Analysis of Italian Crowdfunding Market (November 2013)

Analysis of Italian Crowdfunding Platformsby Daniela Castrataro and Ivana Pais

Promoted by the Italian Crowdfunding Network

www.italiancrowdfunding.org

October 2013This work is published under a Creative Commons cc by-nc-sa 3.0 Unported Licence

Analysis of Italian Crowdfunding Platforms by Daniela Castrataro and Ivana Pais October 2013

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Contents

Composition of Italian Crowdfunding Market 4

Crowdfunding models in the Italian market 4

Descriptive list of Italian crowdfunding platforms 6

Active platforms 6 REWARD-BASED 6 DONATION-BASED 8 LENDING-BASED 9

Platforms in their launch phase 9 REWARD-BASED 9 EQUITY-BASED 10

Projects in Do It Yourself (DIY) Crowdfunding 12 PlatformsofferingDIYsolutions 12 Inactive platforms 12

The questionnaire 13

History and Geography of Italian crowdfunding platforms 13

GenesisofItaliancrowdfundingplatforms:motivationsandinfluences 14

Demographics 15

Legal form, partners and employees 15

KeyfiguresoftheItaliancrowdfundingmarket 16

Crowdfundingplatforms:successfeeandserviceoffer 17

Markets, target audience, competitors, collaboration networks 17

Main issues of the Italian crowdfunding market 18

The legal framework 19

What is crowdfunding? 21

Conclusions 24

Contacts and Credits 25


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Index of figures, tables and graphs

Fig.1 Italian Crowdfunding platforms’ models (Active platforms) 5 Fig.2 Crowdfunding platforms’ models (Active platforms/platforms in their launch phase) 5

Graph n.1 Italian crowdfunding platforms: Timeline 13

Fig. 3 Map of Italian Crowdfunding Platforms 14

Table n.1 Total value of funded projects divided by crowdfunding models 16

Fig. 4 Total value of funded projects divided by models 17

[*cover image: Election night crowd, Wellington. Raine, William Hall, 1892-1955 :Negatives of New Zealand towns and scenery, and Fiji. Ref: 1/2-066547-F. Alexander Turnbull Library, Wellington, New Zealand. http://natlib.govt.nz/records/22334852]


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Composition of Italian crowdfunding market

In Italy there are 41 crowdfunding platforms. As of 18 October 2013, 27 are active platforms are, while14areintheirlaunchingphase.Furthermore,thereisalsoanactiveplatformthatoffersDIY crowdfunding1 solutions and one in its launching phase, which, however, we preferred not to include in the count of the platforms.

6 platforms are considered no longer active as there has been no activity for - at least – all 2012.

Crowdfunding models in the Italian market

Wedecidedtoclassifytheplatformsbythemodelstraditionallyrecognisedinthefieldofcrowdfunding2, in such a way as to allow a comparison with the global market. However, Italian platforms show a greater complexity of models: hybrid platforms continue to grow and some models are not easily reconciled to those standards. In the descriptive list of platforms we have described more in depth the characteristics of each platform, but for the purposes of this section, we categorised the platforms in the 4 typical models:

» Reward-based » Donation-based » Equity-based » Lending-based

Of the 27 active platforms, 15 belong to the reward-based model, 9 to the donation-based model and 3 to the lending–based model. There are no equity based platforms active as yet3.

Regarding the platforms in their launching phase, 9 are equity-based (one of which is a hybrid platform,reward+equity)and5reward-based.Tothese,wecanaddanotherplatformthatoffersDIY crowdfunding solutions.

The dominant model is therefore the reward-based, representing more than 50% of current platforms. Together with the donation-based platforms these represent 89% of the platforms on the Italian crowdfunding market (see Fig. 1). This may change shortly. If we include the platforms intheprocessofbeinglaunched,then22%ofItalianplatformscouldoffertheequitymodel,achange driven by the recent regulation issued by CONSOB on July 124(fig.2).

Many platforms do not classify themselves in the traditional forms of crowdfunding and propose

1 DIY or Do It Yourself Crowdfunding is a rapidly emerging trend in the crowdfunding sector. In this model the crowdfunder decides not to use a third party or popular crowdfunding platform and chooses instead to run the entire project themselves.

2 See 2013CF, Crowdfunding Industry Report, Massolution, April 2013 (http://research.crowdsourcing.org/2013cf-crowdfunding-industry- report).

3Inlastyear’sreport,weincludedtwoplatformsintheEquity-Basedcategory,specificallySiamoSociandwearestarting.However,inlightofthenewregulation,theequity-basedcrowdfundingplatformsinItalyarenowdefinedbyConsob(seep.19),andthereforeat present no active platforms can be considered as such. In the paragraph “Descriptive list of Italian crowdfunding platforms” we will listallthoseplatformsthatdefinethemselvesas“equity-based”andarewaitingfortheapprovalintheCONSOBregister,includingwearestarting,whichwehadalreadylistedinApril2013report.AsforSiamoSoci,whichdefinesitselfasa“marketplaceforventures,”we are not aware of any intention of the portal to apply for inclusion in the CONSOB register and we have therefore decided to exclude it from this year’s report.

4 See pf. “Legal Framework”, p. 19

Analisi delle Piattaforme Italiane di Crowdfunding di Daniela Castrataro e Ivana Pais Ottobre 2013

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theirowndefinition:ProduzioniDalBassodoes“folkfunding”,Retedeldonodoes“personalfundraising”fornon-profitandTerzoValoredoes“crowd/socialbanking.”

Fig. 1 - Italian Crowdfunding platforms’ models (Active platforms)

Fig. 2 - Crowdfunding platforms’ models (Active platforms/platforms in their launch phase)

48.8% Reward-based

22%

Donation-based

7.3%

Lending-based

22%

Equity-based

20

9

3

9

11.1% Lending-based

33.3% Donation-based

55.6% Reward-based

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9

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Descriptive list of Italian Crowdfunding platforms

Active platformsREWARD-BASED

1. Com-Unity - www.com-unity.it (mixed model: Reward / Donation)Com-Unity is a generalist crowdfunding platform, mixed donation-reward model, owned by Banca InterprovincialeSpa,developedtogetherwithStudioSCOA,aconsultingfirm,andlaunchedin March 2013. It features projects of many kinds with particular reference to humanitarian, social,culturalandscientificareas.COM-Unityiscomposedofthreeindependententities:anEthics Committee, which evaluates projects verifying their legality; the Tutor, who expresses a binding opinion on the relevance and feasibility of projects and assists project holders across the publication of the draft and the fundraising phase; and the Bank, which manages the money donated to individual projects.

2. Crowdfunding-Italia - www.crowdfunding-italia.com

Crowdfunding-Italia is a generalist crowdfunding platform, founded in October 2012. Registration on Crowdfunding Italia is free and it does charge any commission on funds raised.

3. De Rev - www.derev.com (mixed model: Reward / Donation / Petitions)DeRev is “a platform that allows you to turn your best ideas into Revolutions in order to concretely improve the world we live in.” The platform hosts crowdfunding campaigns as well as petitions and signature collections for projects and initiatives of common interest. Founded by Roberto Esposito, the platform was launched in November 2012.

4. Distribuzioni dal basso - www.distribuzionidalbasso.com (Sectorspecific:CINEMA)Launched in April 2013, the goal of the editorial project is to support the circulation of independentfilmsanddocumentariesmadebythenewgenerationoffreelance,borninthewake of the phenomenon of Creative Commons and the new mechanisms of production-based crowdfunding.Allfilmsanddocumentariesincludedintheportalmeettheneedtobuildanewwayofmakingfilmsandinformation.Youcanrequesttitlesthroughaneconomicmechanismofdonation, which will at the same time support the management of the portal and give the right value to the works included in it.

5. Eppela - www.eppela.com

Eppela is a reward-based crowdfunding platform founded in the second half of 2011 by Nicola Lencioni.Itallowsthefinancingofinnovativeandcreativeprojectsinthefieldsofart,technology,film,design,music,comics,socialinnovation,writing,fashion,non-profit.

6. Finanziami il tuo futuro - www.finanziamiiltuofuturo.it (Local:Valled’Itria-Apulia)Finanziamiiltuofuturoisalocalcrowdfundingplatform,operatinginValled’ItriaintheSouthernItalian region Apulia, for the promotion and dissemination of new projects for the development of the territory. The platform was launched at the beginning of 2013 “from the need to integrate and revitalise the productive sectors of the local economy through innovation and the creativity of young people of the region”. It is aimed at people aged between 18 and 35 years old, living in the municipalities Alberobello (Ba), Cisternino (Br), Locorotondo (Ba), Martina Franca (Ta), Noci ( Ba ) andPutignano(Ba).ProjectholderscansubmitarequesttoraiseafixedamountofE10,000andfor the realisation of projects of a maximum duration of 12 months.


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7. Foritaly - www.foritaly.org (Sectorspecific:ART)For Italy was created to “help protect the beauty that our country holds, a fragile beauty that is likely to be overwhelmed by lack of attention or lack of resources.” It is a crowdfunding platform dedicated to raising funds for the arts.

8. IdeaGinger - www.ideaginger.wordpress.com (Local: Emilia Romagna)GINGER is a web platform aimed at creatives, companies and public institutions in Emilia Romagna to reduce the gap existing between these 3 players in the current world of work. The platform allows project holders to give visibility to their projects and products, and at the same time create a network of supporters and collaborations.

9. Kapipal - www.kapipal.com

KapipalwasfoundedbyAlbertoFalossiin2009anddefinesitselfasasitetocollectmoneyonline. This is a generic platform that allows you to fund any project, especially personal projects, suchasabirthdayoraweddinglist.Kapipalalsodefinesitselfasthefirstinternationalplatformto support personal crowdfunding. It does not charge any fees on projects. In July 2013 it was acquiredbytheinternationalgroupGrowVC.

10. Kendoo - www.kendoo.it (Local: Province of Bergamo)Kendoo is a crowdfunding platform that operates in the province of Bergamo, sponsored by Media on (of the Bergamo-based group Sesaab, which publishes the local newspaper “L’Eco di Bergamo”). It can be used to design, create and fund projects, according to the all-or-nothing model. The platform was launched in early 2013.

11. Microcreditartistique - www.microcreditartistique.com (Sectorspecific:ART)The mission of the platform “is to help those who have an idea for contemporary art and wants to achieve it.” Micro Crédit Artistique emerged from an idea of Mauro Defrancesco and focuses exclusively on contemporary art.

12. Musicraiser - www.musicraiser.com(Sectorspecific:MusicProjects)Musicraiser is a reward-based crowdfunding platform exclusively dedicated to music. Founded by bandMartaSuiTubi’svocalist,GiovanniGulino,andhispartnerDJandproducerTaniaVaruni,theplatform was launched in October 2012 and accepts fundraising projects for disks, promotional tours, music videos, concerts, and all music related projects.

13. Produzioni dal Basso PdB - www.produzionidalbasso.com

PdBwasthefirstcrowdfundingplatforminItaly,foundedin2005byAngeloRindone.Thepurpose of the platform is to “provide a space for all those who want to propose their own project through the system of bottom-up production.”Produzionidalbassoisfreeandeveryproposalismanagedindependentlyandwithoutanyintermediation.

14. Starteed - www.starteed.com

Starteed was founded in late 2011 by Claudio Bedino. The platform, launched in September 2012,isacrowdfundingsitethathelpspeopletofinancetheirideaswiththefinancialandsocialsupport of the Starteed community. The platform integrates the crowdfunding campaign with all the subsequent stages of the development and sale of the product, giving the creator the


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opportunity to sell their product on the platform itself and then put in place the royalty model.

15. TakeOff Crowdfunding - www.takeoffcrowdfunding.com

TakeOffisanItaliancrowdfundingplatformthathelpsdevelopandrealiseentrepreneurialideas,thankstothefinancialandsocialsupportofTakeOffcommunity.

Active platformsDONATION-BASED

16. BuonaCausa - www.buonacausa.org (Donation/Reward)BuonaCausa is the “ethic network dedicated to good causes and projects that require support.” The platform allows associations, testimonials, companies, donors and activists to collaborate on initiatives and projects of social value.

17. Commoon - www.commoon.it Commoonisacrowdfundingplatformtargetedprimarilyatthethirdsectorandnon-profitorganisations, “ideal for micro-enterprises, social cooperatives, non-governmental organisations, and micro-credit projects.”

18. Iodono - www.iodono.com

Iodonoisapersonalfundraisingsitefoundedinthefirsthalfof2010,andisthebrainchildofDirect Channel, a Milan-based company leader in database management in the publishing industryandonthenon-profitsector.Thegoalistoallowpeopletodonateonlinetoraisemoneyfornonprofitsandthecausesclosesttothem.

19. Let’s donation - www.letsdonation.com

Let’sdonationdefinesitselfasasolidaritysocialnetwork:aplatformforProfitandNon-Profitsto collaborate on the same project. Social Initiatives and crowdfunding are the underlying mechanisms to do this.

20. Leevia - www.leevia.com Leevia is a crowdfunding platform devoted to charity where companies sponsor projects initiated bynon-profit.

21. Oboli - www.oboli.org Oboli.orgisacrowdfundingplatformfornon-profitprojectsconceivedandpromotedbythenon-profitorganisationOboli.ThefundraisertakesplaceinObolicurrency,creditsareconvertedintoeuroatthedateofexpirationoftheprojectsandaredonatedtonon-profitorganisations.

22. Pubblico Bene - www.pubblicobene.it

Pubblico Bene is an experimental project of investigative journalism funded by the readers. It was born in December 2011, thanks to the contribution of the GECO project, funded by Emilia Romagna. The platform promotes “a new model for independent information, on a local basis, modelled on community funded reporting”.


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23. Retedeldono - www.retedeldono.it

Retedeldono is a web platform for the collection of donations towards socially useful projects, designedandmanagedbynon-profitorganisations.Foundedin2011byAnnaMariaSiccardiandValeriaVitali,itaimstospreadthepracticeofpersonalfundraisingacrosstheItalianculture.

24. ShinyNote - www.shinynote.com

ShinyNotewasfoundedin2009fromanideaofRobertoBassoandFabrizioTrentin,inBrescia.TheofficiallaunchoftheplatformwasinMarch2011.ShinyNoteisrootedintheideaandthepurposeof“meetingtheneedsofindividualstofindasharedspaceofaffectiveandemotionalexpression.”Theplatformisasharedspacebetweennon-profitorganisationsandordinarycitizens/users,whotellpositivestoriesaboutordinarypeopleandfundsolidarityprojects.

Active platformsLENDING-BASED

25. Prestiamoci - www.prestiamoci.com

Prestiamoci,ItalianP2Pplatform,wasfoundedin2010byMarianoCarozzi,PaoloGalvaniandGiovanni Tarditi, entrepreneurs with important national and international experiences in theworldofbankingandfinance.“Prestiamociaimstopromotetheexchangeofmoneybetweenindividuals, without the intermediation of banks or other lending institutions.” The platform activity is currently suspended.

26. Smartika – www.smartika.it

Smartika arrived in Italy in 2007 as Zopa Italy. After a few years, Zopa and Zopa Italy ended the franchise agreement which allowed Zopa Italy to use the Zopa branding. In 2012, Zopa Italy’s operationsrebrandedunderthenameSmartika.ManagedbyMaurizioSellaandtherestoftheteamthatbroughtZopatoItaly,itofferstheopportunitytodosociallendinginItaly,asregulatedand supervised by the Bank of Italy in order to protect users.

27. Terzo Valore - www.terzovalore.com (Social Banking - Lending / Donation)TheplatformdefinesitselfasSocialbanking,butitisincludedinthisgroupforthepurposesofthisreport,astheservicesitoffersfallmostlyinthisarea.TerzoValoreisaserviceofBancaProssima, the Bank of Intesa Sanpaolo Group dedicated to the Third Sector. It is a crowdfunding servicethroughwhichindividuals(residentinItaly)andlegalentities(withregisteredofficeinItaly)canlendordonatedirectlytonon-profitorganisationswhoareclientsofBancaProssima.TheBankselectstheprojectsandfinancesatleast33%ofeachselectedoneplusthedifferencethatis not collected through crowdfunding. Project holders set an interest rate, but lenders can reduce it, cancel it or decide to donate the sum. Loan repayment is guaranteed by the bank itself.

Platforms being launchedREWARD-BASED

1. Cineama - www.cineama.it(Sectorspecific:filmprojects)Cineama is a platform and a community dedicated to cinema and open to professionals, creativesandfilmfans.Theplatform-foundedin2011byTaniaInnamorati,FedericoBo,Antonio


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Badalamenti,FabrizioMoscaandSavinaNeirotti-combinescrowdsourcing,andwillsooninclude crowdfunding. It directly involves cinema lovers in the early stages of creation, production, promotionanddistributionoffilms,documentaries,shortfilms,andwebseries.

2. Mabita - www.mabita.it(Sectorspecific:CraftsMadeinItaly)Conceivedinearly2013,itisexpectedtolaunchbyDecember2013.Itdefinesitselfasthefirstcrowdfunding platform dedicated to crafts made in Italy.

3. Polisfund - www.polisfund.altervista.org (Civic Crowdfunding) Founded in June 2013, it is expected to launch in November 2013. It is a site of civic crowdsourcingandcrowdfundingandthebrainchildofDamianoOberoffer,ayounglocaladministrator in Piemonte, with the same desire shared by many: do something useful for their own community.

4. Schoolraising - www.schoolraising.it (Sectorspecific:School)ThefirstcrowdfundingplatformforItalianschools.

5. WeRealize - www.werealize.it (Sectorspecific:Design)Werealize.itisacrowdfundingplatformthatallowsdesignersandmakerstolaunchinnovativeandoriginal products, never traded before.

Platforms being launchedEQUITY-BASED

6. Agis.co (exSiliconVeneto) - www.agis.co

It is a platform that allows you to design and develop startup incubators according to new methods.Amongthesteps,itincludesequity-basedcrowdfundingasafinancingmethod.

7. CrowdfundMe – www.crowdfundme.it

Crowdfundme.it is a portal of equity-based crowdfunding, waiting to be included in the CONSOB register of operators. CrowdFundMe will facilitate the encounter and dialogue between entrepreneur and investor.

8. Fundera - www.fundera.it

FunderaisthefirstItaliancrowdfundingplatformdedicatedtorenewableenergyefficiencyandsustainable mobility. Founded in March 2013, it is expected to launch in March 2014.

9. Opsidea - www.opsidea.it (mixed model: Equity / Reward)FoundedinApril2013,itisexpectedtolaunchattheendof2013.Itisaplatformthatoffersboth the reward model, and the equity. Initiatives published on the platform relate mainly to the promotionofaspecificareaofSouthernItaly.

10. Starsup - www.starsup.it

Designed at the end of 2012, the launch is scheduled for the end of 2013. It is an online portal for


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thecollectionofriskcapitalbyinnovativeorsocialvocationstart-ups.Itwasthefirstoperatortobe included in the CONSOB register.

11. Startify - www.startify.it Startify.it is a platform for equity crowdfunding projects aimed at entrepreneurial startups.

12. Startzai - www.startzai.com StartzaiisastartupthatdealswithCrowdfundingforinnovativestartupsintheregionofMarche.Itispartofalargerproject(WeVenture)thatalsoincludestheCaspitalportalforcultural,socialand artistic initiatives.

13. Unicaseed - (website not available)

Itistheequity-basedcrowdfundingportalofthefinancialintermediaryUNICASIM,basedinGenoaandportalmanager“bylaw”accordingtoCONSOBRegulation,thefirstonetobeincluded in the special register of CONSOB. Launch is scheduled for December 2013.

14. We Are Starting - www.wearestarting.com

We are starting is an Equity-based Crowdfunding platform founded in March 2013, with “the goal of giving visibility to entrepreneurs with bright ideas.” It is in the analysis phase of the process of inclusion in the CONSOB register.


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Do It Yourself (DIY) Crowdfunding Projects

DIY Crowdfunding has also begun to establish itself in Italy. In the previous section we mentioned twoexamplesofplatformsthatofferwhite-labelsolutionsforcrowdfundingportals.Inthissectionwe include instead crowdfunding projects carried out on their own websites rather than on a publiccrowdfundingplatform.Belowwelistedthemostsignificantprojectsofrecentmonthsthatcompleted successfully

Acquista con noi un pezzo di Storia (Buy with us a piece of History)-PalazzoMadama(Torino)www.palazzomadamatorino.it/crowdfunding

ThecampaignwascarriedoutbyPalazzoMadamainTurinin2monthsanditraised€89,409.49,surpassingthetargetof€80,000.ItsaimwastobringbacktoTurinaporcelainservicewhichbelongedtothed’Azegliofamily.Itwasareward-basedcrowdfundingcampaign:inreturnfortheiroffers,backersreceivedtheirrewards(ticketstothemuseum,acknowledgments,etc.).

viceversa - Italian Pavilion at the 55. International Art Exhibition -VeniceBiennalewww.viceversa2013.org/it/crowdfunding-artisti-opere-arte

This was a fundraiser to support the production of the works of the artists featured in the exhibition“viceversa”,atthe55thVeniceBiennale.Thefundraiser,organisedasareward-basedcampaign,hadatotaldurationof90days,andcompletedinMay2012havingraised€178.562.

Platforms offering DIY solutions

Starteed Platform - www.platform.starteed.com

Crowdfunding Lab - www.crowdfundinglab.it (not launched)

Inactive platforms

Boober - www.boober.it Boomstarter - www.boomstarter.com

h2raise - (site not available)

Fund For Culture - www.fundforculture.org

FundTo - (site not available)

youcapital - www.youcapital.it


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The questionnaire

30 platforms, 21 of which are active and 9 are being launched, responded to our questionnaire, sent out in October 2013.

History and geography of Italian Crowdfunding Platforms

CrowdfundinginItalybeganin2005withProduzionidalBasso.Whilstotherpioneeringprojectsfollowed its real growth occurred in 2011 when 10 portals were launched with a further 5 in 2012. But the real peak was recorded over the past year: since January 2013, 24 new platforms have been born and Do It Yourself projects have become popular.

Graph 1: Italian crowdfunding platforms: Timeline


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Most of the platforms have their headquarters in northern Italy, but not necessarily in large cities. Compared to the geographical spread of 2012, we note the emergence of some platforms in southern Italy. One platform is based in London, where the founder lives.

Genesis of Italian crowdfunding platforms: motivations and influences

The idea of opening a platform came mainly from the growing awareness of the foreign experience (mostly American, but also European in the last year) and the desire to replicate them in our country. Platform holders’ answers included: “From an idea of a collaborative platform around ideas and projects, I discovered American crowdfunding and I was fascinated by it. I immediately realised that it could be a revolution, made possible thanks to the evolution of social networks, which could also make many developments possible in the Old Continent”, “Italian platforms are not well-known and are not free. [Our platform] was born exclusively for charitable purposesandit’sfree”;“anexperienceasthefirstsociallendingintheworld”,“studyingaforeignplatform.”

Somewerefoundedwithprecisegoalssuchas“theneedonthenon-profitsparttomaketheirprojectsfinanciallysustainableandtoengagetheirsupportersinanewandloyalway.”ProduzioniDalBassoisabitdifferent,inthatitwasfoundedmuchearlierthantherestofnationalandglobalplatforms,“observingthefirstchangesininformaticsandself-production.”“In2005thetermcrowdfundingdidn’texist,soIcameupwiththeideaofahorizontalsystemtosupport

Fig. 3 Map of Italian Crowdfunding Platformshttps://mapsengine.google.com/map/edit?mid=zqNLwfXXtVsA.ky63pyptYYx4


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self-productions. The idea originated in the Italian hacking environment”, as the founder said. Some platforms originated from a careful analysis of the market and target audience, but most weremovedbythedesiretoofferanalternativetotraditionalfinancialinstitutions;asolutiontotheeconomiccrisis,thecreditcrunchfrombankstobusinesses;theconsequentdifficultyoffindingpublicandprivatefunding;theuncertaintiesonthetaxcredit;theunfavourablesituationfor startups and innovation in Italy. Another motivation is to try and do something useful for the community.

Forsomefinancialprofessionalsnowactiveincrowdfunding,itisaboutescapingfromthenormalcanonsoftraditionalfinancialbusiness.

Demographics

Founders and members are between 30 and 50 year-old, although the average age falls when it comes to reward-based platforms, where more than half of the members are younger than 35. The founders have gained professional experience in the areas of activity of their platforms or, to a lesser extent, in communication. Over 70% have a degree equivalent or higher to graduate.

The presence of women is on the rise: they are among the partners in half of the platforms and two platforms were set up only by women.

Legal form, partners and employees

Of the 9 soon to launch platforms interviewed, 4 have not a legal form yet, while three are already a Srl (equivalent of an Ltd., NT), one is currently managed by a limited company, and one is a financialintermediarythatwillmanageitsequity-basedplatform.Theexpectedandplannedlegalform for most new platforms is Srl.

As for the active platforms surveyed, 7 platforms do not have a legal status as a business, and theirownersareVATregisteredassoletraders,3platformsarebeingmanagedbyanothercompany (a private limited company and two banks), 7 Srl, 2 Spa or corporation (lending-based), 1 Limited Company based in the UK. One platform did not responded to this question. Srl is the prevailing form, but almost one third of the active platforms have chosen not to register with the companies register. The number of platforms managed by other companies has dropped in comparison to last year.

As for the 6 equity-based platforms that answered to the questionnaire, 3 said they had applied to CONSOB to be included in the register of operators (see paragraph “The legal framework”), while 3 said they had only just begun looking into this process.

As for the number of business partners, not taking into account the platforms managed by banksorfinancialintermediaries,theaverageisaround5partnersperplatform.Thereare3platforms with only 1 partner, therefore sole businesses, and only three platforms with a number of members equal to or greater than 10, one of which has as many as 30. As for permanent employees, current or foreseen by the platforms being launched, the average is about 3 per platform, but almost half of the platforms have only one employee. In many cases, the founders themselves work full-time on the platform. Fixed employees are on average 1.7, while the average of temporary employees is 1.5. However, half of the platforms surveyed did not have any employees.


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Key figures of the Italian Crowdfunding Market

Pending the arrival of equity crowdfunding in Italy, this section only includes Reward, donation and lending models”

Some 52,000 projects received have been launched since crowdfunding emerged in Italy, of which 66% were received by lending-based platforms, 30% by reward-based and only 4% by donation-based platforms. Of those 15,000 have been approved/published: 58% of published projects are reward-based, 30% are lending-based and donation-based projects reach a 12%. The number of projects in Italy is therefore increasing but still limited, especially considering the highnumberofactiveplatforms.Theofferseemstogrowfasterthanthedemand.Thesuccessrate is 54% in lending-based projects, 44% in donation-based and 24% in reward-based.

According to Massolution data, in 2012 $2,7 billion was raised worldwide through crowdfunding platforms. The European total for 2012 was $945 million.InItaly,thetotalvalueofprojectsfundedthroughtheplatformssurveyedamountedtoalmost€23million($31,687,100),ofwhichmorethan€11million($15,149,200)havebeencollectedoverthe last twelve months (October 2012 - October 2013), and to which lending-based platforms significantlycontributed(80%).Sociallendingplatformsalsohavethehighestgrowthrates,inlinewith international trends.

Lending-basedcrowdfundingrecordsthehighestaveragevalueoffinancedprojects(€7,892,morethanthedoubleoftheworldaverage,€3,433)pushedupbylendinginitiativespromotedbynon-profitassociations.Reward-basedprojectscollectonaverage€1,636(similartotheworldaverageof€1,680),whiledonation-basedprojectswintheinternationalcomparisonwith€1,501(vs.€1,023).

Table n.1 Total value of funded projects divided by crowdfunding models

Model Proposed projects

Published projects

% success average Total raised

Total raised in the last year

Average project value

Reward-based 15.390 8.533 24% €3.340.178 €2.613.473 €1.636

Donation 1.937 1.768 44% €1.164.400 €919.400 €1.501

Lending-based 34.747 4.311 54% €18.443.000 €8.138.500 €7.892

TOTAL 52.074 14.612 € 22.947.578 € 11.671.373

Analisi delle Piattaforme Italiane di Crowdfunding di Daniela Castrataro e Ivana Pais Ottobre 2013

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Fig. 4 Total value of funded projects divided by models

14.6%5.1%

80.4%

€1.164.400 Donation-based

€18.443.000 Lending-based

€3.340.178 Reward-based

Crowdfunding platforms: success fees and service offer

Overaquarterofrespondentplatformsoffertheirservicesforfree,i.e.theydonottakeanypercentageoffsuccessfulprojectsnorimposeafeeforpublishingtheproject.Theremainingplatforms ask for a success fee that on average is equal to 6.5% of the total raised, from a minimum of 2.5 % up to touch peaks of 10-15%.

Atpresentthemajorityofplatformsdonotofferanyadditionalservicefee,butmanyplantodosoin the coming months.Theplatformsoperatedbybanksorfinancialinstitutionshandlealltransactionsforcollectionofoffersandloans,repaymentofloanstoindividualproviders,andtaxation.

Typicalservicesofferedbytheplatforms,whichinsomecasesattractfees,includeprivateQ&Aarea for users and backers, forums that bring donors and project holders together; tutoring and mentoring before, during and after the crowdfunding campaign (incl. advice on producing a video and promotional materials, communication management, events with the physical presence of staffduringthefundraiser);crowdsourcing;signaturecollection/petitions;appsusingFacebookand Twitter to promote the project and showing trends in real time on such networks.

Markets, target audience, competitors, collaboration networks

The target market is predominantly domestic, with the exception of four platforms that also target the European market and two the market outside Europe.All platforms are aimed at individuals, who can publish their projects. Over 60% of the portals are also targeted to businesses and associations, 36% to PA.

Most platforms consider other platforms as key competitors be they at a national (50%) or internationallevel(30%),butalsoinbanksandfinancialintermediaries(20%).Only30%ofplatforms see international platforms as competitors. The vast majority sees other national platforms as competitors and, in the case of equity and lending, also venture capitalists and banksandfinancialinstitutions.Adonationplatform,withouttoomuchirony,answeredthatthey


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see the priest as a competitor.

Collaborative networks between participants in the sector are very diverse. Just over half of the platformshaveestablishedinformalpartnershipswithotherorganizations/companies,particularlylawfirms,companiesactiveinthesectorofactivityoftheplatformitself,startupsassociations,universities,municipalities,incubators,banks,radioorTVstations,consultancies.Theexchangesrelatemainlytocustomerinformation,marketinformation,informationtechnology,financialresources,technology,institutionalpartnershipsand,inafewcases,communicationandstaff.

Less than a third of platforms have entered into formal cooperation agreements. In addition to the exchange of information (about customers, markets, technology and enterprise management), theseagreementsareaimedattheacquisitionoffinancialresources.

Main issues in the Italian Crowdfunding market

According to the platforms the main problems are related to the absence of a culture of crowdfunding in Italy, both at the level of donors and of project holders (especially in the non-profitsector).Theplatforms,bycomparisontolastyear,aremuchmoreactiveinaddressingthis problem by organising events, conferences, media campaigns, gathering in networks and associations, all aimed at spreading the culture of crowdfunding at a national level. Some platforms work particularly closely with project holders and organise events and meetings, online andoffline;providematerialsontheirplatformandingeneraldoawareness-raisingactivitiesonthe subject. The most recently launched platforms are more sensitive to this problem and more active in attempting to solve it.

More latterly, the inability to distinguish between reward and equity based models arose as a resultoftheextensivemediaexposurethatthelatterhashadattheexpenseofthefirst.

Thelackofconfidenceofpotentialinvestorsinthecrowdfundingsystemisstillanissue.Furthermore, there are structural problems such as the Italian digital divide, especially in peripheral areas.

IthasalsobeenreportedaproblemataculturallevelthatseemstobespecificofItaly,theexcessive individualism present in the territory, “probably a cultural heritage that limits the openness to sharing and cooperation” commented one of the platform owners, and the reluctance to donate unless there is an economic return. In fact, some platforms are concerned aboutbeingabletofindprojectsthatcanprovideattractivereturnstogivepeoplereasonstodonate or invest that go beyond enthusiasm and participation.

Much like last year, the issue of payment services on the site and the monopoly of Paypal is still present.

Manyplatformsarefindingthattherelativelownumberofprojectsresultsinlowrevenuesfromfees and consequently many are unable to make the preferred level of investment, and many platform operators have, by necessity, alternative income sources.”

Amongtheissuesthataremorespecifictocertainmodelsofcrowdfunding,Equitybasedplatforms’ownerarefindingitmoredifficultthanexpectedtofindthelegallyrequiredfinancialintermediary service providers to operate according to the requirements of CONSOB Regulation.


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The legal framework

The only crowdfunding model currently regulated by Italian law is equity-based crowdfunding. Crowdfunding legislation has been included in the Law Decree 179 of 18 October 2012 (known asGrowthDecree2.0),specificallyinArticles50-100-teroftheConsolidatedLawonFinance,which govern, respectively, the “Management of portals for raising capital for innovative start-ups”andthe“Offersthroughonlineportalsforraisingcapital”andithasdelegatedtheCONSOBto adopt the implementing provisions.

On 29/03/2013 the CONSOB, after little more than the 90 days provided for the implementation of the provision of the decree, published the Regulation implementing art. 30 of the Law Decree n. 179/2012, which introduced equity-based crowdfunding (“the widespread collection of venture capital through online portals”) in the Italian Financial Services Act. After a period of public consultation, the regulation on the “Collection of venture capital for innovative start-ups through online portals” (equity crowdfunding) was published on 12 July 2013 and entered into force on 27 July 2013.ItalyisthefirstcountryinEuropetoadoptsuchlegislation.TheRegulation,whichconsistsof25articles, is divided into three parts dealing respectively with: general provisions; registration and disciplineofportalmanagers;andthedisciplineofoffersthroughportals.Attachedtothetextare:the instructions for submitting the application for inclusion in the register of operators; scheme of the report on corporate and organisational structure, template for the publication of “Information onindividualoffers”thatinclude,amongotherthings,awarning,informationontherisks,theissuer,financialinstrumentsandsupply.

The following are the main points of the Regulation:

» Theportalswillallowthecollectionofcapitalupto€5million. » Itisonlyforinnovativestartups,asdefinedinthesamedecree. » It is only for risk capital and not debt capital, therefore equities, but also - an

absolute novelty in the rules of the Italian Civil Code – shares in Srl companies (Italian equivalent of Ltd’s).

» It includes a set of rules and requisites for online platforms managers, in order to reduce operational and legal risks, and the risk of litigation and fraud. In this regard, it has been established a register for portal managers, which includes a specialsectionreservedformanagersbylaw(banksandfinancialoperators).Banksandfinancialintermediariescanmanageonlineportalwithoutregistration,however they have an obligation to inform CONSOB and they will be included in a special section of the register for the purpose of transparency.

» It introduces the constraint of the presence of professional investors who must signatleast5%oftheoffer.

» Theoperatormusttransmitorderstobanksandinvestmentfirmsthatoperatein relation to investors in compliance with the applicable provisions of Part II of the Act and its implementing regulations (MiFID). The rule mentioned above does notapplyiftheinvestmentislessthan€500and€1000peryearforinvestmentsmadebyindividuals,and€5000and€10000perannumforlegalentities.

Reward and donation based crowdfunding fall under the legislation for donations.

Social lending platforms are recognised and regulated by the Bank of Italy.


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Regarding the expectations and concerns about the implementing rules for crowdfunding in Italy, a fairly widespread fear among platforms managers is that the rules will become too tight constraintsandthebureaucracywillstifleasystemthatbyitsnatureshouldbelean(althoughof course protected and transparent). According to some platforms, the role assigned to the intermediaries and the requirements of integrity and professionalism of those who perform administrative tasks, management and control of risk “will transform crowdfunding in a mere segmentofthefinancialmarketandnotinanewmarketwithnewpartners”.

“It must be open to new subjects and not to the same system that caused the economic and social crisis of our country. Crowdfunding should be conceived as an alternative to the current credit system and not as an innovative revival of it”, declared one of the platform owners.

In addition, platforms are sensitive to the problems of governance of companies that raise funds using equity crowdfunding, and to the low limits of annual investment, “beyond which MiFID checksmustbeperformed,withtheinvolvementofbanksorinvestmentfirmsthatcouldburdentheinvestmentprocesswithintheportals,whichwouldneedextremefluiditytoworkattheirbest.”

Many people hope that equity crowdfunding will be extended to all kinds of companies and projects, not just to innovative startups and as participatory tools to venture capital, and that the investment thresholds exempt from MiFID will be raised. In particular, they wish for the facilitation of SRL equities’ exchange.

Crowdfunding owners wish for a review of the current legislation relating to crowdfunding so that it can be applied to all other entities that are not innovative startups.

Some platform owners wish for further tax breaks for those who invest in projects belonging to certain categories or those who favour them (e.g. awards to municipalities that promote civic crowdfunding) or in general tax-deductibility for donations made by companies and individuals. Someonecallsfortheestablishmentofaregistertoprotectusers,orformsofcertification.

Some platform owners consider it appropriate “to prohibit the development of crowdfunding platformsmanagedbybanks,sofacilitatingeffectivecompetitiononthecreditmarket.”

“More than a regulation, the market would require a deregulation”, declared one of the respondents.

Specificallyforthesociallending,platformsurgefor:

» the elimination of tax penalties for lenders who, although making a socially useful action, are taxed on the interests at an IRPEF (personal income tax, TN) rate with mandatory inclusion in the tax return (“if not favoured, it would already beacceptableawithholdingtaxof20%likeithappensforotherfinancialinvestments”).

» ability for legal entities to lend, as it is happening in social lending around the world. This would favour the satisfaction of the demand for loans, which at times cannot be paid because of lack of funds1.

1IthasbeenbroughttoourattentionthatonTerzoValorelegalentitiescanlendmoneyuptoa“globalloanportfolio”of€50,000.


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What is crowdfunding?

Weaskedthosewhofilledoutthequestionnairetogiveusaconcisedefinitionofcrowdfunding.

Here are the answers:

» It is that activity that, through the typical tools of social networking, can transform a donor in a promoter of a real fundraising.

» Abottom-upapproachtofinancingprojects. » The voice of the networks. » Forthenon-profitsector,crowdfundingisanopportunitytopresentthemselves

in an innovative way by focusing on the emotions and being able to expand their network of donors.

» Opportunities for growth and development. » An ideal model to fund ideas and to stimulate the desire to do business. » Equitycrowdfundingrepresentsaparadigmshiftintheworldofcorporatefinance,

which becomes transparent, accessible to anyone, diverse and meritocratic. » Crowdfunding is like a boat show: all the goods on display have the word “boat”

incommon,thenit’sdowntoyoutofigureoutifaboatandashipactuallyhavesomething in common.

» Collecting money to fund individuals, projects, products or economic activities through contributions from a large number of sources.

» Inafinance-orientedera(perhapsnotforlong),it’sanopportunitytorediscoverthe real economy through the digital world.

» Analternativetotraditionalfinancingchannels.Supportinganideawithmanysmallcontributionsthattogethermakethedifference.

» Minimalist fundraising, market testing, community management, regional development, communication.

» Financing system that uses the Web as a tool to share projects and integrate donations for the realisation of them.

» A transparent and direct participatory tool to enhance and guide the funding of projects and innovative ideas or with a strong emotional impact by designing and directly to lenders the idea and the wished results of a project. A tool to bring out the best ideas or to strengthen the sense of community and mutuality both within local networks and the global ones.

» Promotionoftheraisingoffinancialresourcesdirectlyrelatedtothepurposeofthe funding itself.

» The ability for individuals to contribute to the implementation of projects through the provision of sums of money that can also be remunerated and returned at a point in time.

» Newfinancialdynamicforthesponsorshipofprojects. » A superstructure of social networking. » We do crowdfunding as if it were a two-dimensional fundraising: the web, which

is virtual, says to the reality (through public presentation of the proposal, chat with


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friends) that what is virtual is true. » Interestingly, the idea of planning occurs just as much as the idea of funding, with

attention to the participatory processes that convey it.

Finally, we asked the platforms to describe their most interesting project. We report a selection of them:

1) Completiamo La Città nella Città: un luogo di incontro tra persone (Let’s complete The City within the City: a meeting point for people),TerzoValore.AprojectbyFondazioneCometaforacareandeducationspaceforyoungpeopleandfamilies.Totalraised:€900,000(ofwhich€600,000viacrowdfunding).https://www.terzovalore.com/terzovalore/progetti/dettaglio?idProgetto=341

2) E fu sera e fu mattina,Produzionidalbasso.FilmbyEmanueleCaruso.Totalraised:€70,000.http://www.produzionidalbasso.com/pdb_534.html

3) End Polio Now, Rete del Dono.AcampaignbyRotaryFoundationagainstpolio.Totalraised:€28,789.http://retedeldono.it/progetti/rotary-international-distretto-2080/end-polio-now

4) Vdb23/nulla è andato perso, Musicraiser.MusicprojectbyGianniMaraccolowithClaudioRocchi.Totalraised:€27,446.http://www.musicraiser.com/it/projects/427-vdb23nulla-e-andato-perso

5) Genovag8, Buona Causa.FundraisingforthepeoplecondemnedfortheG8inGenoa.Totalraised:€13,212.http://www.buonacausa.org/genovag8

6) Un giardino per la scuola di Medolla, Com-unity. (A Garden for Medolla School)Project for the realisation of a garden in the 0-6 year-old school in Medolla municipality, entirely builtaftertheearthquake.Totalraised:€11,010.http://www.com-unity.it/projects/un-giardino-per-la-scuola-di-medolla/

7) Santiago non molla, Shinynote.Campaign for the reconstruction of the municipality of Sant’Agostino in the Ferrara province, after theearthquakeofthe20thofMay2012.Totalraised:€8,500.http://www.shinynote.com/story/santiago-non-molla-530

8) Social market di Milano, Crowdfunding Italia.Fundingof400shopstostartthesocialmarketinMilan.Totalraised:€8,020.http://crowdfunding-italia.com/projects/400-spese-da-e-20-luna-per-aprire-il-primo-social-market-dii-


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milano/

9) BERGAMO! Save the globes, Kendoo.AprojectbytheFAIinBergamofortherestorationofthetwoGlobesbyVincenzoMariaCoronelliconservedintheCivicaBibliotecaAngeloMai.Totalraised:€6,000.http://www.kendoo.it/fondi/detail/126/

10) Nicky’s team, Io Dono.PersonalfundraisingsupportingtheNGOAbbraccio.Totalraised:€5,085.http://www.iodono.com/nicky’steam

11) H2A Amianto a chilometro zero, Pubblico Bene.Documentary on the presence of asbestos in the pipes of the city of Bologna. Total raised: €1,528.http://www.pubblicobene.it/pitches/32-h2a-amianto-a-chilometro-zero/details


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Conclusions

Italian crowdfunding recorded a visible growth over the past year. The number of active platforms more than doubled in 2013 as did the total raised. But it is still a small sum by comparison to the totalraisedglobally,indicatingthattheofferisperhapsoutpacingdemandinourcountry.Thereis a large imbalance in the models: over 80% of the total is collected by social lending platforms, while the donation-based and reward-based platforms share the rest, perhaps indicating that in Italy there is openness to these funding models but at the same time a certain reticence towards funding when you do not have a “tangible” reward. The high percentage of proposed projects that are turned down by platforms, particularly in the reward based model, would seem to indicate a mismatch between the expectations of platforms and the preparedness of project holders. Plat-forms continue to express concern at what they see as a lack of knowledge of crowdfunding on all levels. The good news is that this year, unlike last year, the platforms themselves, especially theyoungerones,areveryactiveintheireducatorrole,organizingevents,initiativesandprovidingresources of various types on their portals.

ThenumberofcrowdfundingrelatedeventshasincreasedsignificantlyandcrowdfundinginrecentmonthshasmadeanappearanceontheradioandevenonnationalTV,specificallyontheTG1 on 20 October 2013, a date that somehow marks the entrance of the word “crowdfunding” into Italian homes.However, there appears to be a greater volume of information available on the equity based mod-els than others and this seems to be resulting in some confusion amongst the more novice users who can think no model other than equity crowdfunding is permitted in Italy. The CONSOB regu-lation and the consequent media visibility of the equity-based model have given rise to discordant positions on the nature of equity crowdfunding, and on the actual need for a regulation.

Among the trends of crowdfunding in Italy there are the emergence of local and niche platforms, thedevelopmentofhybridplatforms,offeringmorethanonemodelofcrowdfunding,and“DoIt Yourself “ crowdfunding is also beginning to spread. These trends, which are similar to global trends, have “taken root” well in Italy. Interestingly, in all these models (excluding hybrid platforms) the community element and the bond with the territory is very strong and this seems to be a necessaryconditionforanycrowdfundingproject,giventhelackofconfidencethatItalianshavein the web and their inclination to be very open and trusting towards people who are part of their immediate community.

The CONSOB regulation has had the great merit to stimulate further debate on crowdfunding and especially to bring it to the attention of institutions and thus of the Italian media. Now we need to take advantage of the visibility of the tool to rebalance the knowledge, the discussion and the developmentofallcrowdfundingmodels,eachsuitablefordifferentsituationsandcompanies.


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Contacts and credits

The report was created and written by:

Daniela Castrataro twintangibles [email protected]

www.twintangibles.co.uk www.crowdfuture.net

@twintangibles @crowdfuture

Ivana Pais Università Cattolica del Sacro Cuore [email protected]

www.laretechelavora.com

@ivanapais

The graphics of the report are curated by:

Imke Bähr nois3 [email protected] www.nois3.it www.crowdfuture.net

@kruxxx @crowdfuture


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Analysis of Italian Crowdfunding Market (November 2013)

Economy & Finance

Transcript of Analysis of Italian Crowdfunding Market (November 2013)