Crowdfunding in Holland : regulation and market information

As mentioned in the previous article about Alternative Finance in the UK , the crowdfunding market in Europe is getting bigger and bigger. Today the country of subject will be the Netherlands. The Netherlands is also one of the earliest adaptors but not well known by many. The Dutch crowdfunding market had a volume of 78 million in 2014. This volume seems small if we compare it to the UK volume, but in comparison to other European countries the Netherlands is quite a developed country for its size.

logo-autoriteit-financiele-markten

Crowdfunding in the Netherlands is regulated by the AFM (Financial Market Authority) and the DNB (Dutch National Bank). There is a lot of discussion going on between crowdfunding platforms and the authorities regarding the regulations. This is because the AFM proposed new rules which, in the eyes of the crowdfunding platforms, would slow down their development. As the negotiations are still ongoing, a final overview of the regulations cannot yet be given but we will discuss the probable rules applicable to crowdfunding.

First of all, some types of crowdfunding need to apply to the AFM in order to get a required license. The AFM has identified 4 different types of crowdfunding; Equity-based, Loan-based, Donation-based and reward based. The types which require a license are the following;

  • Equity-based crowdfunding
  • Loan-based crowdfunding

The other two; donation-based and reward-based do not require a license from the AFM.

Regulation

On top of the licenses, the AFM has also put together rules related to, for example, Investment limits, risk awareness etc.. These rules are, as already mentioned, not definite yet but it is assumed that they will be put in place by the AFM

Hereby the rules formed by the AFM.

  • Investment limits: Currently there already exists investment limits for both loan-based and equity-based. These limits are, in the eyes of the platform owners, limitations to this type of funding. To date the limits are; €20.000 per investor per platform for equity-based funding, and €40.000 per investor per platform for loan-based funding. These limits will be, starting from april 2016, €40.000 for equity-based and €80.000 for loan-based per investor per platform.
    On top of the investment limits per platform, there also exist limits per project of; €5.000.

 

  • Another part of the regulations formed by the AFM is that investors must do an assessment in order to test their knowledge about investing and the risks associated with investing in start-ups prior to investment.  The investor must do the assessment for every €5.000 or more invested. For example: An investor has already had an assessment prior to his first investment on the platform. After his first investment, he made another investment of €1.000. He does not have to do a test for this investment. Today the investor makes another investment of €4.500, he now needs to do the test again as he invested another €5.000 or more (with the 2 investments combined).
    The AFM clearly states that the platforms themselves are responsible for the creation of those assessments.

 

  • A third rule of the AFM is that the platform must send an e-mail to the investor within 1 working day after the initial investment. This e-mail must contain information about the associated risk of the project and give the investor the possibility to easily cancel its investment by, for example, sending an e-mail to the platform.

 

  • Something the AFM forbids is that the platforms must have separate accounts for the platforms’ money and the money of the investors and/or funding seekers. This is to avoid that when the platform get into financial problems, the investors and or borrowers will not lose their money.

These are the rules specified by the AFM for platform owners to respect.

We now have an idea of the Dutch regulations related to crowdfunding platforms but what does the market look like?

Market information

The Dutch market is as mentioned in above, one of the first countries to participate in alternative finance. The mCrowdfunding websiteain players in the Dutch market are:

  • Symbid: Equity-based platform
  • Collincrowdfund: Loan-based platform
  • Crowdaboutnow:Loan-based platform
  • Doorgaan.nl: Award-based platform
  • Geldvoorelkaar: Loan-based platformCrowdfunding website
  • Horeca crowdfunding Nederland: Loan-based platform
  • Kapitaalopmaat: Loan-based platform
  • Kickstarter: Donation- and reward-based platform
  • Leapfunder: Loan-based platform & equity-based platform

These crowdfunding websites are the main ones in the Netherlands and were part of the €78m raised in the year 2014.  The development rates are less impressive as the ones from the UK but they are still very promising:

  • An average growth rate of 59% for all the types of crowdfunding combined.
  • An average growth rate of 257% in loan-based crowdfunding
  • An average growth rate of 44% in equity-based crowdfunding
  • An average growth rate of 211% in reward-based crowdfunding
  • An average growth rate of 67% in donation-based crowdfunding

These figures show that the Dutch crowdfunding market is still in strong development and the expectations for the coming few years are more promising after having applied the new regulations with fewer restrictions for investors. The AFM is trying to optimize its regulations in order to make the alternative finance market in the Netherlands as attractive as possible.

As from the platform owner side there are quite a few rules to respect, we at Particeep will always be able to provide platforms with the requirements from the different regulations per country.

If you; have any questions regarding this article; need more information; or if you are interested in starting your own platform, check our website or just get in contact with us and we will be more than happy to help you!

 

Interest in crowdfunding in holland  ?