July 23, 2017    4 minute read

Is Crowdinvesting Finally Taking Off in Italy?

Too Much Red Tape?    July 23, 2017    4 minute read

Is Crowdinvesting Finally Taking Off in Italy?

The alternative finance market in Italy could be at a turning point. The statistics, data and trends of the past 12 months, included in the second Italian report on crowdinvesting, prepared by the Osservatorio del Crowdinvesting of the Politecnico di Milano School of Management, that has been presented on July 12th by Giancarlo Giudici, look all positive.

The crowdinvesting market has grown pretty quickly in the past twelve months. The volumes have almost tripled, reaching €189m – a 289% increase. Looking at the various sub-categories, it is invoice trading that increased more drastically, with a 560% bump to €88.5m, followed by P2P lending with €88.3m – a 178% increase, and equity crowdfunding with €12,4 million; a 123% increase.

Source: Osservatorio del Crowdinvesting of the Politecnico di Milano School of Management

Other takeaways from the report are: the number of equity crowdfunding offerings substantially increased, doubling the number of the whole 2016 in just the first semester of 2017 and along with that, the number of the successful campaigns.

Regulatory Bottlenecks

The number of authorized platforms remained almost the same, with a couple of portals that close down and few new entrants that launched; Starsup, Mamacrowd and CrowdFundMe are the three portals with the highest number of equity crowdfunding campaigns as well the highest amount raised through their online platforms; a clear regulation for P2P lending is now needed to support the growth of the market.
Taking a step back, Italy moved surprisingly early on alternative finance, with the Commissione Nazionale per le Società e la Borsa, Consob, the Italian securities market regulator, that enacted regulations for equity crowdfunding in July 2013, making Italy the first country in Europe to adopt such a regulation.
Despite that, the market has developed slowly, with only about €3 million raised in the first 3 years. This was due to a number of factors, but it has certainly not helped to have regulations that were broadly considered too restrictive, making raising funds through online platforms and portals an option available to a very limited number of firms.

Government Response

Although the Consob showed strong interest in the market and made significant improvements to the framework of crowdfunding regulations over the past years, with amendments made in January 2015 to expand the possibility to raise funds via online portals to “innovative SMEs” and in February 2016 when they tried to significantly simplify the regulations and again earlier this year through the Stability Law for 2017 approved by Italian government, that once in effect will extend access to equity crowdfunding to all kinds of SMEs and increase to 30% the tax deductions for investments in innovative start-ups and SMEs.
However, it should be considered that the Italian market is still in its infancy and these are relatively small numbers compared to those of other European countries, like France, that excluding the UK, it has the biggest market in Europe. But the Italian market is very small even compared to the market volume of small countries like The Netherlands and Finland.
The chart below displays the 2015 volumes of the online Alternative Finance sector, taken from “Sustaining Momentum”, a report prepared by the Cambridge Centre for Alternative Finance (CCAF) of the University of Cambridge Judge Business School. It’s evident that Italy in 2015 had the same market volume of Estonia, a country with just over one million inhabitants, compared to about 64 million Italians.

All Set to Take Off?

But that was two years ago and it is now very encouraging to see that the market seems finally ready to take off and this would be vital taking also in consideration that the total amount of investments in Italian start-ups decreased by 12% in 2017, from 86.2 to 76.6 million.
The development of the alternative finance market would be then even more important to open up access to capital and give private investors the opportunity to sustain and accelerate the growth of the whole start-ups ecosystem.

Source: ‘Sustaining Momentum’ – the 2nd European Alternative Finance Industry Report by the Cambridge Centre for Alternative Finance (CCAF) of the University of Cambridge Judge Business School.

The good news is that financial institutions have now started to join the market, with an increased awareness of the potentiality of innovation and FinTech, and along with them, foreign investors and international firms are coming. For example, the case of Housers, that after good results in Spain has now just launched a real estate crowdfunding platform in Italy as well.
In an environment that is slowly opening up to innovation, there is a market that is now certainly more mature than in 2013, and there are also better market specific regulations to make it flourish. All these factors are drawing a better scenario with an optimistic outlook for the period ahead.
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