Crowdsourcing refers to the outsourcing of certain work tasks from a company. Volunteers are recruited via the Internet to dedicate themselves to solving the respective task. Something is outsourced to the crowd. Behind this is not only the idea of division of labor and cost savings, but also the intention of gaining know-how. The keyword for this is swarm intelligence.
Location-independent tasks go to an undefined group of volunteers on the Internet, who become part of the company with the help of this communication system. With their experience and possibilities, they solve a task, results that represent a gain for the company, due to a lack of their own capacities and possibilities. However, crowdsourcing is not limited to existing business processes, it is also an instrument of raising capital to raise financing for projects. With crowdfunding or crowdinvesting, a new and interesting financing model is on the market, which has also gained momentum in Germany.
Crowdinvesting – How does it work and what should be considered?
Capital raising via crowdinvesting is usually done via a public call on the Internet. For this purpose, an intermediary can be called in to mediate the raising of capital between companies and individual investors. There are very different orientations as to how the financing is to be used, but in particular also how refinancing is regulated for investors. Four financing models have established themselves on the market from the point of view of raising capital. – Donation model (crowddonating) There is no provision for refinancing to the donor, the benefit for him is in the intangible area. – Reward model (crowdsupporting) The investors receive an early return, the type and scope are determined in advance. – Loan model (crowdlending): The collected capital is passed on to the company as a loan and is subject to the rules of credit financing. – Equity model (equity crowdfunding): Capital is raised on the condition that the financiers receive a share in the company for their financing. This can be regulated temporarily. The legal classification of a crowd investor, especially with regard to classic financing via banks, is clearly regulated in Germany. Since 10 July 2015, the questions and rules of the various forms of financing have been based on the provisions of the Retail Investor Protection Act.
Crowdinvesting in Germany – The market is growing
Although still relatively new as a financing model, a steadily growing trend can be assumed in Germany. This applies to both the number of projects and the amount of funds raised to raise capital. In 2011, less than EUR 500 thousand was collected for financing via crowdinvesting, but in 2014 the sum was already almost EUR 9 million. However, it should not be overlooked that Germany is still in the infancy of this alternative financing with this share. Worldwide, more than 16 billion dollars were collected via crowdfunding in 2014. A completely different dimension that allows two conclusions. On the one hand, it shows that there is still a long way to go for crowdinvesting in Germany, but the high sum also shows that crowdfunding is a great opportunity to secure projects through alternative financing. With regard to Germany, however, it should not be forgotten that behind the relatively small amount of funding in 2014 there are over a thousand projects. This means start-up financing for new things, especially in the area of start-ups and innovations. An opportunity to acquire financing for follow-up investments through market presence that can lead to great success. This starting function of crowdinvesting is therefore an important driving force for the innovative development of the economy. Start-ups and innovative projects are also important fields of crowdfunding in the future.
Do you have any experience with crowdinvesting? What potential do you see in this financing model? We look forward to your comments.
Image source: Fotolia.com, Photographer: Olivier Le Moal
