2019 was a record year for crowdfunding equity in Italy. In fact, at the end of the first half of 2019. Over the past five years almost $90 million (€82 million) has been raised in Italy via equity crowdfunding.
Of these $90 million (€82 million) almost $29 million (€27 million) was collected in the first 6 months of 2019. This rapidly rising popularity is good news for both Italian investors and companies and could represent a watershed moment for the equity crowdfunding movement.
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There has been an explosion of active equity crowdfunding campaigns and an increasing number of these have been successfully completed. Additionally a wider variety of companies are opting for equity crowdfunding in Italy and this has lead to a proliferation of authorized platforms. The fourth report on crowd investing by the Politecnico di Milano Observatory offers a more detailed picture.
The Italian equity crowdfunding campaigns
In the last twelve months, 170 equity crowdfunding campaigns have been surveyed out of a total of 401 activated or concluded from the time it became possible to make this type of investment in Italy. This means that on average two new companies a day launch an equity crowdfunding campaign: according to the data, in most cases, these are unique campaigns, with 369 different companies, to which approximately 400 active campaigns that were mentioned above can be attributed.
At this point, it is still mainly innovative startups that turn to crowd investing: 72% of campaigns would be attributable to this type of business entity. However, even small and medium enterprises that are part of the Italian entrepreneurial fabric are beginning to discover the advantages of crowdfunding equity.
Individual entrepreneurs, and people with a business idea, but without the capital to put it into practice, are now frequently using novel forms of equity crowdfunding, such as P2P lending, to finance individuals rather than companies. According to the Milan Polytechnic Observatory, $228 million (€207 million) has already been raised in this crowd investing niche.
The development or implementation of marketing and branding strategies (about 55% of campaigns are aimed at this), and the creation of ICT platforms (a result to which 33% of campaigns are aimed). The average value of the individual campaigns is around $209 thousand (€190 thousand), with a record for the real estate sector: here the individual equity crowdfunding campaigns are worth over $727 thousand (€660 thousand).
On average, 85 different investors participate in a campaign, and investors – especially men, with an average age of 45 years – would spend an average of $5000 (€4500) per project, which is also an increase compared to the past. The average return is around 10.4% of the company’s capital, with an increasingly common practice that is to offer non-voting securities to those who invest below a certain threshold. However, perhaps the biggest record of this year would be the number of successful campaigns: in the first half of 2019 alone, they would have been 75% of the total when for the entire five-year period (from 2014 to 2019, i.e. since the start of the Observatory on crowd investing) the percentage had remained at just over 71%.
Future prospects for equity crowdfunding in Italy
Despite progress gender balance still remains a problem in the Italian labor market. The report gives insight into the composition of the teams behind the winning campaigns: they have an average of just three female members. A sign that even the most innovative companies, leveraging the most advanced financial instruments, have yet to come to terms with gender issues in Italy.
Another weak point for those who do equity crowdfunding in Italy is the lack of ad hoc professional figures. Surveyed by Consob, the most recent trend would have to do with the emergence of new vertical platforms, specializing in equity crowdfunding, sectors such as energy, real estate, or impact investing in particular.
However, rarely, do companies and other business entities turn to new professionals, such as equity crowd funders, to help them better manage their campaigns and avoid gross errors that risk lowering the chances of success. The year 2019, still in support of the records achieved by equity crowdfunding in our country, would finally see the first quotations on the stock exchange of specially created platforms and management companies.
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First published in INSIDE MARKETING, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
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