In light of recent EU policy reports published this September 2024, such as the Draghi report and mission statements from the new European Commission leadership, the focus on institutional investments, venture capital, and large-scale financial mechanisms is clear. These approaches are vital for fostering European competitiveness and driving the green and digital transitions. However, we at EUROCROWD believe that citizen-led investment, particularly through crowdfunding, should be recognized as a complementary force to institutional finance, ensuring inclusive, resilient, and locally impactful growth.

The Untapped Potential of Crowdfunding

Crowdfunding has emerged as an innovative and democratic form of investment, offering a platform where individuals can directly invest in SMEs, start-ups, social enterprises, renewable energy projects, and community initiatives. Regulated under the European Crowdfunding Service Providers Regulation (ECSPR), crowdfunding unlocks capital for sectors often underserved by institutional finance. This is especially important as Europe works to build a more resilient financial ecosystem that can support local entrepreneurship, foster green innovation, and drive regional development.

Addressing Gaps in EU Financial Policy

While the Draghi report highlights the importance of scaling up institutional investments to achieve European growth objectives, crowdfunding offers a unique solution to the fragmentation of Europe’s capital markets. It provides early-stage capital for start-ups, niche innovators, and regional entrepreneurs who may not have access to traditional funding sources. By tapping into citizens’ savings, crowdfunding adds fresh capital to the European investment landscape, allowing everyday citizens to actively participate in creating wealth and the innovation funnel.

Although citizen participation in financial markets remains underutilized, crowdfunding can help address this gap. In contrast to institutional mechanisms, crowdfunding directly engages individuals, giving them a stake in the success of projects aligned with local needs and the social economy.

EU Institutions Must Prioritize Crowdfunding

To fully harness the potential of crowdfunding, we urge the European Commission and EU policymakers to take the following actions:

1. Recognize crowdfunding as a key element of the Capital Markets Union (CMU): Crowdfunding should be incorporated into EU policy frameworks aimed at closing the financing gap for SMEs and start-ups, especially in sectors like cultural and creative industries, renewable energy, and social innovation, where institutional finance often falls short. This will ensure that the full potential of crowdfunding is realized in contributing to Europe’s local economies.
2. Leverage crowdfunding for the social economy: Crowdfunding is uniquely suited to supporting impact-driven businesses that contribute to sustainability and social inclusion. EU institutions should encourage member states to integrate crowdfunding into national financial frameworks to support smaller transactions, particularly those below EUR 5 million, which often escape the radar of institutional investors.
3. Promote cross-border crowdfunding: With the European Crowdfunding Service Providers Regulation (ECSPR) in place, EU funds and initiatives must support cross-border platform scaling. This will enhance the flow of capital across member states and empower citizens to invest beyond their national borders, amplifying the impact of crowdfunding across Europe.

Aligning Crowdfunding with the EU’s Strategic Priorities

As Europe advances its sustainability and digital innovation goals, crowdfunding can play a pivotal role. Platforms are already facilitating direct investments in renewable energy projects, circular economy initiatives, and technological start-ups, directly supporting the EU’s green and digital transitions.

Crowdfunding is also an important tool for fostering democratic engagement in the economy. By allowing European citizens to invest directly in securities or loans for businesses, crowdfunding offers a transparent and participatory model for financial inclusion. Though small in scale compared to institutional mechanisms, crowdfunding enables bottom-up economic participation that aligns with the EU’s ambition to strengthen social cohesion and economic resilience.

Institutional Fatigue and the Need for New Solutions

While institutional investments remain the backbone of EU financial policy, they are not always suited to address the fatigue many citizens feel towards traditional top-down financial solutions. Both Draghi and von der Leyen’s policy outlines miss the opportunity to engage citizens as active participants in Europe’s economic future. Crowdfunding offers a way to reinvigorate citizen involvement, creating a more inclusive financial ecosystem where everyday investors have a say in the projects and businesses they support.

A Call for Strategic Integration

To realize the full potential of crowdfunding within the EU’s broader investment strategy, we call on the European Commission and policymakers to:

• Incorporate crowdfunding more explicitly in financial instruments and policy discussions: Crowdfunding can uniquely address Europe’s SMEs' needs while fulfilling citizens' desire to be co-owners in wealth generation.
• Foster public-private partnerships: By combining institutional capital with citizen-led funding, the EU can accelerate innovation and meet diverse financing needs. Crowdfunding is the perfect vehicle to engage citizens as active investors, ensuring they play a meaningful role in economic development, rather than simply being recipients of financial education or passive participants.
• Encourage R&D in blockchain, AI, and digital technologies: These technologies can enhance transparency, security, and the efficiency of crowdfunding platforms. With the right support, crowdfunding can scale across Europe and provide significant economic and social impact.

As Europe aims to become a global leader in sustainability, digitalization, and innovation, citizen-led investment through crowdfunding must be recognized as a vital enabler of inclusive economic participation, growth, and resilience. EUROCROWD remains committed to working with policymakers to ensure that crowdfunding is a core component of Europe’s financial future, alongside traditional institutional investments. Together, we can build a financial ecosystem that serves all Europeans.