Spain’s Minister of economy and competitiveness, Luis de Guindos, has introduced new legislation making Spain one of the first countries to regulate the crowdfunding sector, imposing restrictions on how much non-professional investors can invest.
Crowdfunding in Spain
In 2013 approximately €19 million was raised through Spain’s top crowdfunding websites
Crowdfunding for new projects and startups has been incredibly popular in Spain as an alternative to bank credit, especially for the arts, NGOs and social movements as well as business startups. In 2013 approximately €19 million was raised through Spain’s top crowdfunding websites Lanzalo, Verkami and Goteo according to the Spanish Association of Crowdfunders, and Spain is second in Europe for total successful crowdfunding campaigns (17% of total European campaigns, Germany is first with 24%) according to Startup Europe.
New projects seeking funding must choose the appropriate platform, decide on a target total and impose a time limit. In exchange the fund-seeker promises monetary ‘dividends’ or non-monetary gifts in equivalent depending on the amount of funding. The well thought and perfectly executed crowdfunding campaign begins and once the time limit is up, and 100% of funds have been reached, the solicitant can collect the funds and if needed pay the investors.
Crowdfunding can be split up into:
- Equity crowdfunding – companies offer shares and monetary paybacks without having to float on the stock exchange e.g. Sociosinversores, Seedquick, Seedrs
- P2P crowdfunding or crowdlending – by individuals or particulares who determine how much to ask for and the platform establishes the interest rate, the petitioner then pays back every month plus interest what has been lent to him. e.g. Lendico, Comunitae, Loanbook, Zank
- Reward based or micromecenazgo – investors receive material compensation such as “€25 for naming one of the abandoned cats plus a photo, or €80 for a campaign bag”. e.g. Verkami, Lánzanos, Goteo, IndieGoGo, Kickstarter
- Donation based crowdfunding – ideally for non-profit projects, no compensation or payback involved. e.g. Migranodearena, Hazloposible
Restrictions on the Crowdfunding Sector
Earlier this year, due to the massive growth of this sector, and to protect small investors from fraud, Spain’s finance minister limited how much capital you can raise through equity and P2P crowdfunding, however after criticism of curbing competition, the improved Ley de Fomento de la Financiación Empresarial, has been adapted to exempt professional investors:
- Each project may raise crowdfunded capital up to a limit of €1,000,000. Top crowdfunding campaigns have only reached up to €750k so far in Spain but are set to grow further. Larger projects will have to be divided up into several smaller campaigns.
- Each individual non-professional investor may fund up to €3,000 per project, or up to a total of €10,000 per year.
- Professional investors (earning over €50,000 a year with an investment fund of at least €100k) and accredited companies (official institutions, companies with more than €1million in assets and €300,000 own funds) are now exempt from these rules.
The call for tighter regulation and auditing this new investment sector has been welcomed as a sign that the Spanish government are improving their understanding of crowdfunding, however still receives criticism for limiting individuals in their right to invest.
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