Crowdfunding in Italy: Stress Test and Perspectives

The Politecnico di Milano has published the 5th Annual Report on Crowdinvesting in Italy. This year’s report was particularly awaited to see how the lockdown had affected crowdfunding and its growth prospects in Italy in light of the difficulties encountered by Italian businesses.

Subject of the study

Established in 2014, the Observatory on Crowdfunding of the Politecnico di Milano monitors the evolution of this innovative financing tool in Italy.

The analysis carried out takes into consideration the platforms operating in Italy and the trend of the campaigns carried out in previous months, comparing Italian numbers with those of other European countries. Important is also the focus on businesses that decide to raise funds through crowdfunding, investors and returns on investment. Particular attention is at the same time given to the regulatory developments on crowdfunding and its repercussions on platforms, investors and financed companies.

The 5th Report examines the phenomenon of crowdfunding in its different versions of Equity and Lending (dedicated to individuals and companies), but also looks at Real Estate crowdfunding (both Equity and Lending-based) and photographs the situation as of 30 June 2020.

Equity Crowdfunding

There were 42 authorized platforms in Italy in the Equity crowdfunding segment, with a 56% growth in terms of raised capital compared to the previous period reaching approximately € 76 million.

With regard to the type of businesses that participate in the Equity Crowdfunding market, the preponderant presence of innovative start-ups was confirmed for this year as well, representing more than 58%. In the last 12 months, however, there has also been an encouraging participation of SMEs and innovative SMEs.

From the investors’ point of view, there has been an increase in the average amount of funds invested over the last year, but this was not the result of a significant growth in the number of new investors. Thus, there is a tendency towards diversification among those investing through crowdfunding platforms.

With regard to the turnover of financed companies, one year after the crowdfunding campaign only a small number reached what had been forecasted in the business plan, and this number was even lower in the second year, confirming the riskiness of these type of investments.

Lending Crowdfunding

Lending Crowdfunding confirms to be the leading segment in Italy in terms of capital raised with a total of approx. € 314 mil (€ 179 mil of which were raised by businesses). There has also been registered an increase in the number of lending-based crowdfunding platforms with 5 more platforms entering the market.

On the consumer side – where the raising of capital is carried out by individuals – the volume of capital raised slowed down compared to the previous period.

The impact of COVID-19 on Crowdfunding in Italy

COVID-19 has certainly impacted on this new financing tool even though we will be able to have a real grasp on its repercussions only in the near future. In the first months of the year (March – April – May) there was contraction in the volume of crowdfunding transactions. However, campaigns resumed in June highlighting the confidence of investors in companies that choose to raise capital through this innovative tool. This is partly due to the nature of these companies, i.e. innovative start-ups and innovative SMEs, which attract the interest of (mainly institutional) investors at a time where the focus is on high-tech companies.