Austria = Europe's Crowdfunding Pioneer
Crowdfunding can take ridiculous measures as Kickstarter’s 2014 potato salad campaign demonstrated. However, the necessity, and economic impact of crowdfunding remains undisputed.
The World Bank in its 2013 report highlights the rapid 524% compound annual growth rate for rewards-based crowdfunding between 2009 and 2012. This is due to the fact that crowdfunding remains one of the cheapest and easiest forms of capital formation till date.
Despite the tremendous market and potential of crowdfunding, its success has largely been reserved and focused within North America, the region raising 59% of worldwide capital in 2012.
To foster entrepreneurial growth in Austria, the Austrian Council of Ministers recently approved a new crowdfunding bill, considered to be at the legislative forefront of crowdfunding legislation in Europe. In recent years Austrians have warmed up to the idea of crowdfunding. A 2013 survey show 56% of Austrians surveyed as being positive about crowdfunding and the idea investing small amounts of money into concrete projects in return for interest or revenue shares.
Reinhold Mitterlehner, Austria’s Vice Chancellor and Federal Minister of Science, Research and Economy, underlined that crowdfunding is considered to be a “meaningful complement to traditional credit financing” and aims to strengthen the entrepreneurial spirit in Austria. Vice Chancellor Mitterlehner believes that crowdfunding platforms provide startups with immediate, “…feedback on their product ideas directly from the market, and that at a very early phase”.
The new crowdfunding law in Austria is a clear signal towards alternative and modern means of financing. Read more http://t.co/HEVNE8ZHNi— AustrianStartups (@austrianstartup) June 3, 2015
Austria is ready to embrace this new legislation change with local platforms such as conda.at, 1000x1000.at wemakeit.com and greenrocket.com complementing the international platform leaders; Kickstarter and Indiegogo.
The following changes have been reflected in the new Austrian crowdfunding law:
- In the future, the obligation to publish a complete capital market prospectus will first apply starting with an issue volume of EUR 5 million. At present this limit is EUR 250,000.
- The requirement to put together a prospectus for issue volumes between EUR 250,000 and EUR 5 million has also been changed. In the future, only a simplified prospectus (prospectus requirement light) is required for an issue volume of between EUR 1.5 million and EUR 5 million.
- One investor can invest up to EUR 5,000 per project.
- This EUR 5,000 limit can be surpassed if the investor earns a net salary of more than EURE 2,500 per month. In this case, the investor is allowed to invest double his net monthly earnings.
- One option is for investors to invest ten percent of his or her financial assets if this amount exceeds EUR 5,000
- Similar to the Consumer Protection Law, investors have the right to withdraw within two weeks.
- Issuers may not raise more than EUR 5 million in capital over a seven year period, less the amounts already paid back to investors. If this threshold is exceeded, the company is required to issue a capital market prospectus.
- The investment is made with the issuing SME or via crowdfunding platforms.
Similar legislative initiatives have been conducted on a local level in the US. The District of Columbia amongst others passing a novel legislation change in October 2014. The Department of Insurance, Securities and Banking approving crowdfunding rules that allow entrepreneurs to raise as much as $2 million from city residents and businesses. The maximum amount a funder can invest varies