Crowdfunding in Europe consists of different types of alternative financing of which p2p consumer lending with a 42% market cap is the largest. The highest funding volume still originates from the United Kingdom followed by France, Germany and the Netherlands. The European crowdfunding sector has experienced impressive growth rates and continues to evolve, but many uncertainties like regulation and the consequences of a potential economic downturn are still lurking. However, compared to the Americas and the Asia-Pacific the European market is still small leaving great potential for further growth.
If you are new to crowdfunding, you might want to check out this article about the four main types of crowdfunding before reading on. Crowdfunding is in many eyes all about donation and reward, but it is fair to say that such an understanding is not aligned with the numbers. In Europe, the four main types of crowdfunding are roughly divided into 79.1% lending, 13.9% equity, 4.7% reward, and 1.6% donation. We will dive deeper into these numbers below.
The Market of Crowdfunding in Europe
The most thorough mapping of the European market for crowdfunding has been made by the Cambridge Centre for Alternative Finance. Their latest rapport from 2019 is called Shifting Paradigms and uses data from 2017. Since the United Kingdom still accounts for 68% of the European crowdfunding market and uses a different currency compared to mainland Europe, we have dedicated a separate article to the UK market. Thus, our focus in this article will be on mainland Europe, but in the following paragraph, we will briefly touch upon numbers for the total European market including the UK. In the same way, in our own data section, we distinguish between European platforms with funding volume denominated in Euro and UK platforms with funding volume denominated in Pound Sterling (GBP).
At P2PMarketData we are working to bring transparency and clarity to the market of crowdfunding. Our data are always updated and valid for the specific platform, but we are still in the process of collecting data from all the world's peer-to-peer platforms. Therefore, our data are still less complete in terms of the overall market when compared to the Cambridge Centre for Alternative Finance (CCAF), an interdisciplinary academic research institute focusing on the study of alternative finance. The following description of the European market for crowdfunding will consequently focus on survey data collected by the CCAF.
Total European Market Volume Including the UK
From 2016 to 2017, volumes raised by crowdfunding or alternative finance grew by 36% across Europe, which was an increase from €7.67 billion to €10.44 billion. Of the €10.44 billion, the United Kingdom was responsible for 68% or €7.06 billion. However, one of the reasons why the rapport is called Shifting Paradigms is the possibility that the patterns of growth will develop and change as the market matures. While the UK remained the largest contributor to the total funding volume, followed by France (9% market share) and Germany (6% market share), interestingly the UK share against the rest of Europe is shrinking. Thus, in 2015 the UK market share was 81%, in 2016 it was down to 73% and in 2017 the beforementioned 68%.
However, if we adjust for country size and look at crowdfunding finance volume per capita, we see a somewhat different picture. The UK still comes out on top with a crowdfunding volume of €107.04 per capita, but at the next places, we now find Estonia with €61.76 per capita, Latvia with €47.51 per capita, Georgia with €46.62 per capita and Finland with €35.70 per capita, whereas France has dropped to 9th and Germany to 13th in mainland Europe.
The Continental European Market for Crowdfunding
Excluding the UK, the top six countries by funding volume consist of France, Germany, Netherlands, Italy, Finland, and Sweden with a market share of 19.6%, 17.7%, 8.3%, 7.1%, 5.8%, and 5.8%, respectively. Below, you can see a complete list of the mainland European crowdfunding market by country with numbers from 2017 and 2016, the latest data available.
Figure made by P2PMarketData based on numbers from the Cambridge Center for Alternative Finance
Here, it is worth noting that the top 3 countries – France, Germany, and Netherlands – account for 45.6% of the volume of mainland Europe and that all three countries managed to maintain their positions with France and Netherlands losing and Germany gaining a bit of market share. However, Italy was able to achieve a strong growth rate of 89.4% coming from a high volume already, and could be a challenger to enter the top 3 if it can keep up this rate of growth. Other countries with fast growth rates coming from relatively high volumes are Sweden going from #9 to #6 and Georgia staying at #7. Some countries coming from lower volumes experienced even more impressive growth rates jumping several places. Here, highlights are Poland with a growth of 273.5% going from #13 to #9, and Latvia with a growth of 239.5% going from #16 to #11.
Another useful way of grouping funding volume is by European geographical regions. By doing so, we can get a clear and more manageable overview of how the crowdfunding volumes are spread across mainland Europe:
Figure made by P2PMarketData based on numbers from the Cambridge Center for Alternative Finance
When viewed by geographical region, two regions emerge as 3rd and 4th on the list: The Nordics (Denmark, Norway, Sweden, Finland & Iceland) with almost €450m in funding volume and the Benelux (Netherlands, Belgium & Luxembourg) with €372m. When viewed together, the relatively small Baltic countries (Estonia, Lithuania & Latvia) also account for a significant funding volume of €217m and a market share of 6.5%
Looking at growth rates, all regions show significant growth rates. The slowest growth is located on the Iberian Peninsula (Spain, Portugal & Andorra) where growth is limited to 26%, whereas we find the fastest growth rates, not surprisingly, in regions coming from low funding volumes. Here, the Commonwealth of Independent States of CIS countries (Russia, Ukraine, Armenia, Moldova & Belarus) experienced a growth of 465%, and South East Europe a growth of 357.7%. Also, we see growth rates of 153.2% and 115.5% in Eastern Europe (Poland, Hungary, Czech Republic & Slovakia) and Central Europe (Switzerland, Austria & Liechtenstein), respectively. Considering the funding volume, it is also worth highlighting the impressive growth rates of Germany (85.5%) and Italy (89.5%).
Crowdfunding in Europe by Finance Model
The Cambridge Centre for Alternative Finance identifies 14 distinct alternative finance or crowdfunding models in 2017 (including “Other”). The clear leader of these models when it comes to funding volume in Europe excluding the UK is P2P Consumer Lending accounting for 41.2%. This model is followed by Invoice Trading (15.9%), P2P Business Lending (13.8%), Real Estate Crowdfunding (7.7%), Equity-based Crowdfunding (6.5%), and Reward-based Crowdfunding (4.7%). These six models accounted for almost 90% of the total European funding volume, so we will focus on these in the following.
Other models identified are Balance Sheet Business Lending (2.8%), Debt-based Securities (2.2%), P2P Property Lending (2.0%), Donation-based Crowdfunding (1.6%), Minibonds (0.9%), Balance Sheet Consumer Lending (0.1%) and Profit Sharing (0.05%). Also, 0.7% was ascribed to the category “Other” containing volumes raised through models not contained in the existing taxonomy.
Looking at the four rapports published, different types of crowdfunding models have been used, but there is enough consistency for a comparison to make sense. Below, you will find all the numbers available in Europe from 2014-2017 by finance model excluding the UK.
Figure made by P2PMarketData based on numbers from the Cambridge Center for Alternative Finance
We will now briefly explain the six most important crowdfunding models and their role and development in the European market. Later, you will learn about the top crowdfunding platforms within each category and how to get started as an investor.
P2P Consumer Lending in Europe
P2P consumer lending is a type of debt-based crowdfunding where individuals or institutional funders provide a loan to a consumer borrower. It is also known as consumer crowdlending.
Peer-to-Peer consumer lending has been measured in all four rapports on the European market published by the Cambridge Centre for Alternative Finance, and in all four rapports, it has been the largest driver of funding volume. In the first data available from 2014, p2p consumer lending raised €274.6m, which at the time resulted in a market share of 44.5%. The funding volume of p2p consumer lending has increased significantly through the years with €365.8m in 2015, €696.8m in 2016, and €1,392.4m in 2017, but so has the total market for crowdfunding in Europe and the World. Looking at the data presented above, many crowdfunding models have maintained their proportional market share, but after experiencing a decrease in market shares both in 2015 (down to 35.9% from 44.5%) and in 2016 (down to 33.8%), the market share of p2p consumer lending increased again in 2017 to 41.2%. In terms of year-on-year growth rates that translates to an impressive growth of 99.8% in 2017 from €696.8m to €1,392.1m, a growth rate of 90.5% in 2016 and a bit more modest (but still notable) growth rate of 33.2% in 2015. Here, it is worth noting that only 7 out of 14 crowdfunding models experienced positive growth in 2017, whereas all models experienced positive growth in both 2015 and 2016.
Looking at p2p consumer lending from a country perspective, the largest drivers of volumes in 2017 were Germany (€325m), France (€293m), and Georgia (€170m). Outside of Europe, p2p consumer lending was also the largest driver of volumes in both the Asia-Pacific region and the Americas region.
Invoice Trading in Europe
Invoice trading is a debt-based type of crowdfunding where individuals or funders purchase invoices or receivable notes from a business at a discount.
Coming from a very low base in 2014, invoice trading has shown remarkable growth rates in all years, and it is now the second largest driver of volumes in Europe with €535.8m and a market share of 15.9% in 2017 compared to €6.6m and a market share of 1.1% in 2014. This increase in volume happened through growth rates of 1115.5% to €80.6m in 2015, 212.5% to €251.9m in 2016, and 112.7% to €535.8m in 2017. In 2016, invoice trading accounted for 12.2% of the European crowdfunding market and was the third largest alternative finance model, but the continued growth has led to invoice trading overtaking p2p business lending for the second place. Invoice trading is closely linked to the crowdfunding model of p2p business lending, but the firms driving the largest volumes tend to operate only in invoice lending.
The countries with the largest volumes of invoice trading in 2017 were Italy (€139m), Ireland (€100m), and Belgium (€73m). Firms using invoice trading to raise funds predominantly came from the industries of manufacturing & engineering (20%) and transport & utilities (12%). With 46% of its funding coming from institutional investors, invoice trading had the highest percentage of its funding coming from institutional investors across the key crowdfunding models.
P2P Business Lending in Europe
Just like p2p consumer lending and invoice trading, peer-to-peer business lending is a debt-based crowdfunding model. P2P business lending can be defined as individuals or institutional funders providing a loan to a business borrower. It is also known as business crowdlending.
As mentioned above, p2p business lending dropped from the second to the third position in terms of overall market share in 2017, where it accounted for 13.8% of the European crowdfunding market raising €466.6m in funding. The market share of p2p business lending has been decreasing since 2015 going from 20.8% in 2015 to 17.0% in 2016 and finally to the beforementioned 13.8% in 2017. Even though p2p business lending showed a slowing down in terms of growth rate in 2017, where it “only” grew 33.3% compared to 65.0% the year before, the general trend seems to be pointing upwards. The decreasing market share can therefore in general terms be attributed to large increases in the overall market.
France, Netherlands, and Germany are leading countries when it comes to p2p business lending in Europe raising €88m, €86m, and €71m, respectively. When it comes to companies using p2p business lending to raise funds, this crowdfunding model is the most diverse in terms of industry. Here, the highest-ranking industry, Retail & Wholesale, only accounted for 7% of the volume, which means that a wide range of industries uses p2p business lending to raise funds.
You can read more about peer-to-peer business lending or business crowdlending in this article.
Real Estate Crowdfunding in Europe
Real estate crowdfunding can be both debt-based and equity-based and is provided by either individuals or institutional funders.
In 2017, real estate crowdfunding overtook both equity-based crowdfunding and reward-based crowdfunding and is now placed as number four in the overall market position with a market share of 7.7%. This happened after raising the volume to €258.8m in 2017 from €109.5m in 2016, which corresponded to a growth rate of 136.4%. An even more impressive growth rate took place in 2016, however, from a lower base. Here, volume increased by 305.8% from €27.0m and a market share of only 2.6% to a volume of 109.5m and a market share of 5.3%. Despite the impressive growth rates, real estate crowdfunding might still be underestimated as some equity-based crowdfunding platforms did not have a separate category for real estate crowdfunding. The trend for real estate crowdfunding, therefore, looks very positive.
The market leader in real estate crowdfunding in 2017 was Germany with a volume of €127m followed by France with €67m and Sweden with €48m. In terms of funders, real estate crowdfunding is distinguished from by other crowdfunding models by having almost only non-institutional funders. Thus, in 2017, only 2% of the funders in real estate crowdfunding were non-institutional (down from 9% in 2016). Not surprisingly, real estate crowdfunding attracts almost all their fundraising activities from firms in the Real Estate & Housing industry.
Equity-based Crowdfunding in Europe
In equity-based crowdfunding individuals or institutional funders purchase equity issued by a company.
Out of the 14 different finance models listed (including “Other”), equity-based crowdfunding was one of the five that experienced negative growth in 2017. The other models were reward-based crowdfunding (-16.8%), p2p property lending (-30.0%), balance sheet consumer lending (-82.1%), and profit sharing (-81.2%). Even though the growth rate of equity-based crowdfunding was only -3.5% this could be troubling when compared to the high growth rates of the four crowdfunding models placed above equity-based crowdfunding and the growth rate of the overall market. This is also reflected in the market share, where equity-based crowdfunding went from 10.6% in 2016 to 6.5% in 2017 leading to a drop in the overall market from #4 to #5. Likewise, this is the second year in a row equity-based crowdfunding is showing a decrease in growth rate going from 93.0% in 2015 to 37.2% in 2016.
Equity-based crowdfunding is one of the few finance models that does not have Germany or France as the market leader. Instead, Finland had the largest volume in 2017 with €51m followed by France with €48m and Sweden with €34m. The industries making use of equity-based crowdfunding are especially firms within Bio or Medical Tech as well as firms within Environment, Renewable Energy & Clean Tech, and Technology Software Developers & Service Providers. Looking at the onboarding rate, equity-based crowdfunding recorded the lowest rate of 6%, but as much as 81% of the fundraisers were successful in getting their funding.
Reward-based Crowdfunding in Europe
In reward-based crowdfunding, backers provide funding to individuals, projects, or companies in exchange for non-monetary rewards or products. Together with donation-based crowdfunding, reward-based crowdfunding can be distinguished from the other key crowdfunding models by not having an economic return for the funder/investor. Therefore, it does not belong to the category of crowd investing like crowdfunding models with an economic return.
As mentioned above, reward-based crowdfunding experienced a negative growth rate of -16.4% in 2017. Reward-based crowdfunding was placed as the second largest crowdfunding model in 2014 with a market share of 19.5% but has since dropped steadily through the ranks falling to #4 in 2015, #5 in 2016, and #6 in 2017 with a market share down to 4.7%. This might in part be explained by a shift towards donation-based crowdfunding that, even though placed as #10, has shown steady increases in growth rate since 2014. The donation-based crowdfunding model is usually more open to campaigns where it is not all or nothing for the fundraiser, which is more typical for reward-based crowdfunding, and this could possibly be a factor in such a shift. Also, there might be a crowding-out by crowd investing platforms which can typically raise larger sums.
The countries with the largest volumes in reward-based crowdfunding are France with €47m, Germany with €26m, and Switzerland with €15m. The industries most active as fundraisers were Cultural & Creative, Media & Publishing, and Charity & Philanthropy. Worth noting is also that reward-based crowdfunding had the highest proportion of successful female fundraisers and the second highest number of female funders.
Crowdfunding in Europe Compared to the Americas and the Asia-Pacific
Crowdfunding in Europe, both with and without the UK, is still a small market when viewed in a global context. As described above, the European market including the UK grew 36% in 2017 from €7.67 billion to €10.44 billion. Compared to a funding volume of €39.54 billion in the Americas region in 2017 and €320.90 billion in the Asia-Pacific region, the European number does not amount to much, but that might also leave room for further growth looking ahead.
Of the €10.44 billion funding volume in Europe, the UK was responsible for 68% or €7.06 billion. This means that the market of mainland Europe amounted to €3.37 billion in 2017. If we compare this number to the funding volume of mainland Europe in 2016 (€2.06) an interesting finding emerges, namely a regional growth rate of 63%. In a global context, this is the fastest regional growth rate compared to a growth rate of 48% in the Asia-Pacific region and a growth rate of 26% in the Americas region in the same period. Also, growing 79% on average annually between 2014-2017, the growth of Europe has been much steadier than the Americas region and the Asia-Pacific region.
It is worth noting that in the Americas region, the US accounted for over 96.5% of the funds raised, whereas China accounted for more than 99% in the Asia-Pacific region.