The landscape of equity crowdfunding in Europe has undergone a remarkable evolution in the last few years. This week, two of its most significant players, Seedrs and Crowdcube, released interesting reports that point out the future, challenges and expectations of these investment platforms. Seedrs’ extensive 2023 Investors Survey and Crowdcube’s last quarter data provide valuable insights into the current state of this dynamic arena. What can these numbers tell us about the state of equity crowdfunding in Europe right now and what we can expect for the rest of the year?
Seedrs, a prominent private investment platform in Europe, recently conducted an in-depth survey involving over 1200 individual investors. Despite a temporary dip in investment activity reported by 50% of respondents, the survey illuminates several noteworthy shifts in investment preferences and drivers.
One of them is the escalating impact of industry alignment on investment choices. ClimateTech emerged as a favored sector, signifying an increasing inclination towards investments that resonate with environmental sustainability goals.
Investor motivations are evidently undergoing a transformation, with 57% emphasizing “supporting industries they believe in” as a core factor influencing investment decisions. This motivation surprisingly surpasses the allure of “substantial returns,” which ranked at 47%, signaling a shift towards more values-driven investment strategies.
The survey also underscores the role of UK government initiatives in shaping investor behavior. Approximately 70% of UK investors consider regulatory schemes like the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) when making investment decisions, underscoring the impact of regulatory incentives.
Jeff Kelisky, Chief Executive Officer of Seedrs, said: “In this year’s survey, it’s interesting, but possibly unsurprising with the popularity of ClimateTech, to see that industry affinity now rivals the possibility of substantial returns as the primary influence on investment decisions for our investors. As long-standing champions of EIS and SEIS, we are also pleased to see how fundamental a role those schemes now play in ensuring that the businesses that are shaping the world of tomorrow receive funding.”
Environmental, Social, and Governance (ESG) factors continue to wield significant importance, with 78% of investors factoring them into their decisions. Sectors like Clean Energy (45%) and Climate Tech (40%) garner substantial interest, while others such as Finance & Payments, Food & Beverage, and Crypto experience declining enthusiasm.
Kirsty Grant, Managing Director & Chief Investment Officer of Seedrs, said: “I’m not surprised that 78% of investors consider ESG when making investment decisions. That’s because ESG-focused businesses – like those operating in ClimateTech and Clean Energy – continue to go from strength to strength on Seedrs. ClimateTech in particular is up an astounding 40% so far compared with 2022, which itself represented a 154% increase from the previous year. Fantastic campaigns this year include Green Lithium which is solving a crucial piece of the EV battery puzzle by building the UK’s first lithium refinery. They’ve raised almost 3m from 2300+ investors.”
A new community-driven era is coming
Simultaneously, Crowdcube has been a driving force behind the surge in community-driven fundraising, a phenomenon catalyzed by regulatory changes in 2021. The latest data from Crowdcube paints a picture of the transformative growth within this sphere.
Crowdcube has witnessed an astounding 346% surge in new registrations, signaling a burgeoning interest in community-driven fundraising. Investments directed towards European companies have escalated by more than 400% compared to the previous quarter, indicating heightened investor confidence in this novel approach.
The efficacy of community-driven fundraising is validated by several success stories. Ventures such as Cowboy, Heura, Matera, and Vicio have achieved remarkable fundraising feats, showcasing the potential of collective investment efforts.
Matt Cooper, Co-CEO at Crowdcube, said: “It’s been exciting to witness the increasing number of businesses across Europe raise capital through Crowdcube this quarter. We have seen companies reap the benefits of the changes in crowdfunding regulations implemented around a year ago. Private companies throughout the continent are increasingly understanding that despite the tightening in the capital markets, turning to their customers and users for investment can be a smart move by involving their customers as shareholders and adding them to their cap table.”
Of particular note is the exceptional performance within the French market, which has attracted investments exceeding €5.5 million. Crowdcube’s rapid attainment of a substantial French investor base underscores the viability of community-driven investment strategies.
The future of equity crowdfunding in Europe is bright, as the numbers we have looked at show clearly. While ESG is growing in undeniable influence, community-driven fundraising highlights the potency of collective investment endeavors. The raising significance of values, sustainability, and community collaboration in reshaping the landscape of equity crowdfunding in Europe would be fundamental for the rest of 2023.
