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Italian Crowdfunding Market: Fast and Furious. Results of the latest Analysis of Italian Crowdfunding Platforms

After exactly one year from the first edition of Crowdfuture, the Italian crowdfunding community met again in Rome last Saturday. Five tracks with 45 speakers came together to explore and discuss  the,  still emerging but already disruptive,  phenomenon of crowdfunding. It was also the opportunity to present the updated edition of the “Analysis of Italian Crowdfunding Market”, to date the most complete report on the sector. Ivana Pais, from the Cattolica University, and I presented it during one of the afternoon seminars, in front of a very active and curious audience (you can find the slides here) and we’ve just published the full report that you can view and download for free here (only available in Italian at the moment).

Main points:

– The number of platforms has almost tripled in a year

The availability of platforms is currently outstripping the availability of suitably prepared projects: rejection rate is very high

– Half of the total value raised by successful projects in the history of Italian crowdfunding  has been collected in the last year (11 million Euros)

– There’s a clear and marked predominance of the social lending model: of the total value raised, the 80% is brought in by lending-based portals

Among the trends: localvesting, niche platforms, hybrid platforms and DIY crowdfunding

Italian crowdfunding market is growing fast but it has still a long way to go, especially in overcoming cultural barriers and norms

The Italian market for crowdfunding seems to be growing at a very fast pace.  From 16 platforms in 2012 we now have 41, of which 27 are active and 14 in their launch phase. Among the active platforms, more than half are reward-based, one-third donation- based and only three are lending-based. Among those launching, the vast majority are equity-based, pushed by the recent publication of the Consob Regulation.

Data were collected from 30 platforms. The number of projects submitted to platforms totaled more than 52,000, of which the vast majority to lending-based platforms. Of these 52,000 projects, less than 15,000 were actually published and the majority of these being reward-based projects. The cumulative value of the projects is growing but remains modest part of the overall global totals raised. This would suggest that the availability of platforms is currently outstripping the availability of suitably prepared projects in Italy. As for the success rate, it’s an average 54% in lending -based, 44% in donations and 24 % in reward -based.

The total value raised by successful projects in the history of Italian crowdfunding amounts to almost 23 million euro, of which more than 11 million has been collected in the last year. Of this total, 80% is brought in by lending-based portals, which also have the highest average value of financed projects (€ 7,892 /project). It should be noted that in Italy lending is consumer lending as commercial (to business lending) is not currently permitted.

Among the trends of crowdfunding in Italy are the growing presence of local and niche platforms and we noted also the emergence of hybrid platforms. ” Do It Yourself ” Crowdfunding is also spreading widely  too: two of the most funded projects to date in Italy have been DIY campaigns.

These trends, which in part follow global trends, have ” taken root ” well in Italy probably because (excluding hybrid platforms) they have a strong tie with the community and the territory. This appears to be a necessary aspect for a successful crowdfunding project in Italy, given an apparent lack of trust in the online world whilst, on the other hand, an  inclination amongst Italians to be very open and trusting towards people who are part of their more immediate community.

The rapid growth of Italian crowdfunding is not to be seen only from a positive point of view. The clear and marked predominance of social lending perhaps is a reflection of existing cultural norms and a willingness to  invest only in projects with a financial return. The high rejection rate of projects would seem to indicate a lack of understanding on the part of project owners as to what is required to successfully run a crowdfunding campaign.” Not surprisingly, the platforms continue to lament the lack of knowledge of crowdfunding at all levels. However, unlike last year,  the newer platforms in particular are very active in their educator role, organising events, initiatives and providing resources of various types on their portals. The number of events on crowdfunding has significantly increased and crowdfunding as a subject has featured on the radio and even on national TV in recent months.

However, understandably, the focus of media attention in recent months has concentrated on the equity crowdfunding model and this has had the effect of confusing many to think this is the only option available. The CONSOB regulation has had the great benefit of stimulating further debate on crowdfunding and particularly bringing it to the attention of institutions and Italian mainstream media. There’s still a long way to go. I particularly liked two comments from two of the platforms owners who replied to our questionnaire, which sum up my view on the state of crowdfunding in Italy now and its major obstacle. The first comment said “We are at an embryonic stage of crowdfunding so everything is needed for the later stages“. The other was a response to a question to platforms “Who is your main competitor?”. The answer – “the priest!”.

An overview of crowdfunding in Italy

An overview of crowdfunding in Italy

[written in collaboration with Ivana Pais, Cattolica University, Milan]

“From 10 years to 10 months”. This, according to Alessandro Fusacchia, is how much he would accelerate the implementation of the crowdfunding provisions of the the Decreto Sviluppo and so get Italian legislation in step with US developments under the JOBS Act. For once, it looks like Italy is keeping up with times. But this haste is not without its critics their fear being that the Italian crowdfunding market is not mature enough.

So what is the state of crowdfunding in Italy?

According to a brand new report, Analysis of Italian Crowdfunding Platforms, there are 16 active crowdfunding platforms, and 5 more are in their launch phase.  Eight platforms are reward-based and five are donation-based; two are social lending platforms and only one platform can be included in the equity-based model. Twelve of these platforms took part in the survey that led to the report.

The longest established platform is ProduzioniDalBasso (launched in January 2005), followed by Smartika in 2008 (which launched as Zopa Italy), Kapipal in 2009 and Prestiamoci in 2010. However the boom year so far for Italian crowdfunding was 2011 with the launch of Shinynote, Eppela, Cineama.it, Retedeldono and SiamoSoci, followed by Musicraiser, Starteed and Crowdfunding-Italia in 2012. The platforms are based mainly in Northern Italy, with only one platform based in Rome and one is based abroad, in London. The target market is national, with the exception of two platforms that position themselves on the European market.

Since their launch, Italian platforms received a total of 30,000 projects, of which 75% have been on social lending platforms. Approved/published projects number 9,000 (of which over 5,000 were on social lending platforms); and almost 2,500 projects were funded.

Success rate, on average equal to 28%, varies from 7% in equity-based crowdfunding to 16% in reward-based crowdfunding to 35% in social lending. As for donation-based crowdfunding, platforms report an average 74% success rate, however for many platforms collected funds go to projects holders regardless of target achievement, that is to say they operate a “keep it all model”.

The overall value of funded projects is 13 millions Euros, collected mainly on social lending platforms (78%) and equity-based platforms (15%). Only 7% of the total value of projects can be attributed to reward-based/donation-based crowdfunding.

Suggestions that the market is still immature may be right: with more than half of Italian crowdfunding platforms were founded after 2011 and the sums raised still relatively small in comparison to the billion and a half dollars raised via crowdfunding at a global level.

But first movers have gathered significant expertise, and the dynamism over the last months could lead to rapid changes. Reward-based platforms are growing at the fastest pace, in contrast with the global trend, where the equity-based category shows the fastest growth rate.

The general wish of the founders of reward-based platforms is for the introduction of guidelines  particularly in relation to legal and fiscal aspects, as well as tax relief on donations to private individuals.

The complete report has significantly more detail and is available here.

A Crowdfunding Blog Series

Towards the end of last year, we were asked to write a blog series on crowdfunding for Social Media Week. The series has now come to an end. Below you can find a collection of the series’ posts. Keep an eye on this blog, we will continue to share with you insights and more interviews with some of the key players in the crowdfunding arena. 

 

Crowdfunding – A concept whose time has come?
Tim introduces the concept of crowdfunding and discusses the strong links between crowdfunding and the reach, empowerment and engagement of social networking.

 

 

A Social History Of Crowdfunding
Daniela considers the history of crowdfunding in its connection with the web, and as a sequence of developments parallel to the growth of the social web.

 

 

Getting A Share. Equity Based Crowdfunding
Tim explores equity-based model crowdfunding for capital formation, hot topic at the moment with the legislation in the US about to change.

 

 

Crowdfunding Platforms, to each their own
Daniela describes the different types of crowdfunding platforms, classifying them by the type of return people will get, i.e. rewards, equity, or micro-credit, and further by some of the more affirmed sub-models.

 

 

Components of a Good Crowdfunding Campaign
Tim and Daniela used their experience and analysis of crowdfunding to come up with a bit of general advice that should be useful to anyone wishing to start a crowdfunding campaign.

 

 

Interview with Luke Lang, co-founder of Crowdcube
Crowdcube is the world leader in equity-based crowdfunding. Launched in February 2011, the UK based platform has set the pace in bringing to the fore a new mechanism of raising capital for entrepreneurs and established businesses alike.

 

 

Interview with Stuart McLaughlin, CEO @Fund_it
We had the privilege to interview Stuart McLaughlin, CEO of Fund it, Irish-based crowdfunding platform.

 

 

Crowdfunding Bicycle Building – An interview with Andrew Denham of the Bicycle Academy
The Bicycle Academy, an innovative plan to train people to build bike frames whilst providing bikes to the developing world, used crowdfunding to generate the funds it needed to set up. We had the chance to speak to Andrew Denham, the founder of Bicycle Academy at the very end of 2011.

 

 

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