Current State of Crowdfunding in Portugal 2016
An overview
Inhabitants: 10,43 million
GDP (ppp) per capita: $28,476
(Source: Wikipedia; Image Credit: NuclearVacuum)
Reward based crowdfunding was introduced in Portugal in 2011 by two platforms: Massivemov and PPL. Massivemov has stopped its operations, as other platforms that also tried reward-based crowdfunding since then, which shows the difficulty of having a profitable operation. PPL is the only reward-based crowdfunding that is still active in Portugal, having raised around €1,5 million for almost 500 successful projects. There is room for further growth, once the general public is comfortable with the concept of crowdfunding and online payments.
Volumes
There is limited data available on the crowdfunding volumes. The amounts mentioned are rough indications about the volumes raised from the start of operations:
- Donation based crowdfunding: €240 000
- Reward based crowdfunding: €1,5 million
- P2P business lending: €1 million
(The other forms of crowdfunding do not apply for Portugal.)
Local platforms
Ppl.com (reward) is the only platform providing reward crowdfunding since 2011.
Raize.pt started its activities as a P2P business lending platform in 2014.
NovoBancoCrowdfunding.pt (donation) was launched in 2012 by Novo Banco Bank.
Foreign Platforms
Although not officially operating in Portugal, a number of Portuguese projects are published on the platforms of Kickstarter and Indiegogo.
Seedrs, equity based crowdfunding platform, has recently based a tech team in Portugal. It seems now to be attracting Portuguese startups and investors to the platform.
Regulations in Portugal
Portugal has published proposed investment crowdfunding regulation, for both debt and equity, in a consultation paper. The consultation has recently closed. The proposed rules are as follows:
Non-accredited investors can invest up to €3k per project and a total of €10k per year.
Accredited investors, defined as those individuals with an annual income equal or higher than €100k have no limit.
Entrepreneurs and projects can raise up to €1 million in a given year, unless the offer limited to qualified investors only, in which case the cap is €5 million.
Crowdfunding platforms have to register and are required to be endowed with a minimum capital of €50,000 or, alternatively, a liability insurance covering for that amount.
Banks
NOVO BANCO launched a donation-based crowdfunding platform in late 2012, which is still active today. Banks have demonstrated a modest interest in the alternative finance industry and have done little so far to either fight it or collaborate with it.
Our expert
“In the near future, crowdfunding will be a familiar concept to everyone and a common tool to raise funds online for almost any purpose.“
The Current State of Crowdfunding in Portugal is made possible by the contribution of Yoann Nesme
What is the potential of crowdfunding in your country?
Raize.pt is a lending platform recently launched that is tapping the SME eco-system, where usually robust and mature companies look for working capital. We believe the potential for this type of crowdfunding is significant.
Reward-based crowdfunding also has potential for further growth, once it goes beyond the early adopters. We believe that most of the users of the popular PPL platform are early adopters.
Equity CF might have some potential given the entrepreneurial boom in the country, however we find difficult to attract a large number of appealing startups that are investment-ready.
What are the biggest challenges?
One challenge is to educate the overall population about the concept. A large part of the populations is still uncomfortable with online processes and payments.
The cap of €3.000 per project or €10.000 per year, can limit in our view the potential of equity crowdfunding.
What is the future holding for Portugal?
I think reward-based crowdfunding makes a lot of sense in every country. It applies to many different types of projects, be they entrepreneurial (creation of a new product) for market validation, cultural (arts, theatre, music) that find it hard to find financing elsewhere (banks will not lend, professional investors are not interested, public funding shrinking) and social, that use crowdfunding as an easy way to attract online donations. It has been relatively successful in Portugal, although PPL thinks that there is still room for significant growth. In the near future, crowdfunding will be a familiar concept to everyone and a common tool to raise funds online for almost any purpose.
Another promising model is P2B lending, given the number of SME’s that have a relatively solid background and can offer good returns to lenders.
Equity crowdfunding might also occupy a good space in the Portuguese market, although its success will largely depend on the survival rate of startups born in Portugal, where the entrepreneurial culture has only recently started.
