Marketing Analysis of Crowdinvesting in Switzerland
Nowadays, the market of crowdfunding in Switzerland is not big and stays on the early stage of development because of the lack of legislative norms which regulate such market. Despite this, since 2008, the market of crowdfunding in Switzerland has become very popular, grew up, and continues to grow. That is why it is very important to analyze the market of crowdfunding in Switzerland and crowdinvesting in particular. It will familiarize people with such market and show its advantages. The objective of this paper is to show the trends of young Swiss crowdfunding market with the focus on crowdinvesting platforms and crowdinvesting campaigns involving projects in Switzerland.
The Meaning of Crowdfunding
Nowadays, there is no single definition of crowdfunding.
Crowdfunding is a method of funding campaigns online where … people provide funds for … projects. Crowdfunding platform is an intermediary within funders and founders. The intermediary receives a fee for the transaction. The funders can receive compensation that differ depending on the type of crowdfunding (Dietrich, Amrein 5).
Donations are in the center of crowdfunding; the funder won’t receive his money back even if the project prospers.
Crowdinvesting or equity crowdfunding is the type of crowdfunding. The purpose of crowdinvesting is to obtain shares of the company. In such cases, companies have the freedom of decision-making. Such companies are often on the first stage of development (Gerrit et al. 5).
Founders set up a crowdfunding campaign because of two advantages. From the financial perspective, they need funding for a project. From the non-financial side, crowdfunding is the way to promote the company; it enables companies to have a direct dialogue with their customers (Detrich et al. 7).
Funders also enjoy some advantages. Financially, they expect the return on their investments. Also, funders invest because of the charitable motive and receive a moral reward.
Crowdinvesting Market in Switzerland
Cashare is the first crowdfunding platform in Switzerland. It was launched in 2008. After that, the market has strongly grown up. There are 30 active platforms in Switzerland with physical offices in the country and several international platforms without an office in Switzerland. In April 2015, there were recorded such crowdinvesting platforms operating in Switzerland: Bee Invested, C-Crowd, Companisto, Investiere, Raizers, Swiss-Crowd, and Swiss Starter (Detrich et al. 9). They all are competitors on the crowdinvesting market. Bee Invested, Swiss-Crowd and Swiss Starter and Companisto are new market participants. The business models of crowdinvesting platforms can be different. For example, C-Crowd supports a company to any investor, while Investiere allows only qualified people (Detrich et al. 10). Also, their minimum contributions differ. Therefore, in such way they try to compete on the market and bring something new; accordingly, they have their customers and target market.
In 2010, total funding volume in the crowdinvesting market was CHF 0.4 million. Until 2013, total funding volume has grown up to CHF 5.6 million. However, in 2014, crowdinvesting was down 18% in volume to CHF 4.6 million. Thus, reward-based crowdfunding and crowddonating is now larger than in last year (Detrich et al. 11). Nevertheless, due to the very low number of projects, there is no big significance to this change in volume.
All launched projects were realized. The target amounts … were exceeded by 4% … . The market has … positive growth, as … already CHF 457 million was invested in start-ups in Switzerland in 2014. The average funding volume for the 10 funded projects is CHF 460,000. This value is … higher in comparison to … Germany. … . The average investment amount per investor in Switzerland is CHF 23,400, which is … higher than the other types of crowdfunding (Detrich et al. 14).
Crowdfunding platforms have different payment models depending on the business model. On C-Crowd platform, the payout model is all or nothing, which means that you will receive the money collected through the campaign only if you achieve your goal in raising funds. Fee charged on payout amount is 10%. The owner of the project determines the sum of money needed and the minimum sum. When the minimum funding amount will be collected, the entrepreneur can take the investments. Companisto platform used an all-or-nothing payout model, and the fee charged on payout amount is 10% too. Investiere platform employs an all-or-nothing payout model too; no fee is charged, and 6.5% commission on capital raised via investiere is paid by start-up; 4.5% commission for funders is reinvested in the start-up by Verve Capital Partners (Detrich et al. 15). On Startnext platform, there is an all-or-nothing model too, 4% transaction payment and start-up payment EUR 595. Swiss-Crowd platform uses a diverse payment model and 5% charge on payout amount (Detrich et al. 15).
Promotion of Crowdinvesting Campaign
The most important thing is to pay attention to the choice of the platform, because they differ strongly. The more popular is the platform, the more chances are to stay unwitnessed. Project posted on equity-based crowdfunding platforms takes approximately 8.2 weeks from launch to completion. It is one of the fastest types in completion of crowdfunding (Esposti 24). Also, there is a need to familiarize with the existing similar projects and analyze the market. In this case, there won’t be any repeat of the mistakes of the previous start-ups that will allow to save time. The support of friends from social media is also important, which will help to promote the campaign. During the campaign, there is a need to stay connected. It is also important to make a right choice of the total money one aims to collect within the campaign. The bigger is the amount, the harder it is to accumulate it. The platform chosen will promote the project. The platform promotes the crowdinvesting campaign the through the social media such as Twitter, Facebook, through press releases, multimedia press releases, sending the project to the top bloggers and writers, who will bring potential proponents to the project. On average, crowdinvesting platforms charge entrepreneurs 10% of funds raised, depending on the platform.
In addition, one of the best ways to promote a crowdinvesting campaign is the participation in tech and start-up events. In Switzerland and the neighborhood countries, there are a lot of different tech and start-up events held. Below are the most popular ones, which are going to be in 2015.
The most popular tech and start-up events in Switzerland in 2015. Startupfair is the biggest national convention for young entrepreneurs, where people choose the best start-up of the year. 20 entrepreneurs pitching in Lausanne is a part of the European Venture Program where 20 Entrepreneurs from 4 Tech Campus (EPFL, TUM, DTU and Tu/e) compete for the best start-up. Sictic investor day is the competition between 8 start-ups that have 90 seconds and one slide to pitch their project. Asia Night is an event on which entrepreneurs have a chance to enter Asian market (alphagamma.eu).
The most popular tech and start-up events in the nearby countries in 2015. Startup Camp Berlin is the largest early stage start-up event in Berlin. Capital on Stage London is the global untraditional funding conference, where investors get acquainted with start-ups, and founders pick investors they want to meet. Global Entrepreneurship Week – an international start-up event. LeWeb – conference of digital innovation and internet-driven businesses in France (alphagamma.eu).
Switzerland on the European Crowdinvesting Market
Crowdinvesting market grows 129% each year in Europe. Among 27 European markets, Switzerland is on the ninth place in absolute volume. UK is on the first place, France – on the second and Germany – on third (Detrich et al. 25). Switzerland is also at the ninth place in terms of per inhabitant volume; on the first place is UK, but on second place is Estonia, and on third – Sweden.
European markets are developed while Swiss crowdfunding market has just started to develop. The Swiss market has a lot of differences especially from the markets in the UK. Firstly, the market in Switzerland is significantly smaller. Secondly, there are different legal situations, and there is no regulation of crowdfunding in Switzerland.
2015 Forecast of Crowdinvesting in Switzerland
It is quite difficult to forecast and estimate the volume of the crowdinvesting market of Switzerland in 2015 for some reasons. Firstly, last year, the volume of crowdinvesting in Switzerland has fallen sharply in comparison with 2013. Secondly, one campaign can influence the overall situation. However, still, there is expected a growth because of the entrance of new market players as a result of the Swiss crowdfunding market extension.
In conclusion, crowdinvesting is a type of crowdfunding. The purpose of crowdinvesting is to acquire shares of the company. The market of crowdfunding in Switzerland stays on the early stage of development, but it grows very fast and the amount of people interested in crowdfunding grows too and is predicted to increase. That is why the analysis made is very important. Switzerland is on the ninth place among the European countries in terms of absolute volume of funds invested. There is a place to grow. Unfortunately, there is no actual crowdfunding regulation in place in Switzerland, and this problem must be solved by Swiss government.