crowdfunding: the new frontier for financing entrepreneurship?

© Ediz

ioni F

ranco

AngeliAbstract

The article presents the status of the crowdfunding market in Italy and discusses itsfuture prospects. after defining the crowdfunding phenomenon and highlighting itsmain elements, we present the results from the Italian Crowdfunding Observatory,managed by the three authors at the Department of Management, Economics and In-dustrial Engineering of Politecnico of Milano.

Keywords: crowdfunding, crowdfunding platforms, crowdfunding projects

Parole chiave: crowdfunding, piattaforme di crowdfunding, progetti di crowdfunding

Jel classification: G20, G23

Received: 15.8.2013Final revision received: 17.9.2013

Economia e Politica Industriale - Journal of Industrial and Business Economics2013 vol. 40 (4): 173-188

Osservatorio sulle nuove imprese e i nuovi settori

Focus on start ups and new industries

CRowDfUnDInG In ITaly: STaTE of ThE aRT anD fUTURE PRoSPECTS°

Giancarlo Giudici*, Massimiliano Guerini**, Cristina Rossi-Lamastra***

° The authors are in debt with Gianluca Grassi and Paola Rovelli who provided excellent re-

search assistance.* Politecnico di Milano, DIG (Dipartimento di ingegneria gestionale);

[email protected].** Università di Pisa, DESTEC (Dipartimento di ingegneria dell’energia, dei sistemi, del ter-

ritorio e delle costruzioni); [email protected]. *** Politecnico di Milano, DIG (Dipartimento di ingegneria gestionale); [email protected].

N.B. Copia ad uso personale. Non ne è consentita la condivisione e/o la messa a disposizione al pubblico su rete pubblica o privata,

sia in forma gratuita sia a pagamento.

© Ediz

ioni F

ranco

Angeli

Introduction

Crowdfunding is a rapidly growing phenomenon, in Italy as in the rest of

the world. In its most general sense, it consists in the collection of funds from

the crowd of Internet users as an alternative to traditional financing channels

(e.g., venture capitalists, business angels, and banks). The money can be col-

lected either directly by the proponent of the initiative (i.e., the crowdfunding

project) or through specialized portals (i.e., the crowdfunding platforms). To-

day, crowdfunding is mainly used to support philanthropic activities and social

and cultural initiatives. however, the use of crowdfunding for supporting en-

trepreneurial ideas is growing and some business-oriented projects have been

extremely successful in raising funds through the Internet. The Pebble watch1

is a case in point: it has raised over ten million dollars from about sixty-nine

thousand donors through the american crowdfunding platform

Kickstarter.com. In sum, there is no doubt that crowdfunding holds the poten-

tial to significantly innovate the way in which capital for financing entrepre-

neurial ideas and new ventures is raised. along this line of reasoning, the

Italian government has recently introduced the possibility for innovative

start-ups2 to raise capital through dedicated crowdfunding platforms, in

derogation of the rules on public offerings with the aim of supporting new

entrepreneurial initiatives.

learning more on the crowdfunding is thus particularly important to

fully understand the consequences of this new way of raising capital on the

financial constraints plaguing the development of entrepreneurial ideas and

new ventures. The relevance of the issue is undoubted: practitioners, schol-

ars, and policymakers agree that start-ups are an important engine to drive

Italy out of the crisis.

This study presents the first results of the Italian Crowdfunding Observato-

ry managed by the three authors at the Department of Economics, Manage-

ment and Industrial Engineering of Politecnico of Milano. The Italian Crowd-

funding Observatory monitors, on a continuative basis, the Italian crowdfund-

ing platforms and the projects they host with the aim of depicting a compre-

hensive picture of the evolution of the crowdfunding phenomenon in Italy.

Data presented in this paper refer to 15.6.2013 and account for twenty Italian

crowdfunding platforms, and more than one thousand eight hundred crowd-

funding projects.

The reminder of the paper is organized as follows. The next section offers

a comprehensive definition of crowdfunding and highlights its main character-

174 Economia e Politica Industriale

G. Giudici, M. Guerini, C. Rossi-Lamastra Crowdfunding in Italy

1. http://getpebble.com.

2. as defined by art. 25 of Decreto Sviluppo bis (d.l. 179/2012).



© Ediz

ioni F

ranco

Angeli

istics. Section two illustrates the state and the evolution of crowdfunding in

the world, largely basing on The Crowdfunding Industry Report 2013.3 Section

three constitutes the core of the paper: it reports the results of the Italian

Crowdfunding Observatory, depicting a vivid picture of the phenomenon in

Italy. finally, the concluding section sketches a possible agenda for fostering

the growth of crowdfunding in Italy, focusing in particular on crowdfunding

for business initiatives.

1. The crowdfunding phenomenon

Belleflamme, lambert and Schwienbacher (2013) define crowdfunding as

«an open call, mostly through the Internet, for the provision of financial re-

sources either in form of donation or in exchange for the future product or

some form of reward and/or voting rights». Scholars agree that crowdfunding

is an evolution of crowdsourcing, which Kleemann, Günter and Reider (2008)

define in the following way: «Crowdsourcing takes place when a profit orient-

ed firm outsources specific tasks essential for the making or sale of its product

to the general public (the crowd) in the form of an open call over the Internet,

with the intention of animating individuals to make a [voluntary] contribution

to the firm’s production process for free or for significantly less than that con-

tribution is worth to the firm».

agrawal, Catalini and Goldfarb (2011) identify three main drivers of the

current of crowdfunding:

1. the global financial crisis, which has made the bank credit more expensive

and thus more difficult to obtain;

2. the development of the web 2.0 technologies, which facilitate the interac-

tions between proponents and the crowd of Internet users;

3. the popularity of crowdsourcing.

Crowdsourcing and crowdfunding share indeed the same target: the Inter-

net users. however, crowdfunding differs from crowdsourcing, as its main

aim is to sollicite the contribution of money by the crowd of Internet users,

whilst crowdsourcing focuses mainly on the provision of ideas, feedbacks

and solutions to firms’ problems and innovative projects. In crowdfunding,

the people backing the project (i.e., the crowdfunders) are free to offer just

their financial support without necessarily contributing to the development of

the project with their own ideas and feedbacks. Crowdfunders know that

crowdfunding projects are characterized by high uncertainty. These projects

are often just works in progress: they will be completed or developed in the

Journal of Industrial and Business Economics 175


3. Massolution (2013).



© Ediz

ioni F

ranco

Angeli

future and are therefore susceptible to large changes, even larger in case of

adverse contingencies.

as aforementioned, proponents can directly conduct a crowdfunding cam-

paign on the web, but more often, they post their projects and solicit funding

on dedicated web sites, i.e. the crowdfunding platforms. In other words,

crowdfunding platforms act as intermediaries, which match proponents and

crowdfunders.4 Giudici et al. (2012) argue that crowdfunding platforms share

the characteristics of multi-sided markets as defined by hagiu and wright

(2011): «multi-sided markets are organizations that create value primarily by

enabling direct interactions between two (or more) distinct types of affiliated

customers».

according to this definition, it is possible to distinguish crowdfunding

from traditional forms of financing, in which some of aforementioned require-

ments are lacking. Specifically, a bank loan is not a direct form of financing,

but it is the result of an intermediation between the depositors that provide the

capital to the bank and the borrowers of the loan. also stock markets, which

guarantee the anonymity, exclude the direct interaction between the funders

and the founded company. Private equity and venture capital (and in general

all forms of private placement) lack an enabling structure, which in crowd-

funding is represented by the crowdfunding platform.

The actors (proponents and crowdfunders) who use crowdfunding to finance

their initiatives represent a second important element in this form of financing.

These actors have specific incentives, which make them different from the actors

involved in other types of transactions that take place through the Internet, such

as online auctions or business-to-consumer e-commerce. Gerber, hui and Kuo

(2011) identify several reasons for engaging in crowdfunding. Crowdfunders are

motivated by the desire of supporting valuable initiatives, especially in the case

of philanthropic activities or projects with a social and cultural content. likewise,

crowdfunders like to feel part of the community supporting a given project, to ex-

change ideas about it and discuss it on social networks. The proponent’s decision

to use crowdfunding to finance a project stems from the need for capital and the

possibility to obtain feedbacks and suggestions by the crowdfunders. further-

more, posting a project on the Internet and opening it to the scrutiny of a large

crowd can be perceived as a signal of quality and opens the possibility of relying

on social capital to raise funds. In this latter regard, Giudici, Guerini and Rossi-

lamastra (2013) studied four hundred and sixty-one projects that have raised



4. The intermediating action of crowdfunding platforms is of fundamental importance in

crowdfunding, but it is not a necessary element for defining a fund raising campaign as

crowdfunding. as it is evident from the definition of crowdfunding, what is essential is the

many-to-one relationship between crowdfunders and the proponent, which is enabled

through the Internet.



© Ediz

ioni F

ranco

Angeli

capital on eleven Italian crowdfunding platforms and show that the social capital

of the proponents (measured by the number of contacts that proponents have on

social networks) is significantly correlated with the probability of success in

fundraising. The authors also found an association with the social capital of the

geographical area where a proponent resides and the probability of success of her

crowdfunding project. Specifically, projects that originate in geographical areas

where individuals have comparatively more external social contacts, as measured

by participation in non-profit associations, encounter less difficulties to raise cap-

ital. Conversely, projects that originate in territories where individuals have

stronger family linkages have more difficulties to attract financing through

crowdfunding, likely because their proponents can more easily rely on their fam-

ily to obtain capital and devote less effort to their crowdfunding campaigns.

2. Crowdfunding in the word

as aforementioned, platforms are a fundamental element of crowdfunding.

They can be grouped in four main categories:

1. equity-based platforms, which enable the underwriting of risk capital of a

newly created company by the crowd through shares or similar securities;

2. donation-based platforms, where the project funding is motivated by philan-

thropy or sponsorship, without any other remuneration for crowdfunders;

3. lending-based platforms, which enable the underwriting of securities or

debt contracts between two parties (i.e., the lender and the borrower);

4. reward-based platforms, where financing is provided in the expectation of

a reward or a prize (material or not). Crowdfunders are usually given the

option to choose between different types of rewards whose value increases

with the amount of money that is pledged.

according to the Crowdfunding Industry Report 2013 (Massolution, 2013),

in 2012 there were eight hundred and thirteen crowdfunding platforms around

the world (five hundred and sixty-three active platforms and two hundred and

fifty platforms in the pre-launch stage). In 2012, active platforms have raised

nearly 2.7 billion dollars, mainly concentrated in north america (1.6 billion

dollars), where crowdfunding is largely widespread. The crowdfunding market

is currently accelerating its growth: the annual growth rate in funding volumes

raised from 64% in 2011 to 81% in 2012. The forecast of the annual growth

rate for 2013 is 89% (5.1 billion dollars in funding volumes). lending and do-

nation-based crowdfunding were characterized by the highest funding vol-

umes in 2012 (1.2 and 1 billion dollars, respectively). lending grew 111%,

while donation-based crowdfunding grew 45% from 2011 to 2012. Reward-

based crowdfunding grew more than five times in the same period, to a total





© Ediz

ioni F

ranco

Angeli

funding volume of three hundred and eighty-three million dollars (sixty-two

million dollars in 2011). Equity-based crowdfunding grew 30% to a total fund-

ing volume of one hundred and sixteen million dollars. The relatively limited

growth of equity-based crowdfunding can be explained by the fact that in

many countries equity-based crowdfunding is still subject to regulatory con-

straints (see paragraph 3.1. for a discussion of the Italian context), stimulating

the use of lending and reward-based crowdfunding by start-ups.

The Crowdfunding Industry Report 2013 provides also some interesting

statistics on the median size of successful projects hosted by crowdfunding

platforms in 2012. Equity-based platforms host projects that obtain more fund-

ing than the three remaining categories. In particular, the median amount of

capital collected by successful equity-based projects is one hundred and nine-

ty thousand dollars (over twice the corresponding figure in 2011), while the

median funding collected by successful projects in the other categories is less

than five thousand dollars (one thousand and four hundred dollars, two thou-

sand and three hundred dollars and four thousand and seven hundred dollars

for donation, reward and lending, respectively). hence, despite equity-based

platforms still lag behind in terms of total funding volumes, these platforms al-

low to collect a sizeable amount of capital for each successful project, holding

the potential to be a valuable alternative to finance start-ups.

finally, considering the duration of crowdfunding campaigns, the time

needed for the completion of projects in lending-based platform is on average

half than that of projects hosted on equity-based and donation-based platforms

(Massolution, 2012). Project hosted on reward-based platforms employ an av-

erage of ten weeks to be completed. Interestingly enough, regardless of the

type of platform, a project needs a similar amount of time to reach the target of

25% and 75% of capital. In addition, the collection of the last quarter of the

capital requires on average more time than the collection of the first quarter.

an emerging regularity in the nascent crowdfunding literature suggests that

crowdfunding projects are subject to critical mass phenomena (agrawal,

Catalini and Goldfarb, 2013). Projects that succeed in raising a sizable amount

of capital in the early days of a crowdfunding campaign are fated to succeed,

while those that fail to attract contributions in the early days are fated to fail.

3. The crowdfunding in Italy

3.1. The Italian legislation on crowdfunding

In Italy, crowdfunding is not subject to particular constraints, apart from

the rules on the solicitation of investment in securities. The decree law no.





© Ediz

ioni F

ranco

Angeli

179/2012 (decreto “Sviluppo bis”), converted into law no. 221 of 17.12.2012

has made, among other things, some changes to the Testo Unico della finanza

that will allow innovative start-ups to raise equity capital through online por-

tals (i.e., equity-based crowdfunding platforms). The offers must not exceed

five million euro and the crowdfunding platform must send subscription orders

for the offered securities exclusively to banks and investment firms. at least

5% of the target funding must be subscribed by professional investors. an in-

novative start-up is defined basing on criteria dealing with:

1. the corporate form;

2. the shareholders with the majority of the capital;

3. the age of the company;

4. its revenues;

5. the reasons why the company was born;

6. its linkages with innovation in high-tech context;

7. the distribution of profits.

The operating rules for equity crowdfunding have been issued by Consob, the

authority supervising Italian financial markets, on 12.7.2013. The first equity-

based crowdfunding platform (www.starsup.it) has been authorized on

18.10.2013. lending-based crowdfunding in Italy is subject to supervision by the

Bank of Italy, which has spared extremely restrictive measures in the past to-

wards some initiatives of this kind, in some cases by revoking the licenses of ac-

tivity (for example is the case of Zopa).5 Conversely, donation-based platforms as

well as reward-based platforms are not subject to special rules and permissions.

3.2. Crowdfunding platforms in Italy

This section provides an analysis of the Italian crowdfunding platforms

presenting their salient features. as in 15.6.2013, in Italy there were twenty-

four crowdfunding platforms. In line with the definition provided in section

one, we excluded from the analysis platforms that have only the function of

social networks and web sites that include crowdfunding among their features

but do not have crowdfunding among their primary objective (e.g., Cineama,

http://www.cineama.it, and Derev, http://www.derev.com). we also excluded

portals such as Prestiamoci (http://www.prestiamoci.it) and Smartika

(http://www.smartika.it), because the funding does not go directly from the

crowdfunders to the proponents, but the redistribution of funding among pro-

jects is decided by the portal. out of the twenty-four Italian crowdfunding



5. on 10.7.2009, Zopa was excluded from the Italian financial brokers register by the Italian

ministry of Economy and finance, on indication by the Italian Central Bank. for further infor-

mation see http://blog.zopa.it/wp-content/uploads/2009/07/14lug09_zopa_standby1.pdf (in Italian).



© Ediz

ioni F

ranco

Angeli

platforms, thirteen are reward-based, seven are donation-based, three are equi-

ty-based and, finally, one is lending-based (see figure 1).

Figure 1 – Taxonomy of Italian crowdfunding platforms

Source: our elaboration.

Crowdfunding platforms in Italy differ along several dimensions. Specifically:

1. Industry Focus: generalist platforms accept all the proposed projects, re-

gardless of the domain (however, projects must comply with certain ethical

standards). alternatively, platforms accept only projects that are specific to

a particular area (e.g., business and entrepreneurship, public administra-

tion, art and journalism).

2. Fundraising process: some platforms collect capital from the contributors

and transfer them to the proponents only if a predetermined target is met (all

or nothing model) while other platforms allow the project’s proponent to

keep all of the funds collected irrespective of the fact that the target is met or

not (keep it all model). It is worth mentioning the platform Shinynote,6 which

gives the possibility to support projects without the provision of capital. It is

sufficient that the supporter gives his/her willingness to be actively involved

in the project. furthermore, the platform Retedeldono7 gives the possibility

to open individual campaigns, whose final beneficiary is not the project’s

proponent but a no profit organization.



6. http://www.shinynote.com.

7. http://www.retedeldono.it.



© Ediz

ioni F

ranco

Angeli

3. Project timing: some platforms require proponents to set a project’s dead-

line, i.e. the last date by which supporters can provide funds.

4. Fees: posting a project on a platform can be either free of charge or a per-

centage commission is applied to the raised capital.

5. Payment services: many platforms provide their users with payment ser-

vices, such as Paypal, credit card or wire transfer, while others let them or-

ganize autonomously.

Table 1 reports the characteristics of the twenty-four Italian crowdfunding

platforms along the abovementioned dimensions.

Table 1 – Main characteristics of Italian crowdfunding platforms°

Platform name Industry Focus Fundraising process Project timing Fees Payment services Foundation

(days) year

Boober Generalist Keep it all 30 10% + annual fee wT 2010

BoomStarter Generalist Keep it all n/a 4%, 9%a PP 2011

BuonaCausa Generalist Keep it all n/a 0 CC, PP, wT 2010

Com-Unity Generalist all or nothing n/a 6% CC 2013

Crowdfunding- Generalist all or nothing n/a 0 CC, PP, wT 2012

Italia

CrowdfundMe Generalist Variable 1 to 365 0 no 2013

Eppela Generalist all or nothing 30 to 90 5% PP 2011

finanziami il local develop. all or nothing 180 0 CC, PP 2013

tuo futuro

for Italy art n/a n/a n/a PP, wT 2013

h2Raise Public admin. all or nothing 1 to 120 0%, 2%, 10%b CC, PP, wT 2012

Iodono Social Keep it all n/a n/a CC 2010

Kapipal Generalist Keep it all 1 to 365 0 PP 2009

Kendoo local develop. all or nothing n/a 7,5% CC 2013

Micro Crédit art Keep it all 60 5% CC, PP, wT 2013

artistique

MusicRaiser Music all or nothing 60 10% CC, PP, wT 2012

Produzioni Generalist all or nothing n/a 0 no 2005

dal Basso

Pubblico Bene Journalism all or nothingc n/a n/a PP 2010

Retedeldono Social Keep it all 1 to 365 5% CC, PP, wTd 2011

Shinynote Social all or nothing n/a 5% PP 2011

SiamoSoci Business all or nothing n/a 0 no 2011

Starteed Generalist all or nothing 1 to 90 5%, 10%e PP 2012

Terzo Valore Social Variable 30 0 wT 2013

weareStarting Generalist all or nothing n/a n/a n/a 2013

youcapital Journalism all or nothing n/a 0 CC, PP, wT 2010

° n/a: information is not available; CC: credit card; PP: Paypal; wT: wire transfer. a a 4% fee

of raised capital is charged if the project meets the target. If the project does not meet the tar-

get, the fee is 9%. b a 2% and 10% fee of raised capital is charged to entrepreneurs and public

entities, respectively. no fee is charged to no profit organizations. c if the project does not

meet the target, donations are reimbursed to the contributors in the form of “credits”. d wT is

allowed only if the pledge is greater than three hundred and fifty euro. e a 5% fee is applied on

the raised capital, while a 10% fee is applied on revenues from realized products.






© Ediz

ioni F

ranco

Angeli

3.3. A classification of crowdfunding projects

In this paragraph, we propose a classification of crowdfunding projects.

This classification constitutes the basis for the analysis that will be provided in

the paragraph 3.4. Specifically, we distinguish four different types of projects,

depending on the following two dimensions of analysis:

1. the main objective of project’s proponent, which can be personal (i.e.,

aimed at achieving an individual benefit) or social (i.e., aimed at achieving

a collective benefit);

2. the compensation that is offered to the crowdfunders, which can be mon-

etary (typically in the form of profit sharing) or non-monetary (e.g., the

product or the service that will be realized or a gadget; in this category

we also include the case in which the contributor does not receive any

compensation).

Figure 2 – Classification of crowdfunding projects


figure 2 reports the proposed classification, resulting from the intersection

of the two aforementioned dimensions of analysis. accordingly, we define

four classes of crowdfunding projects:





© Ediz

ioni F

ranco

Angeli

1. Business: the primary objective of this class of projects is the creation of

economic value for both the proponent and the contributor. The contribu-

tor’s remuneration is realized through the joint participation in the risk

capital, loan interests (in case of lending-based crowdfunding) and profit

sharing.

2. Cooperation: projects aimed at increasing the social welfare, in which

there is a monetary compensation for the contributors (e.g. restructuring of

a public property/infrastructure).

3. Mecenatism: these projects support personal initiatives that do not generate

monetary returns for the contributors. however, the contributor can receive

a compensation in the form of realized products and services.

4. Donation/charity: projects aimed at increasing the social welfare, in which

there is no monetary compensation for the contributors.

3.4. An analysis of Italian crowdfunding projects

we collected information on the projects posted on twenty Italian crowd-

funding platforms (out of the twenty-four platforms presented in paragraph

3.2.) in the period from 16.10.2012 to 15.6.2013. Unfortunately, we were not

able to collect information on the projects of four platforms (CrowdfundMe,

finanziami il tuo futuro, youcapital and weareStarting).

for each project, we have the following information: name, description,

classification (business, cooperation, mecenatism and donation/charity), publi-

cation date, expiration date, target capital, pledge system, and whether there is

the possibility to support the project without financing it. furthermore, we also

stored information regarding the individual, the team of individuals or the as-

sociation that posted the project. finally, we monitored the collection of capi-

tal over time.

as on 15.6.2013, we have information on one thousand eight hundred and

seventy-eight crowdfunding projects. Table 2 reports the number of terminated

projects (i.e., projects whose expiration date is before 15.6.2013) that success-

fully completed the fundraising process, i.e. projects that raised at least the tar-

get capital (i.e., successful projects), and those that did not complete the

fundraising process before the expiration date (i.e., unsuccessful projects).

furthermore, table 2 shows the number of projects whose expiration date is

subsequent to 15.6.2013 (i.e., ongoing projects), and, finally, the success ra-

tio, defined as the ratio between the number of successful projects and the

number of terminated projects (i.e., the sum of successful and unsuccessful

projects). we group the projects according to the classification presented in

paragraph 3.3.





© Ediz

ioni F

ranco

Angeli

Table 2 – Number of projects posted on Italian crowdfunding platform as on 15.6.2013

Project classification Successful Unsuccessful Ongoing Total Success ratioa

projects projects projects

No. % No. % No. % No. % %

Business 15 5.0 115 12.3 49 7.6 179 9.5 11.5

Cooperation 22 7.4 26 2.8 4 0.6 52 2.8 45.8b

Mecenatism 170 57.0 368 39.4 223 34.6 761 40.5 31.6b

Donation/charity 91 30.5 426 45.6 367 56.9 884 47.1 17.6c

not defined 0 0.0 0 0.0 2 0.3 2 0.1 -

Total 298 100.0 935 100.0 645 100.0 1,878 100.0 24.2

a the success ratio is defined as the ratio between the number of successful projects and the

number of terminated projects (i.e. the sum of successful and unsuccessful projects). b, c the

success ratio in the focal category is statistically different from the success ratio in the busi-

ness category at the 1% and 10% significance level, respectively.


as on 15.6.2013, out of one thousand eight hundred and seventy-eight pro-

jects posted on Italian crowdfunding platforms, two hundred and ninety-eight

projects were successful, nine hundred and thirty-five were unsuccessful and six

hundred and forty-five were still ongoing. It is worth pointing out that the mece-

natism and the donation/charity categories account for the 87.6% of the total

number of projects (40.5% and 47.1%, respectively). In other words, crowd-

funding in Italy is mainly considered as a way to raise capital for no profit initia-

tives or for initiatives that do not provide for a monetary compensation of the

proponent. let us now turn attention to the success ratio. If we consider all the

projects, the success ratio is 24.2%. If we distinguish for the type of project ac-

cording to the classification proposed in this study, we observe that the business

category exhibits the lowest success ratio (11.5%). The corresponding figure in

the collaboration, mecenatism and donation/charity categories is 45.8%, 31.6%

and 17.6%, respectively. Three tests of proportion confirm that the difference in

the success ratio of these latter three categories with respect to the business cat-

egory is statistically significant (at least at 10%).

Table 3 reports some descriptive statistics on successful projects. without

any distinction for the project’s category, we observe that the average target

capital of successful projects is 20,101.3 euro, the average amount of raised

capital is 21,846.9 euro and the days needed to raise at least the target capital

are on average 56.2. let us now analyze the differences among the four cate-

gories. as to the average target capital, the business category exhibit the high-

est value (69,146.7 euro). The corresponding figure in the “donation/charity”

category is lower (48,043.3 euro), but the difference with respect to the busi-

ness category is not statistically significant at the conventional significance





© Ediz

ioni F

ranco

Angeli

levels (we performed a t-test on the means, which does not reject the null hy-

pothesis that the average target capital in the two categories is different). Con-

versely, the average target capital in the collaboration and in the mecenatism

categories is much lower (5,363.6 and 2,723.8 euro, respectively), and in this

case the difference with respect to the business category is significant at 1%.8

The descriptive statistics reported in table 3 on the amount of raised capital

show a very similar pattern. we do not detect any statistically significant dif-

ference between the days needed in order to meet the target capital between

the business category and the other categories.

Table 3 – Descriptive statistics on successful projects posted on Italian crowdfunding platforms

Project classification Successful Target capital (euro) Time to meet the Raised capital (euro)

projects target (days)

No. Mean Std. dev. Mean Std. dev. Mean Std. dev.

Business 15 69,146.7 98,946.6 41.5 39.8 98,513.3 121,645.9

Cooperation 22 5,363.6a 1,726.4 42.4 35.0 5,593.2b 1,982.2

Mecenatism 170 2,723.8a 2,476.9 60.6 56.0 3,014.1b 3,141.9

Donation/charity 91 48,043.3 145,492.5 53.5 62.6 48,321.2 145,423.1

Total 298 20,101.3 86,194.1 56.2 56.3 21,846.9 88,578.0

a the average target capital in the focal category is statistically different from the corre-

sponding figure in the business category at the 1% significance level. b average raised capi-

tal in the focal category is statistically different from the corresponding figure in the “busi-

ness” category at the 1% significance level.


finally, table 4 reports some descriptive statistics on unsuccessful projects.

The average target capital of all unsuccessful project is 50,869.2 euro while

the average amount of raised capital is 1,761.3 euro. when looking at the four

industry categories, we observe a huge difference between the target and the

raised capital. from these figure, it is hardly surprising that the difference be-

tween the average target capital and the average raised capital is statistically

significant at least at 1% in each category. furthermore, the last column of

table 4 reports the percentage of unsuccessful projects that have raised less

than 5% of the target capital. Considering all unsuccessful projects, the figure

is 69.5%. More interestingly, in the business category the percentage of pro-

jects that have raised less than 5% of the target capital is 81.7%. This percent-

age is the highest among all the categories considered. furthermore, the differ-

ence with respect to the other categories is always statistically significant, at

least at 5%.



8. for sake of completeness, also the difference between the average target capital of the

collaboration and the mecenatism categories is significant at 1%.



© Ediz

ioni F

ranco

Angeli

Table 4 – Descriptive statistics on unsuccessful projects posted on Italian crowdfunding

platforms

Project classification Unsuccessful Target capital (euro) Raised capital (euro) Projects that raised less

projects than 5% of the target

No. Mean Std. dev. Mean Std. dev. %

Business 115 224,093.1 312,661.8 7,326.2a 20,619.3 81.7

Cooperation 26 6,896.9 19,186.1 318.1b 633.1 61.5d

Mecenatism 368 47,818.9 532,310.7 345.0b 1,226.5 63.0d

Donation/charity 426 9,425.7 29,361.8 1,570.7a 19,388.5 72.3c

Total 935 50,869.2 358,062.9 1,761.3 15,107.2 69.5

a, b the average raised capital in the focal category is statistically different from the average

target capital in the same category at the 1% and 10% significance level, respectively. c, d

the percentage of projects that raises less than 5% of the target capital in the focal category

is statistically different from the corresponding figure in the business category at the 1%

and 5% significance level, respectively.


Conclusion

This study reports about the first large scale research on the state of the

art and the evolution of crowdfunding in Italy by analyzing twenty-four

crowdfunding platforms and one thousand eight hundred and seventy-eight

crowdfunding projects in Italy as in 15.6.2013. Basing on our data, we can

draw interesting conclusions. It appears that donation/charity and mece-

natism projects are numerous although we expect that the structure of these

crowdfunding segments will consolidate in the future, as there is high disper-

sion of projects across platforms and many projects have not reached the

funding target. as to business projects, our analysis has showed that they

have some peculiarities with respect to other categories, in terms of size, suc-

cess and investment process. Indeed, these projects are in general bigger than

other projects, but despite this, they take on average the same amount of time

to raise the capital they need. nevertheless, business projects have a lower

success ratio and a substantial percentage (more than 80% if we consider un-

successful projects) attracts less that 5% of the target capital. a possible in-

terpretation is that contributors seem to be more selective, avoiding putting

money in business projects that probably will never reach the target capital

but, at the same time, investing a considerable amount of money in few pro-

jects. we think that the evolution of the normative framework will have a

strong impact on the evolution of business projects and that the development

of this crowdfunding segment will be crucial. Clearly, this is a topic of great

interest as equity-based crowdfunding holds the potential to expand the pos-





© Ediz

ioni F

ranco

Angeli

sibilities for new ventures to raise seed capital for the development of their

innovative ideas.

at present, equity crowdfunding is possible in Italy just for innovative start-

ups. on the one hand, such a limit may constraint the development of crowd-

funding for financing business projects in different areas. on the other hand, it

can be considered as a prudent and gradual opening to this innovative form of fi-

nancing that in the future will be probably extended to a larger class of firms. In

fact, many issues remain open to discussion. Specifically, what are the difficulties

that small business and new ventures would encounter in managing a plethora of

shareholders? how to cope with the strong information asymmetries between

these firms and their shareholders? Moral hazard and adverse selection problems

generated by these information asymmetries may indeed hurt small investors

which might be plagued by the lack of an initial investigation through due dili-

gence, which is a milestone in the investment choice of traditional agents in the

world of equity financing, such as venture capitalists and private equity investors.

References

agrawal a., Catalini C., Goldfarb a. 2011. The geography of crowdfunding. NBER

Working Paper 16820.

agrawal a., Catalini C., Goldfarb a. 2013. Some simple economics of crowdfunding.

NBER Working Paper 19133.

Belleflamme P., lambert T., Schwienbacher a. 2013. Crowdfunding: tapping the right

crowd. Journal of Business Venturing, forthcoming.

Burkett E. 2011. a crowdfunding exemption? online investment crowdfunding and

US securities regulation. Transactions: The Tennessee Journal of Business Law, 13

(4): 63-106.

Castrataro D., wright T., Bähr I., frinolli C. 2012. Crowdfuture. The Future of Crowd-

funding, published online.

Gerber E.M., hui J.S., Kuo P.y. 2011. Crowdfunding: Why People Are Motivated to

Post and Fund Projects on Crowdfunding Platforms. northwestern University Cre-

ative action lab, published online.

Giudici G., nava R., Rossi-lamastra C., Verecondo C. 2012. Crowdfunding: the new

frontier for financing entrepreneurship?. SSRN Working Paper Series, doi:

10.2139/ssrn.2157429.

Giudici G., Guerini M., Rossi-lamastra C. 2013. why crowdfunding projects can suc-

ceed: the role of proponents’ individual and territorial social capital. SSRN Work-

ing Paper Series, doi: 10.2139/ssrn.2255944.

hagiu a., wright J. 2011. Multi-sided platforms. Harvard Business School Working

Paper 12-024.

Kleemann f., Günter G., Reider K. 2008. Un(der)paid innovators: the commercial uti-

lization of consumer work through crowdsourcing. Science, Technology & Innova-

tion Studies, 4 (1): 339-354.





© Ediz

ioni F

ranco

Angeli

Massolution. 2012. Crowdfunding Industry Report. Market Trends, Composition and

Crowdfunding Platforms, published online.

Massolution. 2013. The Crowdfunding Industry Report, published online.

Mollick E.R. 2013. The dynamics of crowdfunding: an exploratory study. Journal of

Business Venturing, 29 (1):1-16..

Surowiecki J. 2004. The Wisdom of Crowds: Why the Many are Smarter than the Few

and How Collective Wisdom Shapes Business, Economies, Societies and Nations.

anchor Books: new york.





crowdfunding: the new frontier for financing entrepreneurship?

Documents