Financing via the internet recorded a volume decline of 16 percent to a total of CHF 662 million in 2022. By contrast, the sub-sector of credit financing for SMEs has grown. This is shown by the Crowdfunding Monitor 2023 of the Lucerne University of Applied Sciences and Arts.
With a volume of CHF 662.4 million, the market fell short of last year’s record figure of CHF 791.8 million. Since the first crowdfunding platform was founded 15 years ago, around 3.7 billion francs have been brokered via the digital route in Switzerland.
A breather or a turning point?
For the first time in the history of crowdfunding in Switzerland, the market volume no longer recorded an increase in 2022. Compared to the record value of 2021, the volume fell by 16 percent. Nevertheless, the volume is still significantly above the value of 2020. According to the study authors, the increased interest rate level has also influenced the market growth somewhat. Higher interest rates tend to have an inhibiting effect on the demand for capital, e.g. in the area of crowdlending. When investing capital, investors are increasingly comparing the risks and returns of this asset class with the risk profiles of alternative investment opportunities. The study authors expect a similar volume for 2023 as in 2022 due to macroeconomic uncertainties (economic development, interest rate level).
Online credit market for SMEs grows
With the exception of corporate debt financing, the volumes of all crowdfunding segments declined. SME crowdfunding grew by 28 percent to CHF 141.9 million in 2022. Andreas Dietrich, co-author of the Crowdfunding Monitor, comments: ’Loans via platforms to SMEs have already been growing continuously for years. However, the market development of this segment was interrupted by the Covid crisis and the corresponding Covid loans in 2020. In this respect, SME financing is now back on its previous growth path’.
Adjusting screws for future growth
The HSLU study authors identify two areas that represent important prerequisites for future market growth. First, the involvement of institutional investors will be central to securing a more significant supply of capital. So far, it has not been possible to attract institutional investors to a significant extent. Andreas Dietrich comments: ’It still takes a lot of education for traditional financial institutions, venture capital firms and business angels, as well as traditional institutional investors, to recognize the potential of crowdfunding as an investment opportunity.’
Another decisive factor for the growth of capital demand is the level of awareness of crowdfunding as a source of financing. Especially in the area of debt financing (corporate loans, consumer loans), higher awareness and knowledge among potential borrowers could drive growth. Many companies refrain from applying for a loan from a bank despite the need for financing because they are concerned, for example, that the interest costs are too high or that they would not receive a loan. Using crowdlending as an alternative source of credit could help alleviate these concerns. In the area of consumer loans, many individuals may not yet have realized that crowdlending offers attractive interest rates compared to other options.
Four forms of crowdfunding
- Crowdsupporting : Mostly creative and cultural projects and campaigns from the sports sector. The investor receives a product, artistic work or service for his or her contribution. For example, those who fund a book receive a copy for free.
- Crowddonating : Majority donations to social, charitable and cultural projects that are not linked to any service in return.
- Crowdinvesting : Investment of equity or debt capital in companies (start-ups) or real estate. In return, investors receive a share of the profits.
- Crowdlending : Mediation of loans to companies or private individuals. In return, the donors receive interest payments, the amount of which depends on the risk of the capital borrower.
Crowdfunding Monitor 2023
The "Crowdfunding Monitor Switzerland" is conducted every year by the Institute of Financial Services IFZ of the Lucerne School of Business with the support of Swiss crowdfunding platforms. The following platforms supported the study in the form of data: Acredius, Bee-n-Bee Beedoo, Cashare, CG24 Group, Conda.ch, Creditworld, Crowd4cash, Crowdhouse, Crowdify, Dagobertinvest, Foxstone, Funders, Fundoo, I believe in you, Imvesters, Lend, Lokalhelden, Neocredit, Progettiamo, Raizers, SigImpact, Swisslending, Swisspeers, There for you, Wemakeit, Yeldo, and Yes We Farm.