Crowdfunding volume declines for the first time

With a volume of CHF 662.4 million, the crowdfunding market fell short of last year's record figure of CHF 791.8 million. Since the founding of the first crowdfunding platform 15 years ago, around 3.7 billion francs have been brokered via the digital route in Switzerland. This is shown by the latest "Crowdfunding Monitor Switzerland". This study is conducted every year by the Institute of Financial Services IFZ of the Lucerne School of Business with the support of the Swiss crowdfunding platforms.

A breather or a turning point?

For the first time in the history of crowdfunding in Switzerland, the market volume no longer recorded an increase in 2022. Compared to the record value of 2021, the volume fell by 16 percent. Nevertheless, the volume is still significantly above the value of 2020. According to the study authors, the increased interest rate level has also influenced the market growth somewhat. Higher interest rates tend to have an inhibiting effect on the demand for capital, e.g. in the area of crowdlending. When investing capital, investors are increasingly comparing the risks and returns of this asset class with the risk profiles of alternative investment opportunities. The study authors expect a similar volume for 2023 as in 2022 due to macroeconomic uncertainties (economic development, interest rate level).

Online credit market for SMEs grows

With the exception of corporate debt financing, the volumes of all crowdfunding segments declined. SME crowdfunding grew by 28 percent to CHF 141.9 million in 2022. Andreas Dietrich, co-author of the Crowdfunding Monitor, says: "Loans via platforms to SMEs have already been growing continuously for years. However, the market development of this segment was interrupted by the Covid crisis and the corresponding Covid loans in 2020. In this respect, SME financing is now back on its previous growth path."

Adjusting screws for future growth

The HSLU study authors identify two areas that represent important prerequisites for future market growth. First, the involvement of institutional investors will be central to securing a more significant supply of capital. So far, it has not been possible to attract institutional investors on a significant scale. According to Andreas Dietrich, "It still takes a lot of education for traditional financial institutions, venture capital firms and business angels, as well as traditional institutional investors, to recognize the potential of crowdfunding as an investment opportunity."

Another decisive factor for the growth of capital demand is the level of awareness of crowdfunding as a source of financing. Especially in the area of debt financing (corporate loans, consumer loans), higher awareness and knowledge among potential borrowers could drive growth. Many companies refrain from applying for a loan from a bank despite the need for financing because they are concerned, for example, that the interest costs are too high or that they would not receive a loan. Using crowdlending as an alternative source of credit could help alleviate these concerns. In the area of consumer loans, many individuals may not yet have realized that crowdlending offers attractive interest rates compared to other options.

Source: Lucerne University

Crowdfunding: These forms exist

• Crowdsupporting: Mostly creative and cultural projects and campaigns from the sports sector. The investor receives a product, an artistic work or a service in return for his or her contribution. For example, someone who finances a book receives a copy free of charge.
• Crowddonating: Majority donations to social, charitable and cultural projects that are not tied to anything in return.
• Crowdinvesting: Investment of equity or debt capital in companies (start-ups) or real estate. In return, investors receive a share of the profits.
• Crowdlending: Mediation of loans to companies or private individuals. In return, the donors receive interest payments, the amount of which depends on the risk of the capital borrower.