Access to funding has always been one of the main difficulties facing entrepreneurs looking to develop their initiatives, and more so in the present climate. Beyond traditional bank funding, crowdfunding is emerging as an alternative, above all in English-speaking markets.
As its name would suggest, crowdfunding involves obtaining small individual amounts of funding from a large number of small investors. The total extent of the funding is not excessively large, although the amounts are on the increase.
Initially, this form of fundraising was used to fund projects such as the publication of literary or audiovisual works or fashion-related projects. Crowdfunding can take a variety of forms: small donations made in exchange for receipt of the final copy of an article or of special purchase terms, formalization of a loan, structures that grant investors a share in the profits of the funded project, or subscription or purchase of capital stock, to name just a few.
As crowdfunding has gained in popularity, platforms have even begun to emerge that put companies in contact with potential investors, supplying them with information on all kinds of business projects in which to invest.
The need to regulate crowdfunding is currently being debated in many parts of the world. Spain, like many other countries, has no specific crowdfunding regulations, in contrast, for instance, with the United States which, in April 2012, passed the JOBS Act. This Law, which aims to stimulate investment in small and medium-sized companies by making the laws governing tender offers more flexible, generated great expectations in the world of crowdfunding, although these have been squashed rather by the considerable delay in the publication of the implementing regulations by the SEC (Securities and Exchange Commission).
In Spain great care must be taken to respect, among others, the rules that reserve certain activities (raising deposits from the general public, placing securities) for financial institutions and investor protection rules (tender offers, securities issues, information …). According to how they are instrumented, the activities may be subject to supervision by the Bank of Spain or by the National Securities Market Commission (CNMV) and any breach of the regulations may give rise to severe penalties. In turn, investors must be aware of the risks they assume and of the lack of protection they may face.