Nowadays, the sources of alternative financing are revolutionizing the way of investing and financing both companies and individuals.

One of these forms of alternative financing is crowdfunding or crowdfunding whose literal meaning is a crowd, crowd, and funding. It is also known as collective financing by the Spanish Royal Academy of Language.

It is the union of a group of people who lend their money through crowdfunding platforms, to finance projects and ideas of other people or organizations.

The term crowdfunding was used for the first time in the article “The Rise of Crowdfunding” published by the American magazine Wired and written by Jeff Howe and Mark Robinson in the year 2008.

The following graph, developed by Google Trends, shows the evolution of the interest generated by the term crowdfunding in Spain.

 

Infographics of crowdfunding in Spain

 

In the following infographic, we summarize the evolution and crowdfunding data in Spain.

Origins of crowdfunding

Image result for crowdfunding spainThe origins of crowdfunding are much older than we can think, in fact, when it originated there were not even computers.

In 1830, an appeal was made to the public to finance a project consisting of a fish-shaped balloon and between 1883 and 1884 Joseph Pulitzer used crowdfunding through his newspaper to finish the Statue of Liberty in New York to change of rewards in the form of recognition of citizen participation and a replica of the statue as thanks. In just 6 months, it was possible to raise more than $ 100,000 with the collaboration of 125,000 citizens.

In our era, the first case of Crowdfunding in Spain was in 1956 when the inventor of the mop Manuel Jalón, with the help of his neighbor Pepita, got financing by visiting other neighbors for the industrial manufacture of 2000 mops.

Another appearance of crowdfunding in Spain took place in 1989 when the rock group Extremoduro became the first Spanish music group to publish an album through crowdfunding, getting 250,000 pesetas.

But crowdfunding can not only be carried out through the provision of money, but it can also facilitate knowledge, know-how (know how), etc .; a clear example is Wikipedia, which is written and published thanks to the collaboration of many people.

 

Types of Crowdfunding

 

Within the crowdfunding we can differentiate 4 types:

  • Crowdfunding of donation: It is normally carried out with solidarity projects and humanitarian aid in which the investors who lend their money do not receive in exchange any consideration.
  • Crowdfunding of reward: Usually carried out with cultural or artistic projects in which the patrons who lend their money receive a reward in return, either in the form of thanks or merchandising, depending on the money that is provided.
  • Crowdfunding of loan https://gadcapital.com or crowdlending: Private investors lend their money to other people or organizations that need financing in exchange for a return for their money.
  • Crowdfunding of participation or crowd equity: People who lend their money to a company receive in return a share in the profits of the same in relation to the money they have contributed.

In this article we are going to focus on pure crowdfunding, that is, reward and donation.

 

Origin and evolution of crowdfunding platforms in Spain

Origin and evolution of crowdfunding platforms in Spain

The first Crowdfunding platforms in Spain were created in 2010 and were Verkami and Lánzanos; Today there are more than 50 crowdfunding platforms registered in Spain.

According to figures published by Massolution, an international consultancy on Crowdfunding, in 2012 11% of the crowdfunding websites were based in Spain, collecting 0.7% of the total Crowdfunding platforms worldwide.
In 2014, crowdfunding in Spain increased 114% in relation to the previous year, with the global amount raised by Crowdfunding worldwide at 34.4 billion dollars in 2015; the amount that doubles the figure of the previous year.

The development of these crowdfunding platforms in Spain is largely due to the development of two technological advances:

  • The security in the payments through Internet
  • The great growth of social networks

According to the Spanish crowdfunding association, of crowdfunding platforms in Spain, 65.5% belong to Crowdfunding of donation or reward.

Through the study “Access to the financing of SMEs in Spain” carried out by the University of Valencia, it can be seen that since 2012, projects in Spain worth more than 100 million euros have been financed (62 million in 2014, 29 million in 2013 and 10 million in 2012).

According to a study by Crowdsurfer (Business Intelligence services company), Spain is among the top five countries within the European Union in amounts obtained through Crowdfunding websites with 21.6 million euros and only behind the United Kingdom, France, Germany, and the Netherlands.

 

Types of projects

The types of projects can be classified into different categories depending on each crowdfunding web platform and the theme on which its activity is based, and it can be of many types, among which we can find: art, music, cinema, science, fashion, games, technology, etc.

According to data from the Spanish Crowdfunding Association:

  • The average amount requested per project is € 1,128 in donation crowdfunding and € 2,804 in reward crowdfunding.
  • The average duration of the projects is 80 days for donations and 40 days for rewards.
  • The average commission is 3.5% in donation projects and 5.6% in reward projects.

 

Spanish Association of Crowdfunding

The Spanish Association of Crowdfunding, member of the World Crowdfunding Federation (WCF) is created with the aim of promoting crowdfunding as a good form of financing and to represent all the crowdfunding platforms in Spain, currently with 39 members.

This association has published a code of practices to be adopted by all these crowdfunding platforms in order to protect their patrons and investors.

 

Regulation of Crowdfunding platforms in Spain

Regulation of Crowdfunding platforms in Spain

With the approval of Law 5/2015 on the Promotion of Business Financing, a new way of differentiating the types of Crowdfunding is carried out in only two modalities:

  • Financial or investment crowdfunding: It encompasses Crowdlending and Equity Crowdfunding.
  • Non-financial Crowdfunding: They are the crowdfunding of donation and reward.

This new regulation of crowdfunding platforms in Spain only refers to financial Crowdfunding.

The Crowdfunding of donation will be regulated by the Law of Patronage and Donations and the crowdfunding of reward through the regulation that regulates the trade since there is a delivery of goods or services.

This Law also makes a differentiation regarding investors, which may be of two types:

  • Accredited: They meet a series of requirements in terms of income and assets that allow them to invest without limit of amount.
  • Not accredited: Having a higher risk, they have an investment limit of € 3000 per project and € 10,000 per year in total investment in all the crowdfunding platforms in Spain.