Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions. Unleashing the potential of crowdfunding in the European Union

Crowdfunding generally refers to an open call to the public to raise funds for a specific project. In 2012 about €735 million was raised for all forms of crowdfunding in Europe and the predicted figure for 2013 is around €1 billion. This figure is rather marginal compared to retail bank lending to non-financial institutions (€6 trillion in 2011), but it is promising compared to the financing provided by business angels (visible market segment estimated at €660 million in 2010) or venture capitalists in seed, start-up, later and growth stages (€7 billion in 2012). Crowdfunding is an important source of finance to some half a million European projects each year that otherwise may not obtain the necessary funds to be realised.

There is great potential in crowdfunding to complement traditional sources of finance and contribute to the financing of the real economy. The Green Paper on Long Term Financing of the European Economy initiated a broad debate on the different factors that enable the European economy to channel funding towards the long term investments needed to ensure economic growth. The follow-up Communication outlines a number of priority areas where the Commission intends to take initiatives to help SMEs attract funding.

Crowdfunding is part of this work plan. It is one of the newly emerging financing models that increasingly contribute to helping start-ups move up the "funding escalator" and contribute to building a pluralistic and resilient social market economy. Crowdfunding has real potential to finance different types of projects, such as innovative, creative and cultural projects, or activities of social entrepreneurs, that have difficulties in accessing other forms of financing.

While crowdfunding is a promising new form of fundraising, responses to the Commission's public consultation on crowdfunding as well as the Startup Europe Crowdfunding Network survey highlighted a number of issues which will be decisive if its potential benefits are to be released. These range from lack of awareness and understanding, challenges of protecting intellectual property, through fraud and consumer protection concerns, to issues of legal uncertainty and burdensome regulatory requirements. Many of these issues relate to other forms of finance as well. In the following, this Communication focuses on those issues that are particularly relevant for crowdfunding.

• Primary Source

EUR-Lex: COM(2014)172: Follow the progress of this communication through the decision-making procedure http://eur-lex.europa.eu/legal-content/EN/HIS/?uri=COM:2014:172:FIN

ESO: Background information: Commission roadmap to meet the long-term financing needs of the European economy http://www.europeansources.info/record/press-release-commission-roadmap-to-meet-the-long-term-financing-needs-of-the-european-economy/

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