By François LOOS
Former minister
By Françoise TRASSOUDAINE
Engineer from École des Mines
By Nicolas LESUR
Founder of Unilend and president of Financement Participatif France
Growing by 100% per year, crowdfunding has been remarkably dynamic in France. The consequences of the recession and the mistrust due to financial institutions do not explain everything, far from it. Spurring this spectacular growth are the possibilities for using the Internet, in particular to establish at a very low cost direct relations between the supply of, and demand for, financing. Crowdfunding, or participatory financing as it is called in French, is a response to the public’s growing demand for transparency and short circuits of transaction, thus enabling individuals to retake control over their choices, money and commitments. Crowdfunding gives a boost to a genuinely “popular” finance by placing at everyone’s disposal the tools for funding, even in small amounts, projects. It directly orients savings toward the economy.
By Stéphane ONNÉE
Agrégé professor in Managerial Sciences at the University of Orléans
How to improve our understanding of the role played by the “crowd” in crowdfunding? Although the public’s main role is to replace traditional financial sources, the “creator” seeking funds for a project may try to take advantage of other resources held by funders: opinions, know-how, skills, aptitudes and time. Given their power of recommendation, funders can help broaden the base of the initial equity put up by creators. In this “two-faced” market, “platforms” (the organizations in between creators and funders) work out innovative strategies for attracting as many cybernauts as possible, tapping their resources and building up a loyal following. For this purpose, they establish partnerships with professionals who, before any call for funds, follow up on the projects to be proposed and serve as trusted third parties.
By François VALÉRIAN
Member of the Conseil Général de l’Économie and associate professor of Finance at the Conservatoire National des Arts et Métiers (CNAM)
Crowdfunding refers to quite different forms of financing, whether investments, loans or donations. Through crowdfunding “platforms”, people can manage all or part of their wealth, invest in companies, lend money, insure risks or make donations. This opens, symmetrically, more possibilities for raising funds too. This system’s appeal is the same as the Internet’s: speed, simplicity, very low marginal costs, the elimination of intermediaries, and user-produced contents. The ease for both parties - those who put up funds and those who will be using them - is, however, a source of problems…
By Fantine LEFÈVRE and Bogdan Filip POPESCU
Engineers from École des Mines
Who among us has never dreamed of helping to change the world, even through small deeds, in our own way? Who has not wanted to realize a cherished project? A comparison of a thousand international platforms and an in-depth study of crowdfunding in France shed light on a French style of “participatory finance”. A few key suggestions are made to creators who are looking to fund their projects.
By Jean-Noël TRONC
Managing director of Société des Auteurs, Compositeurs et Éditeurs de Musique (SACEM)
The music industry was one of the first businesses to develop systems whereby individuals helped fund creative projects - well before the stimulus imparted by the Internet. What place does crowdfunding have in the French music business, in particular as compared with traditional means of production? Attention is drawn to the efficiency and modernity of a nonindividual but mutual form of participatory funding: “private copies”.
By Arnaud POISSONNIER
President and founder of Babyloan
and Quentin BÉVAN
Director of communication at Babyloan
In 2014, 152 million euros were collected thanks to crowdfunding; and more than 134 million, during the first six months of 2015. This success is to be set down to the growing demand from funders for ever more transparency and traceability in the use of their funds. Besides the support given to artistic, cultural, humanitarian and nonprofit projects, crowdfunding finances the real economy by helping to create or develop businesses. Babyloan, a European leader in microcredit crowdfunding, helps very small businesses by providing loans without interest that bear the Finansol label (for financial products that are socially responsible acts of solidarity).
By Dominique GOY
Administrator of SwissLending SA (Geneva)
and Damien CONUS
Associate attorney at CPV Partners (Geneva)
The business environment in Switzerland is still very friendly to real estate projects. Certain property developers see crowdlending as an opportunity for improving their capacity for funding new developments. Not yet having been fleshed out, the legislative and regulatory framework for crowdlending remains still favorable for this sort of operations; but this flexibility is also a cause of uncertainty. While waiting for measures that, targeting financial services on the Internet, will figure in a reform of Swiss laws about the financial markets, the authority exercising oversight of these markets (FINMA: Eidgenössische Finanzmarktaufsicht) is gradually setting precedents that tend to become stricter as new crowdlending platforms proliferate.
By Cyril BERTRAND
XAnge
and Bartosz JAKUBOWSKI
XAnge
“Democracy is the worse form of government, except for the others”, Churchill’s words still resound. Is a “crowd” able to make intelligent decisions? Or is it, by nature, forced to act like a herd of easy-to-influence sheep? How is trust (or mistrust) fostered in a situation where the public has direct contact with demand, without middlemen (apart from the website, which is neutral)? Crowdfunding is much more than individuals funding projects proposed by persons whom they do not know. By eliminating intermediaries between supply and demand, it plays two roles that used to be left to market makers (usually banks): guarantee the liquidity of the market and maintain confidence between the party providing equity and the party using it. Liquidity and confidence, the key words in any marketplace, vary as a function of the three major sorts of crowdfunding based on: rewards (“crowdgifting”), equity or debt “(crowdlending)” three well-known dimensions of monetary transactions down through the centuries. However the crowd effect augments the part played by human motivations: feelings, generosity, greed, boldness, rashness…
By Philippe BAS
Senator (Manche Department)
Launched in the spring of 2015, OZÉ was the first crowdfunding platform set up in France by local authorities. Its purpose is to back, financially and collectively, projects in Manche Department, Normandy.
By Florence De MAUPEOU
Association Financement Participatif France
and Thierry CHEVALIER
Association Financement Participatif France
According to the CompinnoV survey conducted by the association Financement Participatif France, 51 crowdfunding platforms raised 133,2 million euros during the first semester of 2015 in France. This new fund-raising tool enables individuals through website platforms to finance projects identified as being highly attractive.
By Éric HUBER
Engineer from École des Mines and member of the ministerial cabinets of Fleur Pellerin and Arnaud Montebourg that drafted the bill of law on “participatory funding”
Along with its added value for the economy and society, crowdfunding is thriving; and competition in this business will be worldwide. Crowdfunding is subject to national and European regulations on financial services. How to work out a regulatory framework that will help potential leaders emerge in France? How to continue this experiment in conditions as favorable as possible?
By Hélène CLÉMENT
Project manager of strategy and development at Bpifrance
The levels of innovation and risk related to crowdfunding argue in favor of a degree of intervention by public authorities - an interventionism that should amount to more than the (recent) adoption of a regulatory framework. After pushing their way into financial markets for firms, these newcomers are making their contribution on a reworked continuum of funding possibilities in the service of the economy.
By Olivier FLICHE
Director of commercial practices at the Autorité de Contrôle Prudentiel et de Résolution
Claire CASTANET
Director of relations with savers at the Autorité des Marchés Financiers
Christine SAIDANI
Head of market-monitoring at the Autorité de Contrôle Prudentiel et de Résolution
and Anne DELANNOY
Head of monitoring and atypical products at the Autorité des Marchés Financiers
To foster an environment that will provide security to the parties involved in crowdfunding, in particular to the funders who make loans or invest, public authorities have set up a new regulatory framework, now a little over a year old. This framework, its origins reviewed herein, provides for “intermediaries in participatory financing” and “advisors in participatory investments”. An explanation is given of the changes that had to be made in regulations in order to introduce these new players in a highly regulated financial sector. This regulatory framework must be seen as a first step, since newcomers in this sector are constantly making the business models of crowdfunding evolve. Besides, Europe should propose a unified regulatory framework.
By TRACFIN
Ministry of the Economy and Finance
A forerunner in the identification of the risks related to virtual money, Tracfin (Traitement du Renseignement et Action Contre les Circuits Financiers Clandestins) has broadened its scope of action to the potential risks associated with the upsurge in the new means for financing undertakings, in particular crowdfunding. The intent is to win ground in the battle against the circuits for laundering money or financing terrorism that exploit to their own ends the anonymity and limited traceability characteristic of the Internet as well as the absence of intermediaries on crowdfunding platforms. Through its constant monitoring, Tracfin has contributed to the legal framework that, applicable to crowdfunding, allows for regulating new players in this field, the objective being to better inform and protect cybernauts.
By Thierry GAUDIN
Engineer from École des Mines and international expert for OECD
Crowdfunding is now a full part of Generation Y’s mind-set. Statistics attest the scope of this successful new form of finance. In conclusion, questions are raised about the advantages of institutionalizing crowdfunding platforms.
