Crowd Valley is a complete service provider for crowdfunders, peer-t0-peer lenders and other types of alternative finance marketplaces. They offer platform technology, back office services, and access to funding opportunities through North Capital and Sapphire Capital Partners.
Each quarter Crowd Valley releases a report on the current state of the crowdfunding industry. Using a randomly selected sample of more than 100 companies they worked with during the quarter, Crowd Valley attempts to provide a current snapshot of the state on the crowdfunding industry. Note this is not one of the American landscape (though it addresses the U.S. at times) for Crowd Valley operates internationally and maintains offices in London and San Francisco.
I recently spoke with Crowd Valley CMO Alessandro Ravanetti about some of their findings from the second quarter and to get his thoughts on the state of the industry.
1. The report mentions many countries are considering crowdfunding legislation. Does the current federal dithering in the US bring the risk it will lose its leadership in the crowdfunding industry?
Yes, we believe it does and it’s really time to move forward with that. For example in the UK we have seen outstanding growth, favored by the FCA’s rules. London was named the world’s crowdfunding capital by FT and the UK is in good position to compete for the crowdfunding leader title. (More details here.)
2. To which factors do you attribute the rise in the interest in real estate (fr0m 19% of asset types in 4Q13 to 36% in 2Q14)? Opportunity? The success of companies like Realty Mogul?
As we wrote in an article published recently on our blog real estate crowdfunding is the crowdfunding application that has the highest growth rate in this new market. The first actors operating crowdinvesting models were startups, with almost no previous experience in the sector. With their incredible growth, they caught the attention of professional investors and established real estate companies too. Among the latter, some have seen real estate crowdfunding as an innovation that could create a disruptive change in the sector. Therefore they decided to turn the threat into an opportunity and jump on it.
3. Why are people from other industries (such as equity investors and broker/dealers) migrating to crowdfunding? As interest rates rise, is there risk they will migrate back the other way?
Crowdfunding and crowdinvesting have been evolving in a way that could well be that of a potential disrupting innovation for many markets and I don’t see any reason why people should come back to a pre-crowdfunding era, even if interest rates rise and the economy recovers.
4. Can you explain the volatility in the equity and lending sectors?
There’s no reason why every part of the market should grow at the same rate. We’re trying to give some insight into a very complex market – global, sector by sector, asset class by asset class – and the ‘volatility’ just shows that whilst every area is growing, some are growing faster than others.
5. Can you explain the significant drop in equity funding models (82-60-64)? Are they losing their attractiveness or is it because of the novelty of other sectors?
Crowdfunding hasn’t “lost attractiveness” and it isn’t “down”. Everything is up. It’s just that some sectors are growing more quickly than others, so relatively speaking the newer sectors make up a larger part of the market.
6. Many of the demand areas seem to come with a societal benefit – energy and clean tech being two examples. Even pockets of real estate have a community benefit aspect. Is this a trend? Can you explain it?
I see this as a general trend, not just for the crowdfunding industry. In the last few years we have seen an increasing interest for things with a positive impact on society, the same thing happened in the investment industry. The higher offer in my opinion is simply an adaptation to the increased demand.
7. Does the involvement of asset managers, banks and other sectors who were largely responsible for driving people to crowdfunding post-recession risk undermining industry credibility?
No, not in my opinion. I think instead they can help the industry to reach the next stage of its professionalism.
8. Crowdfunding is down most significantly in Europe. Do you have any theories as to why? Is it recession wariness?
It isn’t fair to say its down in Europe, as the entire ecosystem has developed a lot. Europe started early, so obviously it made up a big proportion of the market initially. It’s still growing there, but it’s also growing everywhere else.