Recently-introduced EU regulation affecting crowdfunding providers is shaking up the sector, increasing competition and allowing licensed platforms such as Oneplanetcrowd to raise funds internationally
“With the New Regulation on European Crowdfundig Service Providers (ECSP) now in place much more competition can be expected,” says Maarten de Jong, co-founder and CEO of the Dutch Oneplanetcrowd platform. “American crowdfunding parties will probably also become active in the European market. At the same time, due to the increased regulatory pressure, many smaller platforms will not make it or will be forced to cooperate with larger platforms.”
Oneplanetcrowd lends money from private investors to, what they call, “social-innovative and future-oriented companies”. The platform is part of financial group StartGreen Capital, and works with partners such as ASN Bank and Rabobank.
With the help of more than 43,000 investors and nearly 300 campaigns, the platform recently reached the milestone of €100m in raised capital.
Crowdfunding is increasingly gaining importance as an alternative form of financing, allowing large numbers of investors to back individual projects. For small and medium-sized companies, crowdfunding is not only a financial instrument, but frequently it also serves as an effective marketing tool to attract attention in the market or to test a business idea.
While sentiment among investors worldwide remains strongly negative due to the current economic and political uncertainty, many crowdfunding platforms have experienced impressive growth in recent years.
Oneplanetcrowd, which only focuses on impact-focused campaigns, has already attracted more capital in 2022 than in the entire previous year.
De Jong is aiming for €25m for this year. “That is a growth of 50% compared to last year. I think this shows that we are on the right track.”
Oneplanetcrowd provides loans to companies which already operating and with turnover and want to take the next step to grow, or to sustainable energy projects with relatively predictable cash flows.
The companies receiving finance are expected to generate enough cash flow during the term of the loan to repay the loan plus interest. The interest rate of this type of investments is generally between 4 to 10% , while the term of the loan is somewhere in between 1 to 10 years.
Among recent investments are relatively well-known names such as e-bikes firm VanMoof, sustainable smartphones Fairphone, and provider of natural soaps and cleaning products Seepje.
Yoni, a company that aims to revolutionise the ‘femcare’ business offering tampons and sanitary towels which are free of plastic or synthetic materials, is currently raising growth capital on the platform to finance its expansion plans, and it has almost reached its €1m fundraising target in a short period of time. A convertible loan gives investors the opportunity to become a shareholder in this fast-growing company at a discount within three years.
Oneplanetcrowd is one of the first crowdfunding platforms from an EU-member state to obtain a license under the ECSP regulation, a mandatory requirement to be able to offer cross-border crowdfunding services. Lendahand, another Dutch crowdsourcing platform, has also already qualified.
The ECSP Regulation, which came into force in November 2021, requires for new crowdfunding platforms to apply for a license to be able to offer their services across Europe, while existing platforms are allowed a transition period until November next year.
Crowdfunding providers need to be licensed by their national regulator and face extensive expenses – depending on their business model and maturity level – when applying for licenses and implementing the regulatory requirements.
“It is a lot of work, but worthwhile”, says De Jong. “I am convinced this will result in further professionalisation and quality improvement in the sector.”
The possibility of upscaling operations is one of the main advantages. Under Dutch law, Oneplanetcrowd is limited to a maximum of €2.5m fundraising target per campaign. However, under the new EU framework, the cap is €5m. De Jong adds: “Several of the scale-ups we focus on have international ambitions. Therefore, it is supportive that we can now raise more money in a European campaign, which at the same time allow the scale-ups to build an international community.”
Platforms that acquired the new ECSP license can facilitate trading of bonds and shares among their investors, making it possible for companies to raise longer-term finance to fund, for instance, the construction of renewable energy projects.
As a member of the board of Eurocrowd, the European Crowdfunding Network, Oneplanetcrowd already knows the European market well, says De Jong. “Now is the time to join forces, and this is actually happening. There is plenty of flirting. New consortia will be created, and also takeovers can be expected.”
De Jong expects Oneplanetcrowd to become a partner in a new European consortium at some point next year. “It will be a great advantage to be able to collect extra capital for Dutch companies all over Europe. I also believe that it will be quite attractive for people in the Netherlands to be able to invest in solar parks in Spain, as well as for French people to invest in German wind parks. That is all possible now. It really heralds a new era.”