and it will supplement the existing financial infrastructure.
Across Europe there are about 200 crowdfunding platforms for just about every type of business. In 2011, it is estimated that funds raised can reach up to €450 million from 600,000 campaigns. Compare that to €3.9 billion invested to 4,800 SMEs from venture capital firms in 2011 it is still small but the growth rate estimates that the potential value of crowdfunding can equal European venture capital in two years.
- Europe crowdfunding platforms have raised €450 million for 600,000 fundraising campaigns in 2011
- Europe venture capital has invested €3.9 billion to 4,800 SMEs in 2011
- In the next two years, potential market in value between crowdfunding platforms and venture capital will equal out
- Only 0.5% of SMEs have received risk carrying equity investment from venture capital firms
- 99% of businesses are considered small to medium sized
Oliver Gajda, Co-Chair & Co-Founder, European Crowdfunding Network: “SMEs are widely acknowledged drivers of innovation, job creation and economic growth. However, there are very limited funding mechanisms that share the risk of investing in innovation and job creation for the absolute majority of these businesses.”
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