European Regulation Ushers In Global Future For Fundraising

By Ryan Feit 

Ten years ago, U.K.-based Crowdcube became the first platform in the world to enable ordinary people to invest in startups online.

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Around the same time in 2011, SeedInvest, of which I am CEO and co-founder, helped get the Entrepreneur Access to Capital Act, which sought to legalize and democratize online fundraising and investing, passed by the U.S. House of Representatives. This Act was ultimately rolled into the Jumpstart Our Business Startups (JOBS) Act which was signed into law on April 5, 2012, enabling entrepreneurs to leverage the power of the internet to raise capital for their businesses for the first time.

Flash-forward a decade, and online fundraising and investing has proliferated in both the U.S. and U.K. markets. In the U.S., more than 1.2 million investors have invested over $1 billion into more than 4,500 startups, according to Crowdfund Capital Advisors. Meanwhile, in the U.K., $549 million was invested through equity crowdfunding in 2020 alone, according to the Cambridge Centre for Alternative Finance.

Furthermore, online fundraising in both the U.S. and the U.K. has matured well beyond seed rounds.

For example, digital health startup NowRx closed a $20 million round through online fundraising last year and is currently looking to raise an even larger round online. The space has produced many significant success stories where retail investors had opportunities to invest early on in private startups which ultimately became unicorns, including Heliogen in the U.S. and Revolut and BrewDog in the U.K.

While online fundraising continued to prosper in the U.S. and the U.K., for all intents and purposes, Europe remained largely off-limits due to a lack of regulatory permission. But earlier this month, that all changed.

On Nov. 10, 2021, the European Commission enacted regulation that allows European-based businesses and investors to access online fundraising and investing for the first time. Companies in the European Union will now be able to raise up to 5 million euros ($5.6 million) from European investors (and additional capital from investors in the U.K. and U.S.). This is a huge deal, not just for entrepreneurs and investors in Europe, but also for the rest of the world.

It’s always been inevitable that fundraising and investing would eventually become global and work seamlessly across geographic borders. To date, the U.S. and U.K. have served as powerful illustrations of the potential of online fundraising.

U.S. and U.K. online startup fundraising success proves the internet can radically improve the efficiency of the private capital markets, spurring innovation, job creation and GDP growth.

They have also demonstrated that high risk, high return, alternative investments can be offered to anyone in a fair and balanced way. The expansion of online fundraising and investing across Europe brings us one step closer to an open, global and connected economy where individuals and businesses can more freely connect and transact on the internet without borders or boundaries.

Ryan Feit is the CEO and co-founder of SeedInvest, an equity crowdfunding platform that connects investors with startups. Prior to founding SeedInvest, Feit worked at Carlson Capital, Wellspring Capital Management, and Lehman Brothers in New York City where he invested in, financed and managed dozens of private and public businesses.

Illustration: Dom Guzman