In a still dense crowdfunding market where more than 250 crowdfunding platforms in France are registered with the single register of insurance, banking and finance intermediaries “ORIAS”, there is a category of crowdfunding often little known to the general public. and which nevertheless represents the main source of growth for alternative finance in France. This is bond crowdfunding or how to invest in SMEs by subscribing to bonds.
As indicated by the crowdfunding barometer, produced by KPMG for the Association Financement Participatif France, crowdfunding represented 336 million euros in funds collected in 2017 (+44% compared to 2016). The main contributor to this growth is crowdfunding by subscription of bonds counting for the first form of crowdfunding with 115.8 million euros collected or 34%, ahead of donations with reward (68.1 million euros or 20.3% ), interest-bearing loans (€66m or 19.6%) and capital crowdfunding (€57.5m or 17.1%).
Bond crowdfunding represents the strongest growth in 2017 (+157% compared to 2016), ahead of unrewarded donations (+104%), remunerated loans (+64%), minibons (+29%) and donations with reward (+10%).
In general, it was the bond issues of VSEs, SMEs and ETIs, particularly driven by the real estate and environmental sectors, which boosted the crowdfunding market in France in 2017 since these players represented 65% project leaders when start-ups, individuals, communities and the social and solidarity economy represented 35% of the projects financed.
But what are the characteristics of bonds and bond crowdfunding?
Why are we witnessing the rise of bond crowdfunding?
Bond crowdfunding is a move upmarket and a natural evolution of crowdlending (loan) and crowdequity (capital) which have historically been the forerunners on the nascent French crowdfunding market.
Compared to crowdlending, bonds make it possible to invest larger sums (€5,896 on average per project and per investor compared to €310 for the loan). This financial product is therefore aimed at individuals knowledgeable about financial investments and who wish to access a larger portfolio without having to multiply hundreds of subscriptions as is often the case in crowdlending. Bond investment tickets do not have any regulatory limit on the amounts invested. Without forgetting that the bonds can also be subscribed by legal persons, many investors acting via their personal holding company in particular.