Crowdfunding 101

 

Welcome to Impact Hub Basel’s Crowdfunding Guide! Social crowdfunding platforms are gaining even more traction in Switzerland than before. Whether you are an investor, entrepreneur, or just interested in the crowdfunding offer, you have come to the right place! This page acts as a reference guide to the variety of crowdfunding platforms in Switzerland, as well as general info and legal guidelines.

 

The Lingo

 

Crowdfunding

Concisely, joint financing of a project by a large group of individuals.

 

Crowddonating

Individuals or other legal entities supporting charitable projects, causes, and/or NGOs through monetary donations, without any material return (some projects may offer recognition for participation). In Switzerland, most of these platforms do not charge a commission for donations.

 

Crowdsupporting

Individuals or other legal entities supporting projects with the expectation of a return in investment (profit, delivery of a product, or other material benefit). This type of crowdfunding is the most common, and is used by entrepreneurs, innovators, artists, and businesses to gain financial backing for their projects. Swiss platforms usually charge a recipient fee of around 6% of donations.

 

Crowdlending

Provision of loans from (usually multiple) private investors to individuals and businesses. A common form in Switzerland is P2P (peer-to-peer) lending, where borrowers can choose the interest rate, and investors have a choice of loan options.

 

Crowdinvesting

Similar to crowdsupporting, as investors expect a material return Switzerland, although this type of crowdfunding is mainly used by larger businesses and start-ups in the growth phase. Small investors get a piece of capital (and become shareholders) in return for their funding. The most common use in Switzerland is jointly purchasing real estate.

 

“All or nothing”

The mode of operation for most platforms – a funding target must be reached before funds are transferred to a specific project.

 

“Keep it all”

The other mode of operation for platforms, although less common. Allows funds to be transferred even if targets are not reached.

Moneyland.ch. (2018). Crowdfunding in Switzerland. [online] Available at: https://www.moneyland.ch/en/crowdfunding-switzerland-guide [Accessed 3 Dec. 2018].

The Offer

 

  1. Lokalhelden.ch – Crowdsupporting & Crowddonating

This platform from 2016, run by Raiffeisen Bank, focuses on supporting non-commercial Swiss-based projects. Culture, sport, and broader social projects are the focus, as this platform aims to enact positive change on a local, regional, and national scale. Unique to this platform, interested parties can donate money, as well as time or other resources to available projects (so great to consider if you might have limited finances). Barbara Ortins, who presented her ethical shirt company, Ginga, at Impact Hub Basel’s event in October, used this crowdfunding tool to jumpstart her social endeavor.

This platform does not add a commission (good to know, there is a 1.5% transaction fee for credit card use), so contributions are received by the project owners in full, as long as their target is reached (all or nothing principle). This platform explicitly does not allow for crowdlending or crowdinvesting.

 

  1. Crowdify – Crowdsupporting

Founded in 2012 through event website Ron Orp, this platform offers startups and projects tools to raise awareness – ad space, 500 business cards, postings on Ron Orp’s website and national newsletter, and all-around support. This platform runs like a traditional crowdsupporting platform. Project owners can choose the duration of their projects, up to 120 days. The platform’s partnership with HTW Chur also results in researched advice and potentially beneficial contacts.

This platform takes a commission of 9% of support raised from successful campaigns (all or nothing principle).

 

  1. we make it – Crowdsupporting

This platform is the largest crowdfunding platform in Switzerland (over 3’000 projects) and was founded in 2012. The focus here is wide, with projects of all kinds by individuals, entrepreneurs, startups, and organizations. With four languages, and large variety of collaborations, the platform offers a vast network of opportunities and contacts. This platform also offers promotion and coaching packages for a fee, if extra support is desired.

This platform takes a commission of 10% (6% for service, 4% for transfers) from successful campaigns (all or nothing principle). Backers can pay in CHF, EUR and Bitcoin.

 

  1. CauseDirect – Crowddonating

This Swiss-based crowddonating platform from 2013 is aimed at boosting fundraising and raising awareness for non-profits. Through a partnership with the bank Société Générale, the platform pre-selects projects for backers to ensure impact and legitimacy. Projects do not have a minimum target amount (keep it all principle) and can be posted for indefinite amounts of time. Also, all profits incurred by the platform are invested in its registered projects.

This platform takes a commission of 5% of the amount raised in the previous quarter (good to know, electronic payment through PayPal has a cost of 1.4% per transaction).

 

  1. ProjektStarter – Crowdsupporting

This small platform has been supporting crowdfunding projects since 2011. Through its unique “Ideation Phase” setting, projects can be presented and updated before crowdfunding starts for an unlimited amount of time. When the project is opened for funding, established fans of the project can start backing it, reducing “dead time”. This platform also prints 80 flyers for its projects.

This platform takes a commission of 8% (5% for YOUNG projects by owners ages 18-28) from successful campaigns (all or nothing principle).

 

  1. Fundeego – Crowdsupporting

Operating in the French-speaking part of Switzerland since 2014, this platform offers 90-day fundraising projects. To receive funds, projects can either opt to set a target, or leave this area open. If a target is set, the majority of the funding goal must be reached for the project to receive its financing. The platform also offers a pre-launch option for the project to gain popularity before fundraising begins. There are set levels of contribution (8 amounts, from CHF 5 to CHF 200), and additional coaching and communication packages are available.

This platform takes a commission of 6% (good to know: Stripe, the payment operator, collects 2.9% of the transaction) for all transactions.

 

  1. Fund – Crowdsupporting (also offers crowddonating and crowdlending)

This fintech platform created in 2015 in Geneva offers customizable crowdfunding and blockchain options. Crowdfunding users can choose from a “Freemium” package (CHF 100 per month for maintenance, targets up to CHF 500’000) or a “White Label” package (CHF 1’000 per month for maintenance + CHF 20’000 for an API connection, targets over CHF 500’000). Donations to campaigns start at CHF 20.

This platform takes a commission of 5% (plus payment costs) for its “Freemium” offer and 1% (plus payment costs) for its “White Label” offer from successful campaigns (all or nothing principle).

 

  1. Bee Invested – Crowdinvesting

This platform, created in 2014 and based in Western Switzerland, offers equity crowdfunding. Startups offer capital in return for investment, with the idea that larger-scale entrepreneurial ideas (from CHF 100’000 to CHF 2.5 million) can be financed through small investment amounts, resulting in profitable returns. Campaigns can last a maximum of 120 days, before which candidates are screened mainly through an elevator pitch and audit phase (legal and financial), which can take up to 35 days.

This platform takes a commission of 7% from campaigns that achieve a minimum amount of capital (set by the platform and entrepreneurs), lower than the target amount (all or nothing principle).

 

  1. I care for you – Crowddonating

This platform from 2015 focuses on social and sustainable projects for Swiss non-profit and for-profit organizations. Areas of interest include educational, humanitarian, social, environmental, and animal protection projects. Every project benefits from professional and personal coaching, and all potential projects are screened before they are allowed to operate on the platform. Campaigns can run for 30, 50 or 80 days. Funders from successful projects are given thank-you “gifts” at the end of campaign (personalized videos, drawings, etc.).

This platform takes a commission of 10% from successful campaigns (all or nothing principle).

 

  1. Sosense – Crowddonating

This 2010 digital innovation startup and crowdfunding platform is based in Zurich. The platform has partnered with multinationals such as PwC, Credit Suisse, Starbucks, the UBS Foundation, and SAP. With these partners, the platform creates and/or helps run global campaigns supporting social innovation in the digital sphere.

Campaigns run for a set period of time (determined through a contract with partner), or until the individual funding target has been reached. The platform vets projects and campaigns and supports the fundraising.

This platform takes a commission of 10% (excluding credit card charges) from each donation (keep it all principle).

 

  1. Good Festival – Crowdsupporting

This concept, created in 2012 in Lausanne is an event series and competition founded on supporting social innovators in “doing good.” Innovators apply to be part of the “Good100,” where they can hold crowdfunding campaigns. Projects with clearly defined missions and business plans are accepted, and fundraising has an upper limit of CHF 20’000. Campaigns are reward-based, with gifts such as tickets to the annual Good Festival. This platform especially encourages and supports female innovators.

This platform takes a commission of 4.8% (excluding credit card fees) from each campaign over CHF 2’000, and there is no minimum target (keep it all principle).

 

  1. Funders – Crowdsupporting & Crowdlending

This 2016 project from the Luzerner Kantonalbank is a traditional reward-based crowdsupporting and crowdlending platform. Crowdsupporting campaigns can last up to 90 days, with a recommended length of 30-45 days. For crowdlending, Swiss startups and businesses must set targets higher than CHF 20’000, and the lending campaign can run from three months to five years. The platform is also partnered with cantonal banks from Bern, Thurgau, Obwalden and Nidwalden. Interesting to note, out of scope for this platform are charity projects and individual lending. The platform also provides a statistical analysis of the campaign (i.e. how many people access the campaign site, what keywords support the campaign, etc.), outlining strengths and weakness of the campaign site.

For crowdsupporting, this platform takes a commission of 7% from successful campaigns (all or nothing principle). For crowdlending, the platform charges both the investor and receiver 0.8% if the target set is 90% funded.

 

  1. Investiere – Crowdinvesting

This 2010 venture capital platform offers investors opportunities to support technology-driven startups. Startups apply to become a part of the platform, and 1-2% of these are selected to be in the platform’s portfolio. In early rounds, startups are not charged if accepted into the platform, although later stage growth rounds are also accepted. Typical investments in the startups range from CHF 1-3 million. Investors can be a part of the platform through portfolios starting at CHF 10’000. This platform is supported by 68 capital partners, and the Zürcher Kantonalbank.

This platform charges investors (excluding VAT) transaction fees ranging from 3% to 6%, depending on the size of investment. There is a 15% performance fee on profits from investments (carried interest). The platform offers a fee discount of 2.5% to 4% on investors that make three investments in a year.

 

  1. progettiamo.ch – Crowdsupporting

This 2014 Ticino-based platform focuses on supporting economic development projects in the region. Potential projects submit detailed proposals, and non-profit campaigns in the areas of culture, tourism, or historical heritage promotion are approved and endorsed through the ERS regional agencies. The platform has a success rate of 76% with 92 projects, with an average donation of around CHF 285. The platform is sponsored by the cantonal bank of Ticino.

This platform does not charge a commission, and releases funding if the full target amount is received (all or nothing principle).

 

  1. GivenGain – Crowddonating

This 2001 Swiss Foundation helps verified global charities in their fundraising. The platform holds over 2’200 charities, and only allows charities officially registered with relevant governments. The platform is active with charities in 56 countries, and donors in 193 countries. Among the charities covered are the WWF, UNICEF, Habitat for Humanity, and the Swiss Red Cross. Individuals, teams, or charities themselves can open projects related to specific charities.

This platform takes a commission of 5% (excluding a 2.5% credit card fee and transfer fee between CHF 5-9, depending on currency). A target can be set, but

there is no minimum target (keep it all principle). There is a monthly license fee of CHF 5 per campaign, after the first campaign.

 

  1. c-crowd – Crowdinvesting

This 2010 platform acts as an intermediary between investors and startups looking for funding. Investors can express interest in a project, and in return, they get a business plan and a copy of the shareholder’s agreement from the project owners. Startups need to register as Swiss limited (AG) companies and have a capital requirement of CHF 50’000 to CHF 2.5 million. Projects are approved on the platform by the Board of Directors after an application and in-person meeting. Funds received by the startup are used only for growth purposes, and startups are required to have an independent board member within 6 months of a successful campaign. The platform has partnered with the Europe-wide platform Raizers to open up the offer to startups in Luxembourg, Belgium and France.

This platform takes a down-payment of maximum CHF 8’000 from both successful and unsuccessful campaigns. This amount is deducted from the funding of successful campaigns (all or nothing principle), except when the down-payment is more than 10% of the total amount (in which case the commission is 10%). Unsuccessful campaigns still have to pay the down-payment.

 

  1. Cashare – Crowdlending

The largest P2P crowdlending platform from 2008 offers individual loans up to CHF 1 million, and business loans up to CHF 5 million. Individuals must be domiciled, and businesses must be registered in Switzerland. Interest rates go from 3.9% to 9.9% for both individuals and businesses. The platform completes a credit check on loan campaigns and assigns a credit rating from A (best) to C. Investments are allowed over CHF 200.

This platform takes a commission of 0.75% for the total loan amount per year (minimum for individuals is CHF 75, for businesses, CHF 500). A death insurance is also charged for all individuals up to 65. Lenders are also charged a commission of 0.75% if the overall campaign is successful (all or nothing principle).

 

  1. 3Circle Funding – Crowdsupporting & Crowdlending

This 2015 platform offers both crowdsupporting and crowdlending (P2P) for Swiss registered businesses and domiciled individuals. Both investors and project owners need to apply to use the platform. Crowdfunding projects can determine targets and time ranges for campaigns, with a possibility to extend. For crowdlending, individuals can get from CHF 5’000 to CHF 250’000, businesses from CHF 25’000 to CHF 500’000, in time ranges from 1 to 60 months.

This platform takes a commission of 5% (excluding credit card fees) of successfully funded crowdsupporting projects (all or nothing principle). In some cases, under-funded campaigns may also receive the partial funding, if the platform management decides to release it.

For crowdlending, interest rates for individuals are set at a maximum of 10% of fully funded loans (all or nothing principle). There is a listing fee for each loan process, CHF 50 for individuals, and CHF 100 for businesses. There is an additional annual service fee for both those seeking loans (0.75 for individuals, 1% for businesses) and those providing funding (0.4%).

 

  1. Swisspeers – Crowdlending

This 2015 peer-to-peer lending platform allows established Swiss businesses to achieve target loans for new projects. Only registered companies active for at least two years are in scope, so individual groups, trusts, or financial firms are not allowed on the platform. Loans range from CHF 50’000 to CHF 990’000, for 6 to 60 months. Interest rates depend on credit rating (from A+ to D+), from 1.5% to 10.75%, although most rates fall between 3% and 8%. Interest rates depend on credit rating (from A+ to D+), from 1.5% to 10.75%, although most rates fall between 3% and 8%. If the funding target is not reached, the platform can extend the campaign for a final twenty days. The platform runs its operation with blockchain technology through the Linth Bank.

This platform charges a commission depending on rating, from 1% to 1.25% (good to know, 7.7% tax is added to this payment). A yearly use fee is also charged, from 0.5% to 0.75%, which is added to the interest rate. The loan is released if 90% of the target amount is paid (all or nothing principle). Investors are charged a fee of 0.5% of the loan amount per year.

The sources for all of the information is the respective website of organization.

For more platforms, check out the Swiss Crowdfunding Association.

(Note: At Impact Hub Basel, we focus on projects boosting sustainability efforts and local social impact. We chose to focus on platforms emphasizing these ideas. Out of scope in this article are real-estate or sports crowdfunding platforms. Also, we do not receive any financial compensation for mentioning these platforms in this article.)

Legal Component

FINMA, the Swiss Financial Market Supervisory Authority, revised the Banking Ordinance to accommodate crowdfunding platforms. Legal requirements for “financial market participants” were “relaxed” to “benefit crowdfunding. ” The revisions have been in effect since 01 August 2017. Crowdfunding platforms do not usually require financial market licenses, if platforms transfer funds to project “developers” (owners) within 60 days of completion, or funds transferred are under CHF 1 million. That said, platforms “must either obtain a license from FINMA as a directly supervised financial intermediary (DSFI) or become a member of a self-regulatory organization (SRO) recognized by FINMA.”

 

Crowdfunding platforms are not supervised by FINMA, nor are the deposits protected, except if they violate money laundering legislation. Project “developers” do not require licenses if they accept funds below CHF 1 million, comply with transparency requirements, and do not invest or pay interest on the funds (“unless main activity is commercial and/or industrial”). With regards to risk, crowdfunding platforms are treated like regular financial investments. FINMA will also investigate any reports, but alleged fraud cases are regulated by criminal law. The gist? Be comfortable in the amount of your contribution and be careful if a project seems too good to be true.

Swiss Financial Market Supervisory Authority FINMA (2017). Crowdfunding. [online] Bern. Available at: https://www.finma.ch/en/~/media/finma/dokumente/dokumentencenter/myfinma/faktenblaetter/faktenblatt-crowdfunding.pdf?la=en [Accessed 3 Dec. 2018].