Maturing the crowdfunding market – The very questions to be asked & actions to be taken

As a result of numerous media echoes on the closing of the crowdfunding platform Unilend and the current state of the market in France, we are answering with this article. Let’s look closer on the recent market evolution and ask ourselves: How could the finance world and crowdfunding in particular going mainstream? How to make them easier, more transparent, meaningful, inspiring, exciting, pleasant, understandable and accessible to all? 

Are the right questions being asked to expand and mature the market of collaborative finance with crowdfunding – particularly in France and in continental Europe?

What attitude to adopt to make it mainstream?
Let’s answer to this question and introduce actionable changes in taking a:

  • broader perspective,
  • international point of view, 
  • look at other industries in which Internet users are using simply and easily tools, products and services thanks to online marketplaces.

The state of an evolving market  

Recent changes in the French crowdfunding market are indicators of an evolving market. Some platforms adopt more and more an experts and professionals-oriented model at the expense of a crowd/consumer-oriented model such as the French platforms Lendix, Crédit.fr and WeShareBonds. Others change and diversify their business activity as in the case of SmartAngels. The young market has also already seen the purchase and takeover of platforms by banks. As examples, the group KissKissBankBank (with the platforms KKBB, Goodeed, hellomerci, and Lendopolis) by the French bank La Banque Postale in 2017 and Lumo by the French bank Société Générale in 2018.

Should we worry by recent publications that announce, “A market doomed to fail or just the failure of some platforms?”, as questioned by Benoît LETY, journalist for cBanque in his article, or, as Jean CARVAJAL, founder of the platform Investbook, in his Forbes article[…] is asking [himself…] about the reliability of crowdfunding in France.”.

Are the needs of both target groups sufficiently addressed with the “crowdfunding platform” model as one and only business model & market player? 

At the creation of the market, crowdfunding platforms were obliged to have a dual approach. The business model of platforms “has the characteristic [to address] multiple customer target groups”, emphasizes Cyril TRAMON of the platform WeShareBonds in his article. On the one side, the crowdfunding project owners – business owners (SMEs/start-up) or individuals – who try to finance for example their innovation or market launch of products and services. On the other side, consumers (savers and investors) who try to diversify their investments and boost their savings through crowdfunding investment opportunities.

This approach has as consequence the multiplication of costs and efforts to evangelize simultaneously two different customer target groups. According to Jean CARVAJAL, “The business model is based on the platform’s ability to attract a large number of [consumers], but also a large number of [project owners and thus crowdfunding investment opportunities] on a regular basis.".

A concept that is risking to explode the “crowdfunding platform” model. Additionally, the perfect mastery of marketing disciplines and communications towards those who invest and those who seek financial funding is of the utmost importance to conquer and attract both target groups. These competencies are an even more crucial factor, if platforms strive for communication that is personalized and relevant to target groups. A way to respect consumer’s areas of interest, preferences, and values. And at the same time, to answer project owners’ needs in terms of visibility and creation of investors’ and buyers’ communities to achieve funding goals.

We are also seeing a dual approach of crowdfunding platforms in terms of their market positioning. The market has specialized platforms in specific industries and markets, such as, without being exhaustive, Homunity and Baltis Capital in real estate, Miimosa and AgriLend in agriculture, Lendosphere and Lumo in renewable energies, Winefunding in wine business, and Dartagnans in heritage, art and culture. Or multi-businesses platforms such as Kickstarter, Ulule, Indiegogo, and KissKissBankBank.

The crowd or where is the crowd in crowdfunding? 

The crowdfunding market is very recent and young. Further development and growth of a market implies always the evolution of market players, their business models and their market positioning. It is in the nature of things that some business models by platform (crowd vs. professionals) and market players will disappear, and other players will enter the market. As Cyril TRAMON of WeShareBonds outlines in his article: “Without any doubt, we are in a shifting market, a market which is restructuring itself, over and over again.”.

Should we abandon the crowd, the DNA of crowdfunding, because too costly & time-consuming? 

If we take the essence and meaning of the word “CROWDFUNDING”, we retrieve the words “crowd” and “fun” of funding. Not only “funding” or in the eyes of consumers “investments” which implies the concept of financial gain. We find a vital notion of the crowd with human values and societal interests. “Giving meaning to your money, helping [local] businesses, promoting economic development [of a] region [or country], participating in innovative projects, contributing to projects in a community of interest [with people who share a common interest or passion] are representing equally strong motivations.” as are also emphasizing Michel IVANOVSKY and Jean-Michel ERRERA, co-founders of Mipise in their article. An approach of finance much more collaborative as in the past with products and services that offer little pleasure, not always understandable and above all rarely traceable. “[Collaborative] finance offers near-infinite, almost incredible opportunities for everyone to compose the portfolio that is matching to [his/her] investment profile.”, is confirming Patrick SEZEKORN in his article in Argent & Salaire.

The potential and promise of crowdfunding have always been to enable consumers to give (back) meaning to their savings and investments. An opportunity to integrate into the concept of financial gain aspects such as societal and social commitment, sustainable development and the contribution to face and overcome today’s challenges in fields such as environmental sustainability, technology, health, industrialization and commerce.

A market that must progress? 

The answer to market challenges regarding the shift of the crowdfunding in France and internationally lays in new business models and market players entering the market. Business models which allow to not underrepresent the crowd as well as societal and social impact. The means to diversify and boost consumers’ savings and investments together with societal impact. A market, which by its definition is composed of the crowd of consumers. Or as Cyril TRAMON of WeShareBonds underpins in his article, “[…] the adjunct to the banking market is a necessity that even banks themselves acknowledge.”.

And internationally …? 

Internationally, we see a consolidation and maturing of platforms since some years. As a result, the aggregation of platforms as model appeared to rethink consumer experience and make crowdfunding easier for savers and investors. In return, platforms have the opportunity to rely on the aggregation model which is consolidating the strike force to conquer and attract consumers faster and at lower costs. New means to dedicate more resources (financial and manpower) to the identification, assessment and selection of crowdfunding opportunities.

So, how to make the crowdfunding market grow BIG? 

To grow the crowdfunding market, it needs more crowdfunding opportunities that are identified and offered on a regular basis. Often, platforms propose to view or even no crowdfunding opportunities at all. The crowd needs further insights and information to better understand crowdfunding as well as more transparency. This will ensure the introduction of customer retention and loyalty into crowdfunding with returning customers and hence a significant reduction of customer acquisition costs. Today, the French market seems having trouble in further growing and overcoming the current funding volume with an offer still too limited (diversity and choice), often available on an irregular basis, and little attractive in the way it is marketed. “The sustainability of the French market will be achieved through the variety of offers being proposed, the specialization of platforms and through accentuation of an environment that will foster collaborative initiatives.” […] “[Crowdfunding] has the values of a collaborative economy inherent: trust, trade, sharing, pooling [of resources], proximity, usability, simplicity of interactions, and fun.”, as insists also Jean CARVAJAL in his Forbes article. 

But not only. It needs a crowdfunding community independent from and across all platforms for the benefit of the entire market to establish and boost crowdfunding. We observe that there are as many communities – little crowds – as there are platforms. Crowdfunding today is organized in silos – platform by platform – which is hindering crowdfunding to create and consolidate a real crowd at the advantage of all.

Which change is needed for crowdfunding to reach its full potential?

Impact for classic market players – The crowdfunding platforms

Platforms should create diversity and choice through a larger number and more regular offerings of crowdfunding opportunities. They should focus on their core competencies and activity oriented towards assessments of investment opportunities. A possibility to bring trust and credibility to the market, to reinforce their market positioning, to become key players in their businesses and to face international competition.

Role of new market players – Online marketplaces which are focusing on consumer experience

Online marketplaces should provide consumers with:

  • information necessary to correct understanding crowdfunding and collaborative finance,
  • the broadest crowdfunding and consumer-centric offer in a single account across all types of crowdfunding and diverse domains, industries and markets as well as countries,
  • customized experience where areas of interest, preferences, values, knowledge and financial capacity to crowdfund are put first & in the center of the attention,
  • diversity and choice of crowdfunding investment opportunities in a single-entry point
  • tools to compare crowdfunding opportunities and to simulate investments and their expected return on investment,
  • simplified and aligned transactions directly from and to personal bank accounts or by credit card,
  • 360° overview of transactions and investments centralized in a single account to follow up or manage and pilot crowdfunding activities,

These new market players should enable platforms to focus on the identification and assessment of crowdfunding investment opportunities – their core competencies and business. Online marketplaces should complete the know-how of platforms with marketing and communications expertise to establish in crowdfunding the crowd of consumers as well as customer retention and loyalty. An optimization and increased performance of the market’s value chain.

The outcome of a mature market

Like in other internet-based businesses and industries, in which the internet user is conveniently using products and services thanks to the aggregation of technologies and information – for example to compare flights, hotels, restaurants, insurances, loans – crowdfunding must have this same simplicity, diversity, choice and transparency for collaborative finance being made accessible and understandable to all.

Dominique B. MATZUTAT, Co-founder hubokee
François PLACET, Co-founder hubokee


+++ Link list of publications this article is referring to :

Benoît Lety: Epargne - Faut-il encore croire au prêt participatif ? (published in French only)
Jean CARVAJAL: Unilend - Les questions d'une faillite annoncée (published in French only)
Cyril TRAMON: Clap de fin pour Unilend... ou pour le crowdlending "à la française" ? (published in French only)
Michel IVANOVSKY & Jean-Michel ERRERA: Crowdlending - Pistes de réflexion pour construire un modèle performant (published in French only)
Patrick SETZEKORN: UFC et la finance participative - Ma réponse (published in French only)