Could serial crowdfunding lead us towards the first European internet lion?

Europe does not have big internet companies. Well, there are the likes of Spotify and Zalando just to name the few but, to an extent, they have not become “indispensable internet platforms”. Why?

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Germany’s Zalando sees itself as the “Spotify” of the Fashion Industry according to Co-CEO and co-founder Robert Gentz.

According to Ben Robinson, VC money is a big factor. He argues:

Companies find it hard to raise funds in Europe, especially for blockchain ventures, which are clearly going to be the next thing in financial services. Not only is there more risk capital in the US, but the VC companies are in competition with each other, so you can get funding on really good terms.

Robinson, the FT reports, mentioned additional causes as well like, for instance, the size of the EU market, its heterogeneity if compared to the US, the input military forces gave the US by investing heavily in IT as well as the low responsiveness from markets like Russia and Germany, despite they are tech-wise.

In this context, could equity crowdfunding represent the chance of getting to the first European internet lion?

According to the last paper produced by CrowdfundingHub, the European Expertise Centre for Alternative and Community Finance, equity crowdfunding is part of the rapidly-expanding alternative finance industry in which it is emerging as a popular method of growth finance.

However, the sector represents just $2.5 billion of a total fundraising volume of $34 billion worldwide (7.3%). In this perspective, it is worth to refer to some figures which have been pointed out by the FT‘s Jonathan Margolis. For example, he writes that just considering

the value of the three biggest listed internet companies, businesses whose creations have become platforms in their own right, is $1.3tn. In Asia, it’s $583bn, In Africa (yes, Africa) it’s $76bn. In Europe, however, our top internet companies, including Russia’s Yandex, are worth $20bn.

Moreover, it must be taken into consideration that the most popular sector for equity crowdfunding is the real estate one.

Nevertheless, according to European experts, equity crowdfunding is set for spectacular growth in Europe as the market grew by 151% between 2013 and 2014 and by 92% between 2014 and 2015.

Furthermore, platforms feel that legislation dedicated to online alternative finance enhances the legitimacy of the platforms and build trust among institutional investors.

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Therefore, despite the current dimensions of the market and Brexit concerns as the UK hosts the majority of platforms (143) in Europe, it should be worth to wait and see also because while the first equity crowdfunding raising initiatives were undertaken by companies looking for a one-off investment as seed capital to get projects off the ground, many companies are now experiencing growth and looking for additional growth capital entering the concept of serial crowdfunding, sometimes combined with other traditional ways of funding like business angels or VCs. And this could beneficial for all parties to bring the first European internet lion to life.

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