Why Crowdfunding Is No Longer Popular in France: The End of a Golden Age?

Having arrived in its digital form in the 2000s, crowdfunding quickly attracted many individual investors. However, in 2023 and for the first time in the history of crowdfunding, the amounts raised were down in France. Should we therefore say that the model no longer attracts crowds?

It must be said that, since 2015, the increase in the amounts invested in crowdfunding in France has been particularly significant. From 2015 to 2023, the annual collection figures have increased twelvefold to reach 9 billion, all transactional models combined (donation, loan, investment).

While European figures are difficult to compile, a study conducted by UiA School of Business Law in Agder, Norway , estimates the amounts invested through crowdfunding in 2022 at 19 billion euros. A volume up 17% over one year. The figures for 2023 are, however, not available

Nevertheless, experts anticipate a decline in collection levels within the old continent. The cause: an uncertain macroeconomic context against a backdrop of inflation and rising rates.

Real estate in the red

In France , real estate – 55% of overall collection – is bearing the brunt of the decline. Between 2022 and 2023, funds collected for land projects decreased by 28%.

“In a context of rising interest rates, financing for real estate projects has become tight. Real estate development operations with prices that are too high have therefore been slow to find buyers ,” explains Vincent Heno, founder of the real estate crowdfunding platform Beefordea

Consequence for the saver: a delay in return estimated between three and twelve months, depending on the case. In the worst case scenario, it is a failure with total loss of capital for the investor. “We must keep in mind that what our investors are looking for is a rapid return on investment ,” emphasizes Vincent Heno.

Now, the bold are becoming rarer. If real estate crowdfunding continues to serve high rates of return (above 10% for the year 2023), the associated risks are significant and the total or partial loss of capital is a hypothesis that can no longer be ruled out.

“Savers were attracted by the profitability displayed by these products, but had not necessarily anticipated the risks. Today, they are more aware of the associated risks ,” notes Aurélien Gouraud, director of operations and development at Lendopolis.

The power of renewable energy

The other category to take a hit is lending to businesses. A few months ago, the October platform announced the end of its lending activity aimed at supporting the growth of small and medium-sized businesses, selling its technology to the giant Sopra Steria.

“With the rise in interest rates, platforms specializing in business financing are struggling to be competitive with traditional banking establishments ,” explains Florence de Maupeou, general director of the professional association Financement participatif France

Only the renewable energy sector is currently doing well. Slowly and gradually, collection on impact projects is increasing. In 2023, it increased by 11.5%. The returns paid are around 6.5% with longer financing periods, around 36 months.

The enthusiasm of individual investors for the renewable energy sector counterbalances the reluctance towards the real estate sector. “This perimeter is now stable and secure ,” emphasizes Florence de Maupeou

Savers thus select projects aligned with their values ​​and are prepared to accept a lower return than that provided by real estate projects, in favor of a more controlled risk.

France, a mature market for crowdfunding

The future of crowdfunding may therefore lie in impact projects. From the outset, crowdfunding has attracted savers who are keen to better trace their investments. France is now a mature market with a significant number of regulated platforms.

With very accessible entry tickets – starting at 10 euros on some platforms – small savers have the opportunity to commit to initiatives that are close to their hearts. A financial bias that attracts investors tired of the traditional savings products offered by banking groups.

At the same time, start-up founders continue to apply for crowdfunding loans in their early stages. “It is a financing method that has largely proven itself. Project leaders remain attached to crowdfunding, while investors like to get involved alongside them to finance nascent initiatives that are anchored in the real economy ,” concludes Florence de Maupeou.

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(Featured image omar cheikh rouhou via Unsplash)

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First published in The Good Life. A third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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