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For the past ten years in France, crowdfunding has enabled project leaders to raise money directly from their communities. What are the different types of crowdfunding? How does it actually work?

Crowdfunding: what is it?

Crowdfunding is direct funding by people. It helps you fund all your projects by leveraging communities and the general public through online platforms.

A brief history…

Crowdfunding existed long before the Internet! The Statue of Liberty, gifted by France to the United States in the 19th century, was in fact a present from over 100,000 citizens. Around that time, French workers with steady incomes such as teachers directly supported farmer and winegrower cooperatives. New technologies have simply allowed crowdfunding to grow and be accessible to all.

How does it work?

On a crowdfunding platform, a project creator calls on Internet users to help them realise their plan. To convince them, they draft a presentation page for their project. Then they set a goal in terms of the amount or unit to be reached to initiate or carry out the project. The rules of the game? Achieve this objective within a limited timeframe. If they fail to do so, all contributors are reimbursed. To ensure a successful campaign, the project leader must launch a broad communication push (using social networks, events, e-mails, etc.). They must first convince the people closest to them (friends, family, etc.) before targeting their acquaintances and finally try to conquer the general public.

Crowdfunding in France: key 2018 figures

Regarded as utopian ten years ago, crowdfunding has come a long way since! With €167 million raised in 2015, €234 million in 2016, €336 million in 2016, €336 million in 2017 and €402 million in 2018, crowdfunding platforms have become an irreplaceable tool for project leaders (source: Financement Participatif France, 2018).

Since 2009 on KissKissBankBank, over 20,000 projects have been funded by a community of 1.6 million positive and committed citizens.

Crowdfunding, crowdlending, crowdequity: what’s the difference?

There are three types of platforms for three types of fundraising: donation, loan and investment.

Crowdfunding: donation with or without compensation, and pre-order

When a creator launches a fundraising campaign, they present their project to Internet users who are able to support it with a donation. In exchange, the project leader can thank their micro-patrons with a reward adapted to the amount pledged.

For what types of projects?

Crowdfunding in the form of donations is particularly suitable for creative, associative and entrepreneurial projects. This fundraising method is also used by brands and companies to pre-sell new products, services and event tickets.

Crowdfunding donations in key figures

In 2018 in France, more than €81.5 million were donated to projects on crowdfunding platforms, with a total of 28,474 projects implemented last year.

Extra information

In 2007, the first French crowdfunding platform was launched with the aim of supporting musicians. Today, its scope has extended to all business sectors (sustainable development, solidarity, crafts, fashion, etc.) and society stakeholders (individuals, organisations, companies, local authorities, etc.)

Crowdlending: equity loan

On crowdlending platforms, individuals can lend money to the projects of their choice, with or without interest. On interest-bearing loan platforms, they receive in exchange for their loan  financial interest over a pre-determined repayment period. Gross interest rates can vary between 2.5 and 12.5% per annum depending on the type of project, associated risks, etc. For project leaders, this funding method is a genuine alternative or a complement to traditional bank loans.

For what types of projects?

Crowdlending is particularly suitable for projects of renewable energy players, real estate development or established companies wishing to grow their activity, recruit, carry out a communication campaign, etc.

Crowdlending in key figures

In 2018 in France, over €202.4 million were lent to projects on crowdlending platforms. As a result, 4,733 projects were successfully launched last year.

Extra information

In France, individuals have only been able to lend money with interest to companies since 2014. Before that, interest-bearing loans remained the monopoly of banks.

Crowdequity: capital investment

Individuals can invest in a company in exchange for an equity stake and thus become shareholders. The funds invested will help the company launch or expand. The remuneration of these micro-shareholders depends on the profits made by the company and subsequent dividends.

For what types of projects?

Crowdequity investment is particularly suitable for start-ups and young companies.

Crowdequity in key figures

In 2018 in France, €47.1 million were invested in companies in order to fund 174 projects.