Crowdfunding for Impact in Europe and the USA

This report has been prepared by the Toniic Institute in partnership with the European Crowdfunding Network. It seeks to frame the opportunity for cooperation between impact investing and the equity and debt crowdfunding sectors in the US and Europe.
Although many research papers focus on crowdfunding or impact investing, very few explore how crowdfunding can scale debt or equity impact investing. Yet there is a strong fit between the two–and there is an undeniable need and significant opportunity for social entrepreneurs to leverage online platforms to access investors, and for investors to access greater dealflow.More than one million campaigns are estimated to have raised $2.7 billlion worldwide across all types of crowdfunding platforms in 2012. This figure is expected to reach $5.1 billion in 2013, almost double the 2012 figure.  Given these trends, the impact investing community is showing interest in equity and/ or debt-based crowdfunding as a tool for harvesting more impact opportunities. This report illustrates the progress of crowdinvesting for impact in the EU and the USA, while also highlighting risks, regional regulatory differences and case studies of successful online impact investments.

Despite the challenges ahead, this report offers an optimistic outlook for the equity and debt crowdfunding sector, and about the possibilities for impact investors to operate successfully within this sector. In addition to broad compatibility in terms of geographic location and choice of financial instruments, the opportunity for investors is framed by certain key investment indicators which can be derived from the crowd: social proofing/proof of concept, product validation and market size. Of course, the risks and challenges
for investors and social entrepreneurs are significant. However, we expect these risks to be largely, although not entirely, mitigated through solid regulatory frameworks and a competitive environment for crowdfunding platforms enforcing principles of transparency, self-regulation and social and environmental responsibility.

In keeping with the principle of democratization of capital through crowdfunding, Toniic is pioneering the notion that equity or debt-based crowdfunding can be a tool to democratize impact investing.