Crowdfunding and crowdinvesting: A financing solution for energy (efficiency) investments in businesses?

Panel: 5. Business models, finance and investment in the age of digitalisation

Author:
Sonja Starnberger, Energieinstitut der Wirtschaft / Energy Institute for Business, Austria

Abstract

Crowdfunding and crowdinvesting offer the opportunity to finance projects with the help of many small financial contributions by many different people („the crowd“). In the course of the last few years, there has been a rapid development of online platforms and service providers aiming at facilitating crowdinvesting campaigns.

As banks are subject to an increasingly strict regulatory framework governing the rules for issuing loans, access to finance has become more difficult, especially for small and medium sized enterprises (SMEs). Lack of financial means is often mentioned by SMEs as one of the reasons why energy efficiency measures recommended in energy audits are not implemented.

This paper presents common types of crowdfunding/crowdinvesting models and examines whether and under which conditions it makes sense for businesses to take these financing methods into consideration when they need funds to finance an investment to improve the energy efficiency of their operations or to use renewable energies. This is illustrated by examples, highlighting the benefits, success factors, and also possible risks.

Preliminary research in this field has been carried out by the author with a focus on Austria, where the “Alternative Financing Act” passed in 2015 has clarified the legal framework, and crowdinvesting platforms have boomed. While at first it was mostly start-ups looking to fund the development of innovative products/services, more recently also established firms, for whom financing is not a major issue, use the opportunity for marketing and community/customer involvement.

So far, projects related to energy efficiency measures have been very scarce, though, compared to e.g. financing the development of energy technologies or smaller RES projects (PV, small hydro). This presentation broadens the perspective and looks also at examples from selected other countries, such as Germany, where this type of project is somewhat more frequent.

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