French crowdfunding in crisis
After 5 years of boom the crowdfunding sector has reached the limits of its development. What’s the next step?
“Growth is still an important issue for us, but it’s true that the market has stabilized”. Ulule is one of the leaders of the French crowdfunding sector, together with KissKissBankBank. And the nostalgia regarding the last years where sales revenues doubled on each balance sheet is big – and yet, with an annual growth between 15 and 20%, their success doesn’t seem seriously challenged.
These figures illustrate the current state in the French crowdfunding business. The concept has reached its public and has been incorporated into the customer’s habits. A handful of websites dominate a market which seems to have reached its limits. However, the initial boom is over and newcomers whose offer is not innovative enough are threantened to disappear. Even more so because the crowdfunding market is by definition a field where places are scarce.
“The viability of crowdfunding is based on the visibility of the projects. The most popular websites are the ones with the most clicks and thus attract more people who are willing to donate for projects which they are interested in”
“The viability of crowdfunding is based on the visibility of the projects. The most popular websites are the ones with the most clicks and thus attract more people who are willing to donate for projects which they are interested in. A site which lacks visibility won’t provide sufficient fundings for its projects and it will be less used than others. It’s a vicious circle”, as one explains at Ulule. The French market with two companies sharing the market seems similar to the American market two years ago when apart from Kickstarter and Indiegogo no one else could enter the game.
Creating market niches to surviveAs a result, new companies have to create their own market niches in order to survive. Some of them have specialized in the real estate sector, others focus on the film industry or, even more original, they only feature projects of female entrepreneurs such as MoolaHoop. This exclusivity enables the websites to target a specific audience. However, this still presents a risk. The website MyMajorCompany, which also focused on music projects, had to give up other types of projects.
In France the last Eldorado of crowdfunding may be the field of participative loans. The model has been legalized in 2014 and gives private people the right to play ‘business angels’ and to loan money to start-ups just as banks would do.
Unlike the classic crowdfunding model pursued by Kickstarter, Ulule or KissKissBankBank , the participative loans principle is meant to grant the profitability of the investment. New websites such as Wiseed and SmartAngels have emerged by dozens after the market opening and their growth rates in terms of number of projects and of the amount of the raised funds are impressing. But similarly to their predecessors the fat years could be over soon and the market is likely to shrink down to one or two websites with a strong visibility. And again, newcomers will have to innovate in order to survive...
Crédits photo : DR