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3East European Scientific Journal #4(80), 2022 51
Julia Stepkina2
THE MAIN CROWDFUNDING MODELS DEVELOPING IN GLOBAL FINANCIAL MARKETS
Abstrakt. This article considers the current situation of crowdfunding development based on foreign experience and practice. The author proposes the classification of the main types of financing based on the collection of funds by crowdfunding participants, also the author determines the trends in the development of crowd technologies.
Stowa kluczowe: crowdfunding, crowdinvesting, crowdlending, crowd technologies, crypto crowdfunding, pandemic, financial markets.
The Challenge of Crowdfunding Classification Currently there is an era of rapid development of Internet technologies, new ways of communication, digitalization and cardinal transformations of financial markets, in these conditions, credit and other financial organizations that provide classic credit products to individuals and legal entities are now competing with crowdlending platforms, and venture funds with crowdinvesting services. The phenomenon of crowdfunding is not qualitatively new. Rapidly developing after the financial crisis of 2008, crowdfunding is conquering the financial markets of various countries. In recent years, due to the pandemic, the digitalization of the financial market has only
expanded the opportunities for the development of crowd technologies.
Referring to the figures of world statistics, it is impossible to refute the fact that now the crowdfunding market has a significant impact on the economies of countries. Based on researches of the foreign countries experience that are several steps ahead of the Russian financial market due to certain features (according to experts, the Russian crowdfunding market lags behind the leading markets of the USA and the UK for 5 years), it is possible to trace how a simple idea of project financing by means of the crowd is transformed into separate types of crowdfunding: Crowdinvesting, Crowdlending, Reward-Based Crowdfunding, etc. (see Fig. 1).
Figure 1. The Main Classification of Crowdfunding Source: compiled by the author.
2 Ph. Degree of Economic Sciences, Associate Professor of Banks, Financial Markets and Insurance Department, The Saint-Petersburg State University of Economics
Currently there are no international practices accepted around the world defining crowdfunding and its varieties. We can meet a wide range of crowdfunding formulations from different scientists and scientific schools in connection with the rapid development of the industry. It is necessary to
According to our point of view, the fullest definition of crowdfunding is the following:
'Crowdfunding is an alternative form to attract collective financing of various ideas and projects by means of specialized Internet platforms, in which Internet users voluntarily act as sponsors, investors or donators'.
Crowdfunding platform is a specialized Internet site that creates an organizational system and conditions for the integration of resources between the authors and investors, forms a virtual community of free investors and ensures the redistribution of private capital between participants in the process, regardless of geographical boundaries. The platform acts as a third party and takes the position of an aggregator of information and service provision, is not responsible for the obligations of the parties under the transaction.
The Model of Crowdfunding Ecosystem
The crowdfunding market in the period 2012 to 2016 was at the stage of active development. However, even in the post - pandemic period, according to the forecasts of a number of experts, the global crowdfunding market is expected to nearly triple in total annual donations by 2025, to a staggering $28.8 billion.
The number of crowdfunding campaigns conducted worldwide in 2020, according to Fundly experts, amounted to 6,455,080, and the total amount of funds raised through crowdfunding technologies amounted to $34 billion (2020).
The Covid-19 pandemic has led to a surge in the donation and reward-based crowdfunding incidences
determine the most complete description of crowdfunding.
The most common definitions of crowdfunding, developed by the important regulatory institutions around the world, is presented at the Table 1 :
Table 1.
aimed at supporting the population affected by the worldwide pandemic. There has been a considerable upsurge in the number of Covid-19 reward-based crowdfunding campaigns launched by a wide variety of people (including citizens, business organizations, foundations, charities, and trusts) across the European continent.
Currently, a stable ecosystem of crowdfunding has developed in many countries, which includes regulatory authorities, professional organizations, qualified investors, private funds and credit organizations, legal entities and individuals, etc., as shown in Figure 2.
To protect, regulate and manage the crowdfunding market, as well as to increase the transparency of the system, which involves government agencies, the business community, educational organizations and market participants, in Europe, for example, international non-profit organizations, such as the European Crowdfunding Network AISBL (ECN), the Spanish Strategic Group EUROCROWD (ECN-SSG), the Italian strategic group EUROCROWD-ISG, have been operating in a professional network since 2013.
The purpose of the network of non-profit organizations is to promote the emergence of a crowdfunding ecosystem in the EU countries, to raise professional standards based on training for both investors and market participants, to develop small and medium-sized businesses, industry research and promotion of crowdfunding technologies in Europe. These organizations carry out accreditation of specialists, provide online training, mixed programs.
The Different Definitions of Crowdfunding Used in the Market
Regulatory Institutions around the world Definition
The European Commission Crowdfunding is an emerging alternative form of financing that connects those who can give, lend or invest money directly with those who need financing for a specific project. It usually refers to public online calls to contribute finance to specific projects
The U.S. Securities and Exchange Commission Crowdfunding is an evolving method of raising money via the Internet to fund a variety of projects
The U.K. Financial Conduct Authority Crowdfunding is a way in which people and businesses (including start-ups) can try to raise money from the public to support a business, project, campaign or individual
Zrodlo: opracowanie wlasne na podstawie danych (The U.S. Securities and Exchange Commission, The U.K.
Financial Conduct Authority, The European Commission)
Conducting industry research based on Professional Associations and Universities
Al.
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Promotion and popularization of crowdfunding due to the scale effect
Development of large-scale projects in various industries
Figure 2. The Model of Crowdfunding Ecosystem Source: compiled by the author.
The development of digital technologies in the distribution of crowdfunding types by country are financial market accelerates the growth of presented in Table 2. crowdfunding in various directions. The specifics of the
Table 2.
Various Types of Crowdfunding by Country_
The Country Type of crowdfunding
Germany Debt crowdfunding (more than 60%), Equity based crowdfunding (Seedmatch)
Great Britain Debt crowdfunding (P2P-KpegHiOBaHHe), Equity based crowdfunding (CrowdCube)
Denmark Debt and reward crowdfunding (Booomerang.dk)
France Equity based crowdfunding with high specialization (Wiseed.fr, Smartangels.fr)
China Reward crowdfunding, Debt crowdfunding
Source: compiled by the author.
Thus, the following crowdfunding models can be distinguished on the world market (Table 3):
Table 3.
The Global Crowdfunding Models
Model's name Countries Characteristics Legislation Specialization
European model EU countries Preferential tax regime, regulatory and legal support from the state, orientation to national customers Availability of own legislation defining the direction of crowdfunding development (France, Germany, Austria, Italy). Residency and language restrictions Focus on financing social and humanitarian areas
Anglo -Saxon model USA, Great Britain Funding volumes on North American platforms are the largest in the world. The existence of exchanges where shares of participation in various projects are traded. The crowdfunding mechanism is normatively integrated into the regional business environment. Opportunities to attract international financing. Crowdlending, Crowdinvesting (Equity-Based Crowdfunding), Crypto crowdfunding, Non-Investment Based Crowdfunding
Low fees, high investment threshold, focus on American investors Developed infrastructure (music, scientific sphere)
Mixed or Eastern European model Russian Federation The predominance of the humanitarian direction. Monopolization of the market by large sites. The problem with the underdevelopment of infrastructure. The development of regulatory regulation is slow The predominance of donation and reward crowdfunding.
Asian model China, Japan China is the largest crowdfunding market in the world, monopolization of the crowdfunding market by large corporations. Orientation to socio-cultural projects. Lack of national legislation Predominance of debt and reward crowdfunding, Donation (Japan)
Source: compiled by the author.
According to the results of the conducted research, the main trends that determine the positive dynamics of the development of crowdfunding in the world have been identified:
- an affordable tool for financing the business of small and medium-sized businesses during crises, unlike credit institutions that tighten their lending conditions;
- wide geographical coverage of investors - from individuals to legal entities - and a large range of donations and contributions;
- an integrated approach to the provision of services, including, in addition to financing: marketing research on the demand for a product/service, consultations and support of investment platform specialists, integration on platforms based on the principle of social networks with communication of like-minded people;
- the possibility of diversification of investments due to the variety of projects presented;
- the presence of trends towards disintermediation in financial markets;
- development of cross-border crowdfunding (creation of crowdfunding aggregators that unite crowdfunding platforms around the world);
- the transition of equity crowdinvesting to the capital market;
- the possibility of developing innovative projects;
- development of legal regulation by the state.
Bibliografia
Zetzsche D. A. Cross-Border Crowdfunding -Towards a Single Crowdlending and Crowdinvesting Market for Europe / Dirk A. Zetzsche, Chistina Preiner // European Business Organization Law Review. -2018. - No. 19 - P. 217-251. - DOI: 10.1007/s40804-018-0110-x.
Salomon V. Strategies of Startup Evaluation on Crowdinvesting Platforms: The Case of Switzerland / Victoriya Salomon// Journal of Innovation Economics & Management. - 2018. - Vol. 26, No. 2. -P. 63-88. - DOI:10.3917/JIE.PR1.0029.
