Crowdinvesting Equity Crowdfunding Crowdlanding

Crowdfunding, or crowdfunding, is considered to be raising funds from several investors through special platforms. Both borrowers and investors can be both individuals and legal entities. The funds raised may be issued in the form of loans and shares in the authorized capital or provide for non-financial remuneration for investments (gifts, invitation to open a restaurant, dinner with a celebrity, etc.).

Investments in crowdfunding give a higher income compared to traditional financial instruments (deposits in banks, OFZs, bonds of large companies). However, they are more risky: although crowdfunding platforms try to provide information about borrowers, there are no guarantees for investments, because companies can go bankrupt.

Types of crowdfunding

The Central Bank allocates four segments of crowdfunding:

• p2p-lending: investor and borrower - individuals;

• p2b-lending: investor - individual, borrower - legal entity;

• b2b-lending: investor and borrower - legal entity;

• rewards-crowdfunding: funds are raised for purposes or projects for non-financial remuneration.

Crowdinvesting or equity crowdfunding is an alternative financial tool for raising capital in startups and small businesses from a wide range of micro-investors.

Crowdlanding - lending by individuals to other individuals (P2P-lending) or companies (P2B-lending) through special Internet sites.

Russia

2023: Crowdlanding market growth by 2 times, up to 24.1 billion rubles

The volume of the Russian crowdlanding market in 2023 reached 24.1 billion rubles, which is more than twice (by 108.64%) higher than a year ago. The number of such loans increased by 18%, to 11 thousand. This is evidenced by the data of the Mani Friends plowshare, published at the end of January 2024.

As noted by Flow managing partner Yury Popov in a conversation with Kommersant, the growth of the crowdlanding market is constrained by high rates. Part of this growth was passed on to borrowers, compensating part of the costs from their own margins. The expected future rate cut for several months will be an additional factor for market growth, the expert said.

According to JetLend CEO Roman Khoroshev, the market is expected to reach 50 billion rubles by the end of 2024. Potok also predicts a doubling of the market. The Association of Investment Platform Operators (AOIP) estimates growth at least 1.5 times. Nevertheless, the market still has significant potential capacity, so the growth rate will depend primarily on the marketing activity of the platforms themselves, and not on market conditions, Oriole Capital reported, the publication emphasizes.

High rates cool the demand for money, and crowdlanding is no exception, - said Yuri Kolesnikov, managing partner of Mani Friends.

According to his estimates, rates for corporate borrowers on crowdfunding platforms are already 23-35% per annum, which restrains demand. At the same time, instruments with less risk, such as deposits and bonds, have become more attractive to investors, thanks to high rates, Kolesnikov added.

Despite this, demand is likely to continue, as crowdfunding involves "more flexible and convenient conditions for obtaining funding," said Dmitry Isakov, CEO of Lender Invest.^[1]

2022

Crowdfunding market growth by 48% to RUB 20.4 bln

The volume of the Russian crowdfunding market in 2022 reached 20.4 billion rubles, which is 48% more than a year earlier. Such data in June 2023 led to the Bank of Russia.

According to the regulator's report, by the end of 2022, 64 organizations were included in the register of investment platform operators (OIP) of the Central Bank (18 organizations were included in 2022, four were excluded). At the same time, 28 OIPs (about 44%) did not carry out their activities, since the platforms were under development or their activities were suspended due to the unstable geopolitical and economic situation. Compared to 2021, the total volume of transactions made on these platforms in 2022 increased sevenfold, to 36 billion rubles, and the number of transactions increased eightfold.

As noted in the review of the Central Bank, published in June 2023, in recent years, amid the growth of digitalization and digitalization, especially intensified during the pandemic, a request has been formed in society to increase mobility, including financial services and products. It has become relevant to receive services via the Internet and applications on electronic devices around the clock, preferably with the possibility of choosing a service provider in one place. At the same time, against the background of a long-term decrease in the key rate of the Bank of Russia in the Russian financial market, the need for society and the economy as a whole in new alternative financial instruments was traced, allowing to obtain increased income at a controlled level of risks, due to which a spontaneous crowdfunding market arose. At the same time, investors still needed to ensure the proper level of security and transparency of transactions, the regulator emphasizes.

He adds that the following factors contribute to the growth of interest in the crowdfunding market from investors:

• possibility to simplify the procedure for evaluating projects for inclusion in the investment
• portfolio due to the auto-investment function;
• protection of investors' funds from misuse by using the PPI of the nominal account, the beneficiaries of which are investors;
• increased return on investment for investors compared to classic
• banking products (according to OIP data, annual profitability in 2022 amounted to 17.6% per annum, in 2021 - 15%);

Overview of platform services in Russia

Crowdlanding market growth by 35% to 11.6 billion rubles

The volume of the Russian crowdlanding market in 2022 reached 11.6 billion rubles, which is 35% higher than a year ago. This is evidenced by the data of the investment platform Money Friend (received from the largest players occupying 95% of the market), which were published by Vedomosti on February 8, 2023.

It is reported that in 2022 the most loans were attracted by the Potok platform with a result of 4.3 billion rubles, in second place - JetLend (3 billion rubles), in third - Vdelo (1.6 billion rubles), followed by Money Friends itself (521 million rubles) and InvestGO (379 million rubles).

The Russian crowdlanding market grew by 35% over the year

In the spring of 2022, crowdlanding became an alternative to a loan, especially in conditions when banks tightened scoring (the borrower's valuation system), Kirill Kosminsky, executive director of the Association of Investment Platform Operators, told the publication. In November, the same amount of funds raised through crowdlanding exceeded 1.22 billion rubles, which was a record monthly figure at that time. In the summer months, the market increased by an average of more than 18%.

The only month in the last half of 2022 when the market showed a decline was September. According to the newspaper, crowdlanding, the most popular type of collective fundraising through investment platforms - crowdfunding, is in demand mainly among small and medium-sized businesses (SMEs). Thus, according to the Central Bank of Russia, this segment in 2021 accounted for 64% of all loans in the country. The introduction of partial mobilization led to the fact that, according to Money Friends, companies from the SME segment on average lost 10-20% of key employees, which slowed down business development and, accordingly, activity in the debt market, explained the managing partner of the site Timur Ksenz.^[2]

2021: Central Bank: Russian crowdfunding market almost doubled

The volume of the Russian crowdfunding market in 2021 reached 13.8 billion rubles, almost doubling compared to the one-year-old figure of 7 billion rubles. Such data are contained in the report of the Central Bank of the Russian Federation, which was published in June 2022.

According to the study, the most common type of crowdfunding is crowdland - the provision of collective loans to finance projects. In 2021, it accounted for 64% (9 billion rubles).

Central Bank: Russian crowdfunding market almost doubled

The second type of crowdfunding is crowdfunding. This is a collective investment in companies through the purchase of their securities. In 2021, 4.74 billion rubles were thus attracted (36% in the total volume of the market under consideration).

The Central Bank explained that in the context of a decrease in the capital market and investment opportunities for many investors and borrowers, crowdfunding is becoming a new and promising financial instrument. The high level of competition in the market contributes to improving the quality of services of investment platform operators.

Central Bank: Russian crowdfunding market almost doubled

The main areas of investment of active investors - legal entities or individual entrepreneurs at crowdlanding sites - are development, sale and purchase of residential and commercial real estate, wholesale and retail trade; at crowdinvesting sites - cargo transportation and production of goods.

Active investors - individuals are mainly men (for crowdlanding - 80.07%, for crowdinvesting - 82.77% of the number of investors - individuals) aged about 40 years (for crowdlanding - 39 years, for crowdinvesting - 42 years). Qualified investors account for 6.7% of the total share of registered investors. More than a double increase in active investors in 2021 speaks of the attractiveness of this method of investment as an alternative financial instrument, the Central Bank notes. CROWDFUNDING MARKET OVERVIEW IN RUSSIA

2020

The Central Bank of the Russian Federation registered the first crowdfunding operator

On June 3, 2020, the Central Bank of the Russian Federation registered the first crowdfunding operator. The company "NRK-R.O.S.T." was included in the register of investment platform operators, the regulator said in a statement. Read more here.

Legislative regulation

Until 2020, the concept of "crowdfunding" was applied only in practice and was not legally regulated in any way. The only mention of crowdfunding was in the Finance Ministry Letter dated 25.11.2016 ^[3].

Since 01.01.2020, the Federal Law of 02.08.2019 No. 259-FZ "On Attracting Investments Using Investment Platforms and on Amending Certain Legislative Acts of the Russian Federation" came into force. This law regulates the legal relations of entities for investing funds in various projects, as well as operators of investment platforms with participants in investment activities. Now the law establishes requirements for the platform operator and for the person who attracts investments, requirements for the rules of the investment platform, methods and procedure for investing using the investment platform, etc.

According to Art. 10 of the law, the investment platform operator does not have the right to combine its activities with other activities of a financial institution. Exception - combining only with certain types of financial activities, for example, brokerage, dealer, depository activities, etc. This requirement is very important, as it will help to avoid the appearance of unscrupulous players on the market.

Restrictive requirements have also been established for persons who have the right to directly or indirectly dispose of 10 or more percent of the votes of the investment platform operator. For example, it cannot be a legal entity whose license of a credit or financial institution has been revoked for violations.

Article 12 of the law establishes requirements for persons attracting investments, including prohibiting requirements. For example, persons who do not comply with the requirements and rules of the investment platform itself, etc. cannot be such.

As for organizations, any legal entity may not attract investments in the event that the founders or directors of such organizations have an undisclosed or outstanding criminal record for economic or state crimes.

These restrictions provide additional guarantees to all participants in the investment platform already at the initial stage of the project.

The norms of the law determine the rules of work for platform operators, investors and authors. The operators have established the obligation to maintain confidentiality and not disclose the data of the participants, to determine the procedure and timing of the transfer of funds, the amount of remuneration, the obligation to preserve and reliability of records in the register of contracts, as well as the conditions for amending the platform rules unilaterally.

There are several types of crowdfunding:

• Investors receive bonuses and rewards in exchange for their cash investments. These can be either symbolic gifts or, for example, a mention of a sponsor on the site.
• Investors are guaranteed a stake in a future project or investment from future profits. For example, percentage of sales.
• The creator of the idea sells part of his business to an investor or offers a stake on certain terms. That is, in exchange for money, investors receive the right to receive shares in this company.

2019: Crowdfunding market ​​Obyem contracted by 40% in 9 months

2018

China leads the crowdfunding market

The crowdfunding format for Russia is relatively new, and its size is much smaller than in other countries. The global crowdfunding market, according to QY Research, in 2018 amounted to $10.2 billion, of which 37% fell on China, 33% - on the United States, 18% - on Europe. By 2025, the market could reach $28.8 billion.

$714,719 raised through crowdfunding platforms in Russia

On April 16, 2019, Hobby World Publishing Holding presented its first full analysis of crowdfunding of board games in Russia. According to the results of the study, 2018 was a breakthrough for the segment: the platforms raised $714,719, thanks to which the market grew by 40.1%. The leading position in the industry was taken by the platform of the publishing holding Hobby World - CrowdRepublic.

In 2018, Hobby World accounted for 86.4% - sponsors supported platform projects worth $617,234. Most of the funds to the platform were brought by the fundraising campaign for the publishing house of the game "Gloomhaven. Gloomy Harbor, "which ranks first in BoardGameGeek's world rankings. Platform users in just two and a half months transferred 14,368,450 rubles. Previously, not a single project in Russia collected such an amount on the country's crowdfunding sites. The game also set a record for fees per day - 2,773,290 rubles.

A landmark event was the fundraising for the subscription of "World of Fiction" - a print magazine dedicated to fantasy. Hobby World not only saved the publication from closure, the publishing holding modernized the magazine with the active support of sponsors at CrowdRepublic. In total, fantasy fans transferred 5,046,980 rubles and set a record in the segment of printed Russian media that launched campaigns on crowdfunding platforms.

author '= Mikhail Akulov, CEO of Hobby World ' We see great prospects for the development of the board game crowdfunding market. Suffice it to say that in 2018, 65 fundraising campaigns were implemented at all sites, which is 62.5% higher than 2017. A great contribution was made by the site of our publishing holding - CrowdRepublic. We managed to take a leading position in the segment, and we plan to increase the pace in 2019: in particular, we plan to simultaneously release 2-3 fundraising campaigns for localized publications of world hits and new products. In addition, we set the task of activating the book direction.

As part of the study, the activities of popular platforms for crowdfunding board games were analyzed. In addition to CrowdRepublic, these are Planeta.ru, Game Factory, Boomstarter. The authors of the study predict that competition in the segment will lead to an increase in the quality of products, the emergence of specialized projects, small companies and independent authors.

Central Bank regulates crowdfunding

The Bank of Russia has published a bill regulating the attraction of "people's funds" for various projects (crowdfunding), Kommersant reports with reference to the draft relevant law^[4][5].

According to the document, services organizing crowdfunding will have to disclose data on their activities and exercise strict control over incoming funds. In addition, the regulator wants to limit the volume of investments with such a collection of money.

According to the bill "On alternative ways to attract investments (crowdfunding)," published on the official website of the mega-regulator, the platform will have to register as a legal entity and add itself to the list of investment platform operators: such a register is currently being created by the Central Bank. At the same time, the amount of own funds of such a company should be at least 5 million rubles.

In addition, the Central Bank wants to limit the amount of investments in crowdfunding to 50 thousand rubles. from one investor within one year and up to 500 thousand rubles. from one investor in total.

2016

According to analysts at the VentureClub.co crowdfunding platform, the Russian market for private financing of business projects is in its infancy, but it is rapidly gaining momentum. At the end of 2016, the volume of the domestic crowdinvestment and crowdlanding market approached $20 million, and by 2027 it will reach $4.5-5 billion.

"Crowdlanding in the Russian Federation has become more popular than crowdinvestment, because its refund mechanisms are more understandable to domestic investors. Crowdlowing sites in Russia are already quite successfully competing with banks in the field of lending to small businesses, "says Elena Privalova, CEO of VentureClub.co. - At the same time, interest on the part of private investors and business angels in sites operating under the crowdinvestment model is also growing, since this model has more flexible corporate governance and capitalization growth tools. The rapid development of the crowdsector has already attracted the attention of the state. "

According to the Central Bank of the Russian Federation, in 2016, more than 2 billion rubles were collected through crowdsector sites in Russia. (more than $34 million). However, only four leading sites - VentureClub.co, Starttrack, Simex, Alfa Potok - operating under the crowdfunding and crowdlanding model, announced more than 1.3 billion rubles. (about $20 million) private investment in 2016. In Russia, the share of business angels in the total volume of venture capital investments is about 20%, in developed markets the share of private investments reaches 80%. At the same time, according to Forbes, more than 100 thousand dollar millionaires live in Russia, according to this indicator, the country ranks 13th in the world. According to Goldman Sachs, the global investment market according to the crowdinvestment and crowdlanding model exceeded $24 billion in 2016.

See also

• ICO
• VentureClub.co
• STRK (Starttrek) formerly StartTrack
• Venture investing
• Venture capital investments in the IT sector of Russia
• Lending in Russia

Notes