/Companies: how to finance your project through crowdfunding?
Companies: How To Finance Your Project Through Crowdfunding?

Companies: how to finance your project through crowdfunding?

Arnaud Montebourg presented on Wednesday May 28 the order intended to regulate crowdfunding. The goal: to promote the crowdfunding of companies. Francetv info explains how it works.

In 2020, the crowdfunding market could reach $ 1 trillion worldwide, according to

Calling on “the crowd” to finance your project, the winning formula? The Minister of the Economy, Arnaud Montebourg, presented Wednesday, May 28 the ordinance aiming to relax the legislative framework of crowdfunding. The decrees of application will be published next July, for entry into force October 1, 2014.

Appeared in the 2000s, crowdfunding (literally “crowd funding”) continues to grow. In France, 78 million euros were collected on the various platforms in 2013, i.e. three times more than the previous year, according to a study carried out by CompinnoV (PDF link), a consulting firm for business development, and the Financement participatif France association. In 2020, these amounts could reach 6 billion euros in France, and nearly 1,000 billion dollars worldwide, according to Forbes. These are the companies that stand to benefit the most from this strong growth.

Do you want to get into crowdfunding to finance a project or to raise funds? Francetv info helps you clear the land.

What are the advantages of crowdfunding?

Crowdfunding is a more flexible and faster way to raise funds compared to banks or investment funds, but the amounts expected are lower. The process is also easier, the files much less complex to assemble.

It is above all a way to test the public’s interest in your project. “With its large community, Kiss Kiss Bank Bank has enabled us to give visibility to our product but also to the company and to the other projects that we carry”, rejoices Sophie Tron, co-founder of the company Ticatag, which in January launched a crowdfunding campaign on this site for its ti’Be Bluetooth keychain.

What form of financing to choose?

It all depends on your needs and your project. Funding can take three forms.

Donation for reward. You fix in advance the amount you need, Internet users support your project for a limited period. If the fundraising is successful, the funding Internet user receives a reward. Most of the time, this is the product he helped launch, derivative products and / or a meeting with the project leaders. If the sum is not collected within the allotted time, the donations are fully refunded to the participants.

The loan. This solution is still little known because it is limited by the current legislative framework. The few sites that offer interest-bearing loans must have a credit institution authorization, which is very difficult to obtain, issued by the Prudential Supervisory Authority (ACP), or establish partnerships with banks. However, some crowdfunding platforms offer solidarity loans: the money is reimbursed to the Internet user but it does not touch interest.

Capital investment (or “crowdequity”). Depending on the platform, the Internet user obtains shares in the company and becomes a shareholder, either directly or via a holding company. The holding company makes corporate governance simpler.

How do I select my platform?

Prefer a website that brings together a large community. This will be the first network mobilized to finance your project. Choose your platform according to your sector of activity or the specific services offered (marketing advice, communication, services offered by partners, etc.). Check the fees charged by each of the platforms. They generally vary between 5 and 10% of the amount collected.

Here are some of the French crowdfunding platforms: – for the solidarity loan: Babyloan, Hello Merci, MicroWorld- for the paid loan: Union Loan, Unilend, Spear- for the donation: Kiss Kiss Bank Bank, Ulule, Reservoir Funds , Arizuka, MyMajorCompany, Bulb In Town… – for investment: WiSeed, Smart Angels, Anaxago, Happy Capital, Finance Utile, Particeep…

Then, in the majority of cases, the projects are sorted by the platforms before being put online in order to validate their seriousness and their credibility.

What participation can I expect?

For the donation. 1,000, 15,000, 50,000, 80,000 euros… the amounts collected vary greatly and depend on your project as well as the chosen platform. They are still very far from the sums collected in the United States. Note, however, that the average contributions of Internet users were 64 euros in 2013, according to the crowdfunding barometer of CompinnoV. Each Internet user gives little, but this method of financing is much more widespread than the others since 95% of people who have supported a project have contributed via the donation / counter-donation.

For the solidarity loan.“These are often small loans around 5,000 euros, explains Quentin Bévan, communications manager at Babyloan, a solidarity microcredit site. You can sometimes go up to 10,000 or 15,000 euros, but that’s rather rare. ” According to The echoes, who obtained the latest version of Arnaud Montebourg’s draft ordinance, “Interest-free loans will be subject to the same limitations as onerous loans”.

For the paid loan. The sums are generally much higher than for solidarity loans and are aimed at larger projects. On Unilend, one of the few French paid loan platforms, an entrepreneur can apply for between 20,000 and 250,000 euros, explain The echoes. The decrees that will be published in July will set the new participation limit. In February, Fleur Pellerin announced that it would amount to a maximum of 1,000 euros per person for a total loan increased to a maximum of one million euros per startup (instead of 300,000 currently).

For investment. This method of financing makes it possible to raise larger sums, currently limited to 100,000 euros. The ceiling should reach one million as soon as the new law is applied. This should also make it possible to access an unlimited number of investors and open this financing to SAS, simplified joint stock companies (whereas only public limited companies can claim it for the moment). In 2013, individuals participated on average to the tune of 3,769 euros, according to the crowdfunding barometer.

On the tax side, the sums collected by the loan or investment are taxed in the same way as the sums collected in the traditional way. For donations, it all depends on the status of the project leader. The amounts may be taxable as industrial and commercial profits (BIC) or as non-commercial profits (BNC).

How to mobilize Internet users?

Some crowdfunding platforms take care of communication. In other cases, it will be up to you to stick to it. “It was the most difficult step”, says Sophie Tron. Most platforms do not offer support in this task.

“The crowd has its say. In 50% of cases, the projects that are put online are not funded. But you can’t wait for the money to fall once you’ve posted the ad ”, says Jean-Baptiste Sciandra, co-founder of Reservoir Funds and Crowdfunding Factory, a site dedicated to advice for a good campaign.

Seeking support takes a long time, as this 01net article points out, and requires certain skills in community management. You have to refine your message, communicate on social networks but also find the right contacts, go to conferences, join the media, etc.

What are the risks for the company?

As with any entrepreneur, the risk is that the project will not succeed. “The failure of a crowdfunding campaign is also a failure in terms of communication and image for the company”, says Sophie Tron.

In the case of a donation, the risk is limited since if the amount sought is not reached, the contributors are fully reimbursed and the project does not see the light of day. “To launch your project, you have to clearly define the sums you need and take into account the counterparts”, recalls Nicolas Dehorter, blogger, entrepreneur and founder of the Crowdfunding Guide, an information and advice site. In the event of strong success, you may not be able to honor your commitments to your contributors. “A project leader went bankrupt like that”, remembers the specialist.

And for the funders?

With regard to loans, the risk for individuals is not to recover part or all of the sum committed. “The repayment rate is almost 90%, but obviously the risk is still present”, attests Nicolas Dehorter. Some platforms, like Babyloan, are backed by microfinance institutions (MFIs) which provide a guarantee against unpaid debts.

Entry into capital is also risky: start-ups often have a short lifespan. With the new legislation, platforms will be obliged to inform Internet users about the risks involved. WiSeed estimates that, on its platform, investors have a one in three chance of never seeing their money again due to bankruptcy and a one in five chance that the amount invested will be multiplied by ten or more. The rest of the time, he will recover his stake or an amount two to three times greater. A higher risk than that taken by investing in the stock market, according to The echoes.

Another possible disappointment: that of seeing the supported project bought back at a high price without taking advantage of it. Nicolas Dehorter evokes the disappointment of individuals who had participated in the financing in 2012 of Oculus Rift on Kickstarter, a donation platform. The company, which relies on virtual reality, was bought by Facebook for two billion dollars. The contributors have enabled its development and are watching it leave today, without touching a penny …