Equity crowdfunding platforms: which one to choose

There are dozens of equity crowdfunding platforms in Italy and in Europe, which can generate legitimate doubt in entrepreneurs as to which platform to choose to launch their capital raising campaign.

This is an important choice, because the chosen portal will work alongside the company's team before, during and after the campaign and dictate the rules of the relationship (subject to legal regulations).

The first, imperative criterion is to choose a platform that is officially authorized to operate, according to the ECSP Regulation: as of November 2023, platforms that have not received new authorization from Consob and the Bank of Italy or by the respective national authorities are no longer allowed to provide crowdfunding services. Any portals that offer such services but do not declare authorization are scams.

Another useful reference for Italy is the annual report of the Milan Polytechnic's Crowdinvesting Observatory: every year it publishes an analysis of the situation of the equity and lending crowdfunding market, also making a list of platforms and presenting their results. It is easy, therefore, to first discard the completely inactive platforms. Among those that have recently been inactive, it is worthwhile to sort through them to see if they have any distinguishing features that give a compelling reason to keep them in consideration along with the others.

Once you have narrowed down the initial pool of options, you have to analyze for each one a fundamental set of aspects to choose the ideal crowdfunding platform for your project.

Distinguish platforms by area of specialization

Some crowdfunding platforms have been born or have over time specialized in hosting equity crowdfunding campaigns for projects related to a specific economic field. Others, on the other hand, are "generalist" platforms that publish projects from any sector.

The most common examples are real estate, eco-sustainability, energy, agribusiness and new technologies, but there are also portals dedicated to much smaller market niches.

If there are platforms that cater specifically to your type of business, give them a special focus. Presumably they will have a team that is familiar with your market, your target audience, strengths and weaknesses, the dynamics of your competitors, any regulatory peculiarities, etc. It will be easier to speak the same language and more quickly define the goal and strategies to achieve it.

This does not mean that generalists are to be ruled out beforehand. First, because there may not be a portal dedicated to your industry. Second, because there are generalist platforms that may have enough experience behind them to have known a variety of industries and be able to bring useful strategies and insights learned in another into one.

The advice, then, is to prioritize any crowdfunding platforms specific to your industry, testing them against all other criteria; but then also evaluate generalist ones by the same criteria and compare the results.

Success rate: reading data

Data analysis can be complex and tedious work. Here, however, we have an explicit and easy to interpret piece of data that is very valuable for evaluating a crowdfunding platform: the success rate of campaigns. In other words, it involves collecting information on how many equity crowdfunding campaigns were successful on each portal, and how many failed to reach the goal. This is public data, which can be found conveniently online, starting with the report of the Polytechnic Observatory already mentioned.

A clarification is necessary: it is not the platforms that do the crowdfunding campaigns, but the companies. If a company does not put in all the necessary effort and resources, even the best of platforms will see a failure mark on its scoreboard. However, statistics don't discount anyone: if a high percentage of equity campaigns on a platform fail, the platform is doing something wrong.

The flaw may be in the selection of companies, which is the main task of a crowdfunding portal. Not all companies are suitable or ready to do a crowdfunding campaign, and it is up to the platforms to develop parameters to identify them. Or there could be a communication problem: it is important for the platform to communicate to companies all their duties and rights, the mechanisms of the phenomenon, opportunities, deadlines, etc. Or again, the portal website might be unintuitive and not very user friendly.

Some of these possible weaknesses will be additional evaluation criteria when choosing the crowdfunding platform where to launch one's equity campaign.

Success fee: check costs

All equity crowdfunding platforms have commission costs to host campaigns on their portals. Some charge a flat fee, but these are few. These are usually success fee, which are calculated as a percentage of the money raised by the campaign and collected only in case of success. 

The percentage fluctuates in a similar range for all platforms, but it is worth checking and comparing this important information, which allows you to estimate how much the crowdfunding campaign will cost the company.

Support and services: understanding what your equity crowdfunding platform can do for you

As we saw in the previous section, there are differences between the services that the various platforms offer their companies. Not all of these differences, as is often the case, are perceptible from the outside: some aspects can only be realized once the journey has begun.

As far as possible, however, it is good to check what kind of support each operator offers to proposing companies, for example:

• legal and bureaucratic support;
• consulting on the production of materials;
• investor communication support;
• realization of reporting.

These are some of the main areas where the active presence of the platform is useful. If this information is not specified on the portal, ask for it: it's a great way to get to know them better.

Please note: crowdfunding platforms are not required to carry out marketing activities specific to the campaigns they host. On the contrary, from November 2023, when the EU Crowdfunding Regulation comes into force, it will be forbidden for them to do so. Every crowdfunding campaign will have to be treated the same; platforms will not be able to provide additional paid services, only refer to any services of third-party companies. What they can do is give general guidance, technical advice, insights, testimonials of past experience, send newsletters to their members and investors to update them on current campaigns, act as a liaison between companies and investors for bureaucratic aspects

User experience: choosing an intuitive platform for your potential investors

One last criterion, certainly not the most important, for evaluating a crowdfunding platform is its usability. Put yourself in the shoes of your potential investors and test the process they need to follow to invest in a campaign on a portal: if the process is straightforward and intuitive, guided by a principle of transparency and made enjoyable by a well-designed website, people are more inclined to see it through. The risk of them abandoning the process midway due to ambiguity or misunderstandings is much lower.

Other aspects to be checked from this point of view are any restrictive conditions imposed on investors, in addition to those established by law, and the manner and timing of remuneration.

The main equity crowdfunding platforms in Italy

The most active equity crowdfunding platforms in Italy are as follows (in purely alphabetical order):

• Backtowork24
• Concrete Investing (real estate)
• Crowdfundme
• Crowdinvestitalia
• Fundera
• Mamacrowd
• Opstart
• Starsup
• Walliance (real estate)
• Wearestarting.

Not only Italian crowdfunding platforms

In November 2023, as mentioned above, the European Crowdfunding Regulation comes into force, which introduces an important new element for choosing the platform on which to launch your campaign. Activity rules for all European crowdfunding platforms will be standardized, so that it will be possible to launch crowdfunding campaigns on any platform in any member country under the same basic conditions, and find investors abroad as well.

For some types of business, it is an important opportunity to consider based on one's target audience, the type of product/service, one's personal and professional contacts, possibilities for overseas expansion, etc.

What NOT to look for in an equity crowdfunding platform

Often companies that want to run a crowdfunding campaign place too many expectations on platforms. Underlying this mistake is a widespread belief on the part of those who do not adequately understand the mechanics of crowdfunding: the more registered users a platform has, the more potential investors it offers to the companies that choose it for their campaign. False!

The aforementioned report on crowdinvesting by the Milan Polytechnic Observatory showed that most investors (74.9 percent in 2021) invest in only one campaign. If we add those who invest in two campaigns, we come to understand the behavior of 86 percent of investors. It thus becomes clear that there are no serial investors "loyal" to a platform who follow all its projects and invest in many of them. In most cases, the investment is single and targeted: the investor is not already on the platform, but gets there because he or she decides to invest in a particular project.

It serves little purpose, in conclusion, to base the choice on the number of registered users, hoping that a high number will automatically translate into more investors. 

Once you choose the equity crowdfunding platform where you launch your campaign, you will be responsible for bringing investors there. How? By marketing.

Read more, read the first Turbo Crowd book, which allows people to learn the basics and tricks of the crowdfunding trade in an easy but comprehensive way. As the first crowdfunding marketing consulting company in Italy, we produce useful content for those who want to approach this world and provide professional support.