Published by the Lucerne University of Applied Sciences and Arts, the annual Crowdfunding Monitoring report is already into its fifth year. The current report features record figures: CHF 374.5 million was brokered via crowdfunding platforms in 2017, almost three times more than in 2016 (CHF 100 million, +192%). Over the past eight years, more than half a billion Swiss francs have been brokered via this form of financing.
The major growth drivers in terms of volumes in recent years have been finance for SMEs via crowdlending, and investing in property via crowdinvesting. "Professional investors increasingly perceive crowdfunding as an interesting investment," says report author Andreas Dietrich. "We expect the Swiss crowdfunding market to break the billion franc mark at the end of the year."
High growth in all areas
Some 160,000 people backed crowdfunding projects in Switzerland in 2017. The Swiss crowdfunding market can be divided into four segments: reward- and donation-based crowdfunding, crowdinvesting, invoice trading, and crowdlending (see box for details). Crowdlending recorded the largest volume (CHF 186.7 million, +239% over the previous year), followed by crowdinvesting (CHF 135.2 million, +245%). Invoice trading generated CHF 23.5 million (+38%), while reward- and donation-based crowdfunding achieved a volume of CHF 29.1 million (+72%).
Over 1500 cultural and creative projects successfully funded
"The lower volumes recorded for reward- and donation-based crowdfunding do not mean that this segment is unimportant," says report author Andreas Dietrich. Since the segment primarily involves creative and cultural projects, the volumes of the campaigns tend to be small compared, for example, to real estate projects. But with over 1500 successfully financed campaigns in 2017 (+15% over the previous year), reward-based crowdfunding/crowddonating has continued to grow as a relevant source of funding. Arguably the highest-profile campaign in this segment in 2017 was that run by Republik magazine (CHF 3.5 million).
International perspective: Switzerland two to three years behind – but catching up
The Swiss crowdfunding market has grown significantly more rapidly than those of neighbouring countries since 2015. With a per capita investment volume of CHF 45 (2016: CHF 15), Switzerland still lies two to three years behind leading crowdfunding markets such as the USA (2016: CHF 78) or the UK (2016: CHF 90) – but it is catching up fast: "The strong momentum provided by new platforms and alternative business models suggests that Switzerland is catching up with highly developed crowdfunding countries such as the USA and the UK," says Andreas Dietrich.
Hidden concentration in the crowdfunding market
43 crowdfunding platforms were maintaining a physical presence in Switzerland as of the end of April 2018. Also in the market are several nondomestic platforms without an office in Switzerland. Despite the large number, each crowdfunding segment is dominated by a handful of major platforms. In the crowd lending and reward-based crowdfunding segments, for example, the six largest platforms each have a market share of 96 percent and 97 percent respectively. This concentration is expected to continue: "That said, small, innovative niche players will continue to survive in the market," says Andreas Dietrich.
Businesses and institutional investors discover crowdfunding
The involvement of larger businesses and institutional investors is becoming more prevalent across all areas of crowdfunding. In reward-based crowdfunding/crowddonating, for example, projects are increasingly being launched with the support of businesses. In crowdlending, crowdinvesting and invoice trading – segments of interest to investors – the proportion of institutional investors will increase significantly in future. This will have the effect of contributing significantly to the continued rapid growth in volume.
Crowdfunding goes blockchain
Two Swiss platforms have already announced their intention to launch innovative products based on blockchain technology in 2018. From spring 2018, Swisspeers is looking to transact loans between business and investors as "smart contracts" in the Ethereum blockchain and represent creditors’ claims using tokens. Wemakeit is planning to launch a new crowdfunding platform that will be completely blockchain based. The report's authors are anticipating that blockchain technology will find other fields of application in the crowdfunding market in the coming years.
The Crowdfunding Monitoring Switzerland can be downloaded here
Crowdlending Survey 2018
At the beginning of May the Lucerne University of Applied Sciences and Arts in partnership with PwC Switzerland and the Swiss Marketplace Lending Association published a separate study on the Swiss crowdlending market showing the economic relevance of crowdlending in Switzerland and abroad. In addition, the study highlights the key challenges and problem areas – especially the lack of transparency – facing the crowdlending market. The Crowdlending Study 2018 is free and available in German and English here.