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Crowdfunding For Small Firms

The Economist: Crowdfunding is just one of a number of ways in which European SMEs, typically far more reliant on bank financing than their American counterparts (see chart), are trying to compensate for the continuing decline in bank lending. Others include issuing publicly tradable debt or equity; placing securities privately with institutional investors; and accepting loans from non-bank financial institutions (“shadow banks”). Banks and others are also securitising loans to SMEs (ie, pooling them, dividing the pool into tranches with different degrees of risk, and selling the resulting securities to investors). Governments are keen to promote all this, to limit the economic harm done by sickly banks. 

Governments are keen to promote all this, to limit the economic harm done by sickly banks. In France, for example, the finance ministry has taken a lead since 2012 in creating a pan-European market for private placements. In 2013 and 2014 decrees created SME debt funds and loosened the rules to let insurers invest up to 5% of their liabilities in unlisted companies. In 2014 a regulatory framework for peer-to-peer lending was put in place. Earlier this month the government pushed through parliament the loi Macron, which contains among its many reforms permission for one company to lend directly to another. Read the full article

Fortune: “Greek Bailout Fund” is the brainchild of 29-year-old U.K. man Thom Feeney, who thinks regular citizens can succeed where the Greek government and European bankers have failed. He invites people to donate as little as €3 and receive a postcard from Greek Prime Minister Alex Tsipras, or €6 to get a “feta and olive” salad. After the media picked up news of the project on Tuesday, it received a jolt of popularity. A trickle of donations became a flood and, by 4 p.m. ET, the total eclipsed €160,000 before the campaign’s Indiegogo page abruptly crashed. Read the full article

Wired: Is crowdfunding “the new normal”? Darren Westlake thinks so. He’s the CEO of leading investment crowdfunding platform Crowdcube, which to date has raised over £80 million in investment for new businesses. Westlake is on a mission to raise the profile of crowdfunding as an industry, and he’s seeking to bridge the gap between old school investors and the new school of fintech innovators. Read the full article

DEALSTREETASIA: Technology startup incubator and accelerator IdeaSpace Foundation has observed a new investment trend in the Philippines — that of small and medium-size enterprises (SMEs) becoming startup investors. IdeaSpace president Earl Valencia said there are a number of SMEs who are mulling an investment in startups, as an extension of their revenue source. Read the full article

 

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