How can private banking support the crowdfunding sector

The new European regulation on equity crowdfunding leaves room for a new market segment, for collections of $2.43 – $9.7 million (€2 – €8 million) (until the maximum limit is lowered to $6 million (€5 million by the regulation itself, ed.), which can be subscribed through club deals with larger participation tickets. Private banking can support companies in raising larger amounts of capital, bridging a gap that currently exists between the stock market listing and crowdfunding in a purely retail version”.

This was said on February 18th, by Giancarlo Giudici, professor at the School of Management of the Milan Polytechnic, during the online conference “Private customers and investments in real economy through online portals,” organized by AIPB – Italian Private Banking Association.

According to its general secretary, Antonella Massaro “the current regulatory framework has safeguarded the balance between the interests of markets and institutional investors, but a new class of semi-professional clients should be recognized, composed of private investors who use portfolio advice, have a risk profile balanced between the prudent and the dynamic, an average portfolio of $1.9 million (€1.6 million) and a high portfolio diversification, which could be added to the professional class on demand, already provided for by the Mifid 2″. For a potential market of $850 billion (€700 billion).

Regarding the new European crowdfunding regulation approved on October 7th, 2020, Emma Rita Iannaccone, member of Consob’s Intermediaries Division, recalled that it will be applied in Italy from November 10th, 2021, and managers already active will be able to continue to operate under the previous regulation until November 10, 2022.

The new European regulation introduces an entry test to verify knowledge before investing in crowdfunding, which contains typical aspects of suitability for Mifid purposes. A limit in terms of percentage of assets per unsophisticated investor will also be inserted, who can also enjoy 4 calendar days reflection period if he wants to exceed this limit.

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Consob will launch a 3-month consultation on the new European regulation

AIPB, through the mouth of its general secretary Antonella Massari, has anticipated that it intends to participate in the consultation on the new crowdfunding regulation, bringing its perplexities on the subject. “Crowdfunding is a market still very much dedicated to professional clients, especially in the case of agreements between portals and banks, or to individual savers, who invest very small tickets and thus have little impact on the amount of funding. The new regulation lowers the maximum threshold for campaigns, and this will not attract the interest of the most sophisticated and wealthy clients, as well as leaving much room for self-management in verifying adequacy. While it is true that maximum synergy is achieved by bringing together portal managers with advisory networks and banks, the role of financial advice is crucial in accompanying the client to the crowdfunding investment and developing the market. Otherwise, there is a risk that the new regulation will reduce the potential of the Italian market,” warned Massari.

According to data from the Observatory on Crowdfinvesting of the Milan Polytechnic presented by Prof. Giudici, in Italy in 2020, $118.9 million (€98 million) were collected with equity crowdfunding and $519 million (€428 million) with lending crowdfunding, for a total collection of $631 million (€520 million): levels almost comparable to France and Germany. Within lending crowdfunding, institutional investors are very present, providing 66% of the funds. In Italy there are 47 crowdfunding portals and the market is dominated by innovative startups because there are strong incentives to finance them and because crowdfunding is a form of financing very suitable for them, Giudici explained.

Crowdinvesting has almost surpassed that of venture capital in 2020 $728 million (€600 million), commented Alessandro Maria Lerro, founder and partner of the law firm Avvocati.net.

“Blame the low incidence of corporate venture capital in our country and a culture of venture capital and new entrepreneurship that is poorly rooted,” noted Alessandro Scortecci, Head of Strategy and Business Development at Cassa Depositi e Prestiti Venture Capital sgr – Fondo Nazionale Innovazione. The sgr’s objective is to make venture capital a cornerstone of Italy’s economic development thanks to the investments of its funds: 10 are planned, of which 8 have been launched and 2 are to be launched by mid-2021. The vehicles have an endowment of about $1.7 billion (€1.4 billion), coming from Cdp and Mise.

The most significant crowdfunding operation of 2020 was the e-Novia campaign, which raised a record amount of over $9.2 million (€7.6 million) from more than 200 investors on the BackToWork portal. 

Roberta Sandrone, Head of Marketing – Investment Products and Services at Intesa Sanpaolo Private Banking, said: “The bank carried out an adequacy assessment when opening the advisory relationship and defined the target customers of the operation: HNWI customers, interested in alternative investments and with medium-high level of knowledge and experience. It is in addition to the adequacy assessment carried out by the crowdfunding portal. Intesa Sanpaolo Private Banking has prepared a specific information sheet on the transaction, which was added to the information made available by the equity crowdfunding portal”. Given the success of the transaction, Intesa Sanpaolo Private Banking is working on a second crowdfunding campaign, which will be implemented in the second half of 2021.

The equity crowdfunding portal Doorway also supports private banking in investing in the real economy

The company creates a dedicated investment vehicle for each target startup to invest in it through a club deal and then appoints a champion for each startup, who is the administrator of the vehicle, represents it on the board of the company in which it has invested and is an industry expert, so as to support the founders in key decisions, explained Antonella Grassigli, CEO and co-founder of Doorway. 

In addition, the company has developed a dashboard specifically for private banking, updated with information from each startup’s champion. The crowdfunding portal has an exit orientation: it has already completed 6 out of 12 total investments: Deliveristo; ACBC; Rejoint; Vitesy Pep Therapy; My Secret Case. “For 2021 we aim to present 20 deals between startups and scale-ups, with average rounds in line with HNWIs’ assets. And now a $2.8 million (€2.3 million) round on Doorway is about to launch,” Grassigli said.

Institutional investors on AimAIM can also represent the secondary market for startups that raise capital on equity crowdfunding platforms and become an exit option for investors, thus increasing the liquidity of the investment thanks to the excellent performance achieved. In addition, the recent confirmation of the tax credit on listing costs up to $607,000 (€500,000) in favor of Italian SMEs will allow them to accelerate their growth path by listing on the stock exchange, which is channeling financial resources into the real economy. 

Anna Lambiase, CEO and founder of IR Top Consulting, concluded, “The world of private banking is showing a keen interest in the real economy well represented by the companies listed on the Aim market, which will increase from 77 in 2016 to 138 in 2021 (+79%). AIM Italia confirms itself as a financial instrument with great potential as demonstrated both by the number of qualified investors that has doubled in the last 5 years with an average investment of about $242,800 (€200,000), and by the amount of overall funding in IPOs of companies that has exceeded $4.7 billion (€3.9 billion).”

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(Featured image by Edar via Pixabay)

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