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Equity Crowdfunding Regulations in Italy

6/17/2013

 
PictureImola
Crowd Valley COO Paul Higgins presented at Innovami's event entitled 'Una nuova idea d'impresa e crowdfunding' ('A new business idea and crowdfunding') in Imola, Italy on Thursday June 13th.

The speakers also included Daniela Castrataro, co-founder of ICN (the Italian Crowdfunding Network), Claudio Bedino, CEO and founder of Starteed.com, and Virginia Carolfi, the co-founder of GINGER, a new crowdfunding platform for the Emilia Romagna region.

With Italy's financial regulator, CONSOB, in many ways taking the lead in Europe on crowdfunding regulations with its Decreto Crescita ('Growth Decree'), we have seen the emergence of many different online funding marketplaces that aim to facilitate crowdfunding by using the new exemptions.

The attendees in Imola were in part optimistic and in part sceptical of the likely effectiveness of the new regulations. As the European Crowdfunding Network explains:

One provision of the CONSOB draft regulation requires, as a condition precedent to commence the online offer, a 5% subscription of the share capital to be made by a financial investor. The reason behind this decision is the need to have at least one investor to professionally evaluate the business and the investment, in order to protect the other shareholders’ investment (i.e. those coming from the “crowd”).

Paul's presentation focused on the importance of situating crowdfunding platforms within the connected financial ecosystems in which they must take part. For instance, since Italy lacks a substantial internal venture capital market there must be a consideration for follow-on rounds, and so the condition to require an institutional investor to take part in a crowdfunding round might be a sensible addition.

This type of co-investment model also reflects several investment marketplaces that we see around the world that have the cooperation of larger (active or passive) funders built in to the platforms from the start.

A further condition in CONSOB's proposed roles is that the startup looking for investment through a crowdfunding platform must qualify as 'innovative', which requires the startup to register with the Italian Chamber of Commerce to confirm that it has invested in research and development activities, for example. At the time of writing we understand that there are around 830 such startups that have registered, although not all of them have necessarily done so with crowdfunding in mind, as this status also affords other administrative benefits.

Some attendees expressed some frustration at this limited pool of qualified companies, especially given the importance placed by investment advisors and family offices on their proprietary deal-flow and selection process.

In our view it is often prudent to start step-by-step whether in regulations or in actually operating a crowdfunding platform, and starting with some firm foundations that are within a comfort zone will always leave open the option to broaden the criteria later on, should that be worthwhile.

You can see Paul's presentation 'Crowdfunding negli eco-sistemi connessi' ('Crowdfunding in connected ecosystems') on SlideShare here:
Crowdfunding negli eco-sistemi connessi (Crowdfunding in connected ecosystems), Imola June 2013 from Grow VC, part of the Grow VC Group

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About the author - Alessandro Ravanetti

Alessandro has built and managed web 2.0 companies with international teams and networks of partners.

Alessandro grew up in Italy, where he graduated with a B.A. in Economics. After having obtained an M.S. in Finance at Regent’s College he gained extensive experience in both marketing and finance through positions at British Telecom and Bloomberg.

Alessandro has studied and worked in many different cities, including Munich, Geneva, London and Valencia. Genuinely passionate about international business and innovation, he loves to spend his spare time traveling and discovering new cultures. He now lives between Italy and UK.






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