Doubling each year over recent years, Crowdfunding has seen dynamic growth from $2.7 billion in 2012, to an expected level greater than $34 billion for last year 2015. In the Nordics, crowdfunding continues to gain legitimacy, with Finland-based Invesdor becoming the first crowdfunding platform to be granted a MiFID license, which legitimizes the companies ability to do business across Europe.
In the early days of Crowdfunding, in the late 2000’s, the focus was on ‘rewards based’ crowdfunding – where entrepreneurs with projects, joined a crowdfunding platform and pre-sold a product or service in order to launch a business concept without incurring debt or sacrificing the equity in their company. Early and well-known platforms include IndieGoGo (established in 2008) and the larger Kickstarter (established in 2009).
With the impressive growth of Crowdfunding set to continue as part of the collaborative economy, the nature of crowdfunding is changing.
In the last four or five years crowdfunding has evolved to include ‘Equity’ crowdfunding where the backer receives shares of a company usually in its early stages, in exchange for money pledged. Unlike rewards-based crowdfunding where a product or reward is issued at a point in time, equity (or investment) crowdfunding is based on the potential future returns (profit) coming from a company if it performs well. This is a more regulated environment.
Finnish company Invesdor shows regulation is not a barrier
In Finland, when crowdfunding first arrived four years ago, there was a good deal of hype and plenty of discussion.
It was at this time that Helsinki based financial technology company Invesdor was established, offering debt and equity crowdfunding services. Under the guidance of CEO Lasse Mäkelä, the team saw an opportunity in the financing of early-stage startups – a void had been created as banks were not lending to startups and traditional investors such as VC’s were moving to higher levels of investment.
Mäkelä and the team have simplified the traditionally complex process of funding, to a standard, transparent digital process.
As Mäkelä states:
“What we have created is a digital fundraising process that works for all kinds of companies. We are categorizing our companies as seed, early (turnover from 100,000 to 500,000), growth (upwards of 500,000) and an IPO.”
“One of the motivations for why I love what I’m doing is that we are protecting the small guy and making it (funding process) more transparent.“
Every time a company applies to Invesdor, the parties meet and Invesdor runs their own due diligence – checking the business idea, team, and scalability. After that, if they are satisfied, they do legal diligence. However, they do not perform business due diligence – investors must understand themselves what they are investing in, and the level of risk may be high.
In order to operate their business in compliance with the strict regulations, Invesdor needed to go through an almost year long process before they were granted a MiFID License by the Finnish Financial Authorities. They were the first company to achieve this.
This gave Invesdor the first-mover advantage of being able to operate in several European countries and to promote to all 31 EEA countries.
Operating across borders
They support the European Commissions’ drive to harmonize financial regulations across Europe. However, they are not alone in providing equity crowdfunding services. Other Nordic crowdfunding providors include Karonina Fund, Bidra.no, Boomerang , and Mesenaatti.
However, getting a MiFID license has provided a competitive edge. Invesdor quickly created presence in Sweden, and this year they opened for business in Denmark. They were chosen as the service provider to Norwegian company Cloud Insurance to do their public equity offering under Norwegian law. Invesdor duly marketed to the European Countries under their license, and the offering was so successful it was oversubscribed at 210%.
“We are now focusing on the Nordic Region and the UK. That is where the companies come from, but the investors can come from anywhere.”
Invesdor are a founding member of the Nordic Crowdfunding Alliance, who aim to share knowledge and help drive better regulations.
Bridging traditional markets with modern fintech
Invesdors’ latest equity offering is for Siili Solutions, launched April 4th, is a technology-independent software integrator and digital service partner, which, if successful, will enable them to move up to the Nasdaq OMXH main market. Invesdor will act as a subscription channel in the share offering,issuing new shares worth up to €3.6million.
“We are one of the very first digital fundraising platforms in Europe to be a place of subscription for companies listing their shares on a regulated market. With this revolutionary equity offering, Invesdor continues to build bridges between the old capital markets and modern fintech community…only a full MiFID license enables us to act as a subscription place throughout the European Union,” writes the company of their offering.
In recognition for their efforts, Invesdor has been short-listed in the Nordic Startup Awards 2016 category for Best Investment Company, Finland and are up against Butterfly Ventures, Inventure, LifeLine Ventures and Reaktor Ventures. Public voting at National level runs until 18th April 2016 with the Finnish finale hosted by Arctic startup on 27th April . Thereafter, the Nordic Regional voting takes place 4th May-15th May with the Grand Finale on 31st May in Iceland.