The Current State of Crowdfunding in Austria
The Austrian crowdfunding market is slowly turning from a small market niche to a serious alternative in the financial system. The change owns its development to the introduction of a new legal framework, which came into effect in Austria on 1 September 2015. Since then, the number of crowdfunding projects and crowd based business models have increased rapidly.
Inhabitants: 65 M, GDP (ppp) per capita: $39,826 (Source: Wikipedia)
Due to a blur difference between online and offline fundraising, there is no data on donation based crowdfunding.
The reward based market can be estimated for 2015 on €2,5 million.
Equity based crowdfunding started in 2013. Since then 70 projects have raised €11,1 million in funding1. With six active equity platforms, in 2015 alone €8,1 million was raised.
P2P lending is the fastest growing crowdfunding model. There are no exact numbers, but some businesses raised millions with this model, e.g. the company “Grüne Erde” leveraged €7,7 millions via their customers.
Respekt.net (donations) has raised € 1,4 million since 2010 and is the largest donation based platform.
Conda.eu (equity and lending) launched in Austria in in 2013. The platform is also active in Germany and Switzerland.
1000×1000.at (mixed model) is a platform that offers reward and equity based crowdfunding opportunities, as well as P2P lending opportunities.
Greenrocket.com (investing) is a crowdinvesting platform for sustainable companies in the fields of energy, environment, mobility and health.
Recently the Swiss platform wemakeit.com has set up its presence in Austria
The German platform Startnext is the largest reward based crowdfunding platform for creative and sustainable projects and startups.
Kickstarter and Indiegogo are among the most well known foreign platforms in Austria.
Regulations in Austria
The Alternative Financing Act (Alternativfinanzierungsgesetz – AltFG) came into effect in Austria on 1 September 2015. It is the foundation for the wider establishment of alternative forms of financing, in particular crowdfunding. The new legislation is considered to be at the forefront of crowdfunding legislation in Europe.
Since 1 September, the obligation to publish a complete capital market prospectus will first apply starting with an issue volume of €5 million. Only a simplified prospectus (prospectus requirement light) is required for an issue volume between €1,5 million and €5 million.
One investor can invest up to €5.000 per project. However, this € €5,000 limit can be surpassed if the investor earns a net salary of more than €2,500 per month. In this case, the investor is allowed to invest double his net monthly earnings.
Internet platforms must provide certain information regarding issuers (nature of their business, how they were selected for participation on the platform, and any fees or remuneration received from issuers or investors).
The investment is made with the issuing SME or via crowdfunding platforms.
Reinhold Mitterlehner, Federal Minister of Science, Research and Economy, stated in a press conference that crowdfunding is considered to be a “meaningful complement to traditional credit financing” and aims to strengthen the entrepreneurial spirit in Austria
Banks & Investors
Some of the large banks in Austria have own reward based or donation based crowdfunding platforms. Overall, the banking sector becomes more and more interested in crowdfunding, as it can be seen as a valuable tool for risk minimization. In economically difficult times when banks may not be lending freely, equity-based crowdfunding may also be a viable alternative to raising capital for start-ups and small businesses, and especially to combine these investments with traditional financing instruments.
What is the potential of crowdfunding in your country?
Crowdfunding has enormous potential in Austria. Compared to other European countries, the Austrians have invested much less in crowdfunding so far. The mid-term potential for the crowdfunding market in Austria can be estimated on €65 million per year2.
What is the biggest challenge?
The key to a more dynamic investment culture in Austria seems to lie in the interaction of different financing components within one overall funding concept. Equity, grants, loans and crowd investment complement each other and can result in a new and improved performance in terms of innovative alternative financing. Especially for SMEs crowdfunding lowers the innovation risk through early customer involvement and promotes long-term customer loyalty.
What is the future holding for Austria?
Having regulation provides transparency and legal certainty for businesses, platforms and investors. In the future the crowdfunding market will continue growing like in the past two years. With increasing professionalization of the alternative financing industry, crowdfunding will establish as a real alternative to traditional financing. Especially for SMEs crowdfunding will become an important source of financing, due to the rigorous regulatory frameworks for banks.