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Italian Equity Crowdfunding Market: a Difficult Start

9/25/2014

 
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In July 2013, Italy’s financial conduct authority (CONSOB) released one of the first national regulations for equity crowdfunding in the world. More than one year has passed since and despite the regulation being in place, the market is overpopulated with “empty” platforms, lacking a sufficient vibrance, in terms of deal flow and number of investors.



But why is Italy’s equity crowdfunding market struggling to emerge? One of the main issues holding back this new source of finance, in Italy is the regulation itself. In fact, CONSOB was very proactive, starting to draft a regulation when the equity crowdfunding market was not even in its infancy stage and no international benchmark could be found. The result is a regulation that may be restrictive, especially compared to other international cases: on the one hand, only the so called “innovative startups” can use equity crowdfunding to raise capital, leaving out most of the companies that could benefit from it (like the many Italian SMBs); on the other hand, non-accredited investors can invest up to €500 per deal with a maximum of €1000 per year, which is a cap significantly lower compared to those put in place in other European countries or in existing financial services restrictions for other exempt offerings. Additionally, the issuer, before being able to promote its offer to the public, has to register with CONSOB as an “innovative startup” and get an accredited investor on board for at least 5% of the total value of the offer.

For the portals the way to the market is not easy: complying to requirements and registering with CONSOB is a lengthy, complicated and expensive process that causes platforms to remain inoperative in a limbo that in some cases lasts longer than one year. We’ve seen complex requirements in markets across the world, and despite early struggles, are hopeful for development in the marketplace in Italy as well.

Despite all these considerable obstacles, there is still hope for a functioning equity crowdfunding market in Italy. While only time and a capillary process of digital education will help bring to the next level of online investments in private companies, something could already be done at the framework level. A reassuring signal already came in July, when CONSOB announced that it was considering to review the regulation, expanding the possibility to raise capital through equity crowdfunding to other companies too, such as social enterprises and early stage investment funds. This further re-enforces the notion that crowd funding and crowd investing are much broader than startups only, and in Italy there may be a big market for targeting SMBs, real estate or infrastructure projects which could benefit from activity on a framework level or a few positive spearhead examples.

Furthermore, it is important not to forget that P2P lending and reward crowdfunding are already working helping to raise an interesting amount of capital. Therefore it will even take its time, but equity crowdfunding will eventually flourish in Italy too.


Image credit to N i c o l a http://bit.ly/1CluSNE


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About the author - Irene Tordera


Born and raised in Milan, Italy, Irene is an International Business graduate, with a strong interest for innovative ideas that can simplify our lives.

During her studies, she co-founded an online community for sportspeople and worked in marketing positions at Ogilvy & Mather Advertising and at the European Business Angel Network, in Brussels. She is a passionate blogger about crowdfunding and the startup ecosystem.





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