Dutch Association of Investors for Sustainable Development

Whitepaper | Institutional investors & crowdfunding: The right match?

Publication:

At first sight, the link between crowdfunding and institutional investors is not very logical. Yet there are opportunities here for institutional investors that are currently hardly being used. If we look at neighboring countries such as England and Germany, we see that institutional investors here already invest on a much larger scale in crowdfunding platforms. In the Netherlands we see a gap between small sustainable companies looking for financing on the one hand and institutional investors looking for sustainable projects to invest in, on the other. Impact investing is becoming increasingly important for large investors and VBDO sees opportunities in the crowdfunding market.

That is why VBDO published a white paper called: Institutional Investors and Crowdfunding: the right match?

It looks at the Dutch market of crowdfunding and the opportunities and challenges that lie ahead for institutional investors.

  • Opportunities:
    Crowdfunding platforms offer the opportunity to invest with a positive impact;
  • Crowdfunding is a growing market that is becoming more professional, which also makes this market interesting for large investors;
  • Investing in crowdfunding platforms can have a positive effect on the reputation of institutional investors by giving a positive signal to participants.

The challenges lie in (the lack of) scale and the lack of track records, as a result of which institutional investors often ignore crowdfunding. The fact that crowdfunding is not yet very regulated in the Netherlands also means that there are major differences between the platforms. European legislation is being prepared, which means that this market will be subject to the same rules within the EU. The lessons we can draw abroad, are that it can be interesting for institutional investors to invest in sustainable platforms as a whole rather than in individual projects. In this way, investments can get the right scale.

The VBDO recommends the following next steps:

  • More (international) research into the opportunities that crowdfunding platforms offer to reduce the existing mismatch;
  • Investments in crowdfunding platforms can be tackled in more innovative ways, for example combined with investments in other seed funds;
  • Institutional investors can exert pressure at EU level for better regulation of this market. Government guarantees for part of the investment would help to reduce the risk for institutional investors. Something that we already see happening in England.

With this white paper, the VBDO wants to encourage institutional investors to delve further into the possibilities that sustainable crowdfunding platforms offer to make impact investing.