Equity crowdfunding is a form of financing that is now widely used all over the world, enabling companies to access private capital from investors who decide to support high-potential business projects.
However, equity crowdfunding has not grown in the same way or is subject to the same rules worldwide.
It may be worth understanding what is going on in your own country, which is why we have decided to put together an overview of equity crowdfunding in the major economies around the world.
History of equity crowdfunding
How did equity crowdfunding emerge?
The first proposal to launch an equity crowdfunding project dates back to the year 2000 and was made in Russia. The platform was supposed to manage crowd investing processes, targeting entrepreneurs, start-ups and small businesses with the help of a computer database and providing information on business projects and professional advisory services for investors.
The model proposed that funding would be concluded through the signing of individual agreements, a model later classified as unsafe by the start-up accelerator YCombinator.
The first real equity crowdfunding platform was launched in 2007 in Australia under the name Australian Small Scale Offerings Board (ASSOB).
ASSOB is now active as Enable Funding, a licensed equity raising platform that has raised over $150 million for 176 private companies.
The first US company was ProFounder, which in 2011 launched a tool for start-ups to raise investments directly on the site. Activities were later suspended following the entry into force of federal legislation on equity crowdfunding.
While these are the early days of equity crowdfunding, let’s take a look at how the business has developed since then and what the regulatory provisions are in the most important countries around the world.
Equity crowdfunding in Argentina
Although equity crowdfunding was admitted within the national civil code, it was not initially regulated by a specific legislation.
The CNV (Comisión Nacional de Valores), the authority, regulation and control body of the capital market, has been responsible for setting up a regulatory framework.
Similar to what happens in Italy, equity crowdfunding in South America can only be carried out through collective investment platforms that must be owned by companies previously authorised by the CNV.
These companies must meet a series of precise requirements and their articles of association must explicitly provide for the purpose of ‘bringing together individuals or legal entities that act as investors with individuals or legal entities that require financing’.
Equity crowdfunding in Australia
The regulation of equity crowdfunding in Australia has gone through a rather complex legislative process.
While fundraising in the form of donations is always permitted, there are stricter regulations in the case of debt or equity financing that refer to the Australian Corporations Act.
Back in 2014, the now-defunct Corporations and Markets Advisory Committee (CAMAC) published a report on equity crowdfunding proposing that the government create a specific regulatory regime for the sector, suggesting some limitations.
According to the report, a maximum investment limit of $10,000 was to be imposed on private investors, with an investment ceiling of $2,500 for each company financed. At the same time, companies were to be limited to raising $2 million per year.
In 2015, the Australian government committed to simplifying access to crowd-sourced finance for small and medium-sized enterprises by easing requirements and criteria for accessing capital raising.
At the same time, approximately $7.8 million was allocated over four years to enable the Australian Securities and Investments Commission (ASIC) to implement and monitor the framework for the timely regulation of equity crowdfunding in Australia.
Between 2016 and 2017, following the discussion and passage of certain amendments to the Corporations Act, ASIC was given six months to prepare the regulatory framework and proceed with the subsequent issuance of licences for equity crowdfunding platforms.
The first licences were issued in 2018, and in September 2018, amendments were made to the Act to extend access to equity crowdfunding to small businesses.
Equity crowdfunding in Austria
As of 2015, Austria introduced a law specifically regulating crowdfunding and other alternative forms of investment.
The law aims to establish a clear legal framework for crowdfunding not only to make this form of investment more accessible to entrepreneurs but also to better protect investors and prevent abuse.
Equity crowdfunding in Belgium
Equity crowdfunding sites in Belgium started to emerge as early as 2011, despite the absence of a specific legal framework.
The first specific legislative intervention on the matter dates back to 2014 and provided for rather stringent limitations for the sector. A limit of €300,000 was set for each project, while the amount paid in by individual investors could not exceed €1,000.
As of 2019, the Flemish government has committed itself to gradually loosening these restrictions to allow greater freedom of investment and capital raising.
Equity crowdfunding in Canada
Canada’s first equity crowdfunding portal is Optimize Capital Markets which was launched in Ontario in September 2009.
As of 2013, the different provinces have individually started to promote legislative initiatives to regulate Canadian equity crowdfunding.
Equity crowdfunding in China
On 19 November 2014 in the State Council speech, Prime Minister Li Keqiang endorsed equity crowd investing as part of the financial innovation to solve the financing difficulties of small and medium-sized enterprises. On 20 January 2015, the China Securities Regulatory Commission (CSRC) approved the first eight equity crowd-investing platforms.
Equity crowdfunding in Estonia
The first equity crowdfunding system in Estonia was launched in August 2015 by Fundwise.
In the absence of industry-specific legislation, the crowdfunding guidelines launched by the Finance Estonia industry association and Deloitte in 2016 are used.
Equity crowdfunding in Finland
Invesdor was the first Finnish equity crowdfunding portal, established in 2012.
From a regulatory point of view, while Finnish legislation is quite different from other countries for donation-based crowdfunding, it is rather aligned with other European countries for other forms of funding, including equity crowdfunding.
The Invesdor platform has also extended its services to Danish and Estonian companies, while the Swedish FoundedByMe platform launched its portal in Finland in 2013.
Equity crowdfunding in Germany
After two smaller projects launched in 2010, 2011 can be considered the first successful year for crowdfunding in Germany. The largest crowdfunding project was launched by the company Brainpool in December 2011 to finance the film of the successful TV series Stromberg.
The company’s goal was to raise one million euros by March 2012, which was achieved within a week.
Equity crowdfunding in Hong Kong
In order to operate in Hong Kong, equity crowdfunding platforms need specific authorisation from the Securities and Futures Ordinance.
In addition, the Securities and Futures Commission, Hong Kong’s securities regulator, may impose certain legal restrictions or licensing conditions on equity crowdfunding platforms, such as the requirement to provide services only to professional investors.
Equity crowdfunding in Ireland
Ireland does not have specific and homogenous legislation relating to equity crowdfunding.
There are a number of regulations to guide you through, starting with the Prospectus Directive of 2003. Another regulatory reference is the Markets in Financial Instruments Directive (MiFID) (Directive 2004/39/EC) as transposed into Irish law by the European Communities and also the Investment Intermediaries Act of 1995 and the Consumer Credit Act of 1995.
Equity crowdfunding in Israel
Israel has yet to enact regulation for equity crowdfunding. Therefore, any equity crowdfunding activity is currently regulated by the Israeli Securities Law, which allows equity offerings to a maximum of 35 non-professional investors and an unlimited number of professional investors.
The Israeli Securities Authority has proposed the adoption of a new regulatory framework for equity crowdfunding in Israel, but this has not yet been adopted. Some of the main points include:
a maximum funding amount of up to ILS 2 million in 12 months;
limitation of the amount to be invested by each individual to ILS 10,000;
the presence of a qualified investor (as defined in the regulations) who invests at least 10% of the total amount.
Equity crowdfunding in Italy
Italy was the first country in Europe to adopt a specific regulation for equity crowdfunding since 2013.
The regulation, issued by Consob, provides for a national public register for equity crowdfunding portals and specific transparency obligations for both issuing companies and platforms.
Equity crowdfunding in Malaysia
In June 2015, the Malaysian Securities Commission (MSC) approved six equity platforms to commence operations by the end of the year. The approved platforms include Alix Global, Ata Plus, Crowdonomic, Eureeca, pitchIN and CrowdPlus.
Equity crowdfunding in the Netherlands
In April 2011, Symbid was founded in the Netherlands by Robin Slakhorst and Korstiaan Zandvliet as one of the world’s first investment crowdfunding platforms.
In December 2014, the Netherlands Authority for Financial Markets published ‘Crowdfunding – Towards a sustainable industry’ which provides guidance for sustainable development of the crowdfunding market.
Equity crowdfunding in New Zealand
New Zealand enacted the legal framework for equity crowdfunding in 2013 and related regulations in 2014.
The regulations allow, to date, any New Zealand company to raise up to $2 million in 12 months through a licensed equity crowdfunding platform.
PledgeMe and Snowball Effect were the first two platforms to receive licences.
Snowball Effect launched New Zealand’s first equity crowdfunding offering in August 2014, with craft brewery Renaissance Brewing successfully raising $700,000 in 13 days.
In March 2015, Invivo Wines became the first New Zealand company to raise $2 million, the maximum amount allowed by regulations.
In October 2015, the Financial Markets Authority authorised a new equity crowdfunding portal called AlphaCrowd that focused only on digital and technology companies and with a mission to attract Chinese investors to New Zealand.
Equity crowdfunding in Poland
The activity of equity crowdfunding platforms on the Polish market was specified by the Polish Financial Supervisory Authority in May 2019.
Platforms are not subject to any particular regulations and can act on the basis of the Entrepreneurs’ Law Act, according to which an entrepreneur can perform all actions except those explicitly prohibited by law.
On the other hand, platforms are obliged to offer information documents to investors with details of the transaction and the type of financial instrument offered. Therefore, it is possible to say that the equity crowdfunding platform acts as an advertising tool that only allows issuing companies to carry out promotional campaigns.
Moreover, in 2018, Poland transposed the European Regulation which set the crowdfunding funding limit at €1 million but, at the same time, granted the Polish legislator the option to raise the same limit up to the ceiling of €8 million.
Equity crowdfunding in Singapore
Equity crowdfunding currently falls under the Collective Investment Scheme which is regulated by the Monetary Authority of Singapore (MAS).
The MAS governs crowdfunding activities under the Securities and Futures Act and the Financial Advisers Act. Both equity-based crowdfunding and debt-based crowdfunding fall under the jurisdiction of the MAS.
In both cases, the crowdfunding platform has a CSL (Capital Markets Service) licence. Platforms are also given the possibility to offer advisory services to investors, as long as they have a specific licence as a financial advisor.
Equity crowdfunding in Spain
In Spain, the law regulating crowdfunding was introduced in 2015.
To date, the most important platforms authorised by the Spanish regulator are Fellow Funders (equity), Housers (lending), Socios Inversores (equity), Capital Cell (equity), October (lending), Grow.ly (lending), Urbanitae (lending), Dozen (Before The Crowd Angel) (equity), MytripleA (lending), Adventurees and Startupxplore (equity).
Equity crowdfunding in Sweden and Norway
The first crowdfunding portals have been launched in Scandinavia since 2010, supporting both local language and English-language crowdfunding.
The first crowdfunding platform active in Sweden today is Crowdculture, launched in 2010. The system works with a unique hybrid mechanism in which crowdfunding functions as a basis for crowdsourcing public investment decisions. The donation-based portal FundedByMe has been active in Sweden and Norway since 2011 and Swedish crowdfunding activity is evolving in parallel to crowdfunding in the US with Equity-Based crowdfunding, which became active in Sweden in late 2012.
The Invesdor platform also started operating in Sweden in February 2013.
Equity crowdfunding in Switzerland
The main crowd investing platform in Switzerland is investiere.ch.
The Swiss Financial Market Supervisory Authority has not established specific regulations for crowd investing platforms.
In practice, each platform is examined on a case-by-case basis and authorisation is granted depending on the outcome of the assessment.
In general, if the money raised is only intermediated through the platform and not centralised in any way, even unlicensed portals are acting in accordance with Swiss law.
Equity crowdfunding in the UK
On 1 April 2014, the regulation of the consumer credit market in England passed from the Office of Fair Trading (OFT) to the Financial Conduct Authority (FCA), giving the latter responsibility for regulating the crowdfunding market.
Abundance Generation was the first debt crowdfunding platform in the UK) to be regulated by the Financial Conduct Authority. The platform was authorised in July 2011 and was launched to the public in 2012.
Abundance Generation provides bottom-up funding to UK-based renewable energy developers.
The first platform specifically for equity crowdfunding in the UK was Seedrs, launched in 2012 and still one of the leading crowdfunding platforms in the UK.
Also in 2012 Richard Branson announced his support for the crowdfunding, crowd investing and crowdlending platform BankToTheFuture, while in 2013 CrowdCube came to market.
In 2014, SyndicateRoom, the first equity crowdfunding platform led directly by investors, was launched.
Also in 2014, Crowd for Angels was launched as the first debt and equity crowdfunding platform authorised by the FCA.
In March 2015, Eureeca became the first international platform to receive regulatory approval from the UK’s Financial Conduct Authority. In April 2017, Capital Cell, a specialist biotech and life sciences crowdfunding platform from Spain, launched its UK branch and received regulatory approval from the Financial Conduct Authority in September 2017.
Equity crowdfunding in the United States
Until 2016, equity crowdfunding investments in the United States were limited to a circle of accredited investors, identified on the basis of net worth or income, and investments could only be made through the intermediary of an authorised broker.
As of 2016, the ability to invest in equity crowdfunding was extended to all citizens without asset limitations and investment was allowed to be made either through a licensed broker or through platforms registered with the Securities and Exchange Commission (SEC).
Federal legislation on equity crowdfunding in the US requires all portals to be registered and authorised with the SEC, as a form of market monitoring and investor protection.
The regulations also stipulate that issuing companies cannot raise more than USD 1 million in a 12-month period.
At the same time, investment limits are imposed on private individuals, with a ceiling set at $100,000, depending on the income and assets of each investor.
In detail, the investments allowed over a 12-month period are:
- up to $2,000 or 5% of annual income or net worth, if the investor’s annual income or net worth is less than $100,000;
- up to 10% of annual income or net worth (but not more than $100,000), if both the investor’s annual income and net worth exceed $100,000.
Many observers consider federal crowdfunding legislation to be particularly limited, and several US states have recently enacted or are considering enacting their own crowdfunding regulatory laws to facilitate investment offerings within individual states. Such transactions are in fact exempt from federal regulation.