Crowdfunding in Switzerland is currently more popular than ever – in the year 2021 alone, financing and donations via the internet increased by 31 percent. According to the “Crowdfunding Monitor 2022” of the Lucerne University of Applied Sciences and Arts, a total of 792 million Swiss francs were invested in crowdfunding projects.
Dynamic growth of the crowdfunding market in Switzerland
These impressive figures reflect the dynamic growth that the Swiss crowdfunding market has experienced in recent years. In 2021, the platform landscape in Switzerland was particularly diverse and robust, with 37 active crowdfunding platforms, 28 of which actively financed campaigns. This broad spectrum of platforms offers a variety of crowdfunding options that cover a wide range of projects and needs and thus contribute to the diversity and accessibility of the market.
The financed volume of 792 million Swiss francs shows not only the financial scope but also the increasing commitment of investors. These capital flows into a multitude of innovative and versatile projects underline the role of crowdfunding as an essential building block in Switzerland’s financing landscape.
Instead of competing for the favor of traditional financial players, small and medium-sized enterprises (SMEs) in Switzerland can finance themselves directly with the help of private individuals.
Crowdfunding is interesting not only for companies, but also for supporters. They often hope for lucrative rewards, such as a share in profits. In this way, Swiss start-ups can use the prospect of future profits to attract more investors.
Definition of crowdfunding
In German, crowdfunding roughly translates to “swarm financing”. This alternative financing method involves a large number of backers. As a rule, donations or investments are solicited on the internet. There, companies as well as artists, activists or event organizers present their projects, explain how much money they need and indicate what kind of reward investors can expect. Potential supporters become aware of a project via social media, blogs or media coverage. If the specified amount is reached within a certain period, the money goes to the initiators – and the idea can be implemented.
Development of crowdfunding
The basic idea of crowdfunding – many people come together to jointly finance a project – has existed for centuries. For example, the construction of the Statue of Liberty, or more precisely the construction of its pedestal, was made possible in 1885 through a call for donations. In return, the 160,000 donors were mentioned by name in the newspaper.
The first crowdfunding platforms on the internet emerged in the English-speaking world around the year 2000. Around ten years later, the German-speaking world also produced its first crowdfunding platforms. The first Swiss crowdfunding platform was founded in 2008 under the name Cashare. Cashare focuses on crowdlending and enables private individuals and SMEs to take out loans or invest in them as lenders.
Since then, around three billion francs have been brokered in Switzerland via this digital route. Around 90,000 citizens provided money as donations or loans via a crowdfunding platform in 2015.
- 2020: In this year, the crowdfunding market in Switzerland amounted to 606.6 million Swiss francs. This volume was financed by 270,000 investors. In the same year, the German car manufacturer Sono Motors set a European crowdfunding record. Within 50 days, the company raised more than 50 million euros for the production of an electric car with solar cells integrated into the body.
- 2021: Compared to 2020, the crowdfunding market in Switzerland grew by 31 percent to a new level of 791.8 million Swiss francs. Around 800,000 Swiss francs of this went into political crowdfunding campaigns. Crowdfunding as “bottom-up financing”, which can generate many small donations, is trending, explain the authors of the “Crowdfunding Monitor 2022” of the Lucerne University of Applied Sciences and Arts.
- 2022: The record from 2021 could be surpassed again in 2022 – the study authors assume that the total volume of crowdfunding in Switzerland will grow to over one billion Swiss francs.
Types of crowdfunding
Crowdfunding appears in various forms that differ in the type of expected rewards. Each form has its own characteristics and areas of application that make it attractive for specific projects and supporter groups. The following section takes a detailed look at these four main types:
Crowddonating (Donation-based crowdfunding)
- Characteristic: The altruistic element is at the forefront here. Supporters contribute financially without expecting a direct reward. Their main motivation is often the desire to make a positive social, cultural or charitable contribution.
- Areas of application: This form of crowdfunding is often used for social, charitable or cultural projects. The financing of political campaigns also often falls under crowddonating.
- Example: A striking example is the rescue of the rhinoceros in South Africa, in which the World Wildlife Fund (WWF) was able to raise more than 100,000 Swiss francs via the Givengain platform.
Crowdsupporting (Reward-based crowdfunding)
- Characteristic: In contrast to crowddonating, supporters in this form of crowdfunding receive a non-monetary reward, often in the form of the funded product or other creative perks. This type of crowdfunding enables a direct connection between project initiators and their first customers or fans.
- Areas of application: Particularly suitable for creative, innovative or cultural projects. Supporters become part of the creation story and often receive unique, personal rewards.
- Example: Via the largest crowdsupporting platform in Switzerland, Wemakeit, the design of a food truck in Romandy was supported with 25,000 Swiss francs, with generous donors being able to have specialties of the mobile café named after them.
Crowdlending (Loan-based crowdfunding)
- Characteristic: Crowdlending allows supporters to act as lenders. They lend money to companies or private individuals and receive it back with interest over a defined period. This form offers an attractive alternative to traditional bank loans, often with more flexible conditions and more direct contact between lenders and borrowers.
- Areas of application: Ideal for SMEs or individuals seeking direct and flexible access to capital, whether for implementing a project or for business purposes.
- Advantage: Often offers more attractive interest rates and more straightforward processes than traditional financial institutions.
Crowdinvesting (Investment-based crowdfunding)
- Characteristic: In this type of crowdfunding, supporters invest directly in a company, often in exchange for equity or a share in future profits. This model particularly appeals to investors who are interested in the increase in value of the company and the potential returns.
- Areas of application: Particularly attractive for start-ups and growing companies that need capital to implement their ambitious projects.
- Advantage: Supporters have the opportunity to participate directly in the development and success of the company and benefit from its growth.
The advantages and disadvantages of crowdfunding
Crowdfunding has established itself as an attractive financing option, but every entrepreneur should individually examine whether this method is suitable for their own business concept. A thorough assessment of the advantages and disadvantages can help with this decision:
Advantages of crowdfunding
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Market validation: Even before the official launch, crowdfunding allows you to test the market acceptance of your product or service and thus estimate the chances of success.
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Customer acquisition: The crowdfunding campaign can serve as a platform to build an initial customer base and establish long-term customer relationships.
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Gaining experience: By marketing your business idea within a crowdfunding campaign, you gain valuable experience that you can incorporate into your future marketing strategies.
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Network building: Crowdfunding platforms often offer the opportunity to receive feedback and constructive criticism from supporters, which can be helpful in further developing your business concept.
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Financing without debt: In contrast to traditional loans, crowdfunding does not create debt or high interest burdens, which can be particularly beneficial in the start-up phase of a company.
Disadvantages of crowdfunding
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Financing risk: Successful financing is not guaranteed. If your offer does not convince the crowd, the required capital may not be raised.
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Investor reluctance: Since the investment risk in new business ideas is often high, investors may be hesitant, which can make raising capital more difficult.
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Selecting the right platform: Choosing a reputable crowdfunding platform that is suitable for your project is crucial, as it serves as the link between you and the investors.
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Time intensity: A crowdfunding campaign requires intensive preparation and execution. Convincingly presenting your business idea and reaching a sufficient number of investors can be time- and labor-intensive.
Carefully weighing up these aspects is crucial in deciding whether crowdfunding is the right way to finance your business project.
The most important crowdfunding platforms for start-ups in Switzerland
According to the “Crowdfunding Monitor 2022”, 37 crowdfunding platforms were active in Switzerland at the end of April 2022, although only 28 platforms actually financed campaigns in 2021. There are therefore plenty of opportunities to finance a start-up in Switzerland. Below is a list of some crowdfunding platforms that are particularly interesting for start-ups.
C-Crowd
- targets innovative start-ups
- become a co-owner of a company starting from small contributions
- large number of medium-sized and smaller investors
Cashare
- first Swiss crowdfunding platform
- brings sole proprietorships and SMEs together with investors and lenders
- also finances creative projects
Wemakeit
- largest Swiss crowdfunding platform
- 62 percent of all launched projects reach their target amount
- raise money in francs or euros
Lokalhelden
- supports non-profit or non-commercial project ideas
- primarily for sports, sustainable, social and cultural projects
- can collect not only money but also helpers and material donations
Crowdify
- no category restrictions
- founded by Swiss newsletter publisher Ron Orp
- benefit from being mentioned in the newsletter
Swisspeers
- offers direct investments in small and medium-sized companies
- raise debt capital without involving a financial institution
- credit assessment is neutral and transparent
Funders
- focus on crowdlending as well as crowdsupporting projects
- targets start-ups, SMEs, associations, event organizers and non-profit organizations
- included services such as free project flyers
Creditworld
- for all types of SME financing between CHF 100'000 and 5'000’000
- professional Swiss investors such as pension funds, family offices, asset managers, etc.
- fast & transparent credit assessment