September 09, 2017
Crowdfunding and sustainability are a perfect match, says Coenraad de Vries, co-founder of Oneplanetcrowd: “Sustainability is a complex transition that can only succeed through collaboration. To create that sense of togetherness, financing is an incredibly powerful tool.”
Coenraad de Vries founded the investment firm StartGreen Capital in 2006. The goal was simple: to finance as many sustainable innovations as possible. This resulted in the management of two venture capital funds and two regional energy funds for Overijssel and Noord-Holland.
When crowdfunding first emerged in 2012, De Vries and co-founder Laura Rooseboom decided to establish Oneplanetcrowd. It was the first, and is now the largest, Dutch crowdfunding platform with a focus on sustainable companies, innovations, and initiatives. De Vries: “Crowdfunding aligned perfectly with what we wanted to achieve: financing projects that deliver both a financial and a sustainable return. That is why we decided to innovate ourselves and introduce this financing instrument to the Netherlands.”
What did you hope to achieve by founding Oneplanetcrowd?
“We noticed that as investment funds, we often had to say ‘no’. This is because funds often have a very specific focus or are limited by region. Our venture capital funds, for example, focus solely on sustainable technology companies. But sustainable innovation comes from many more directions. Think of sharing economy propositions or new energy parks; those would fall by the wayside. We therefore saw crowdfunding as a complementary financing instrument that enables the financing of many more sustainable innovations.”
“We never expected it to become this big. We saw crowdfunding exclusively as a complementary financing instrument, but for many companies, it has now grown into a complete financing solution. Five years ago, you were happy if you raised €25,000 through crowdfunding. Now, amounts of €500,000 are very common.”
Where does this popularity come from?
“More and more people want to invest in an environmentally conscious way. They want to be sure that their money is being put to good use. In addition, financial return naturally remains very important. Crowdfunding offers both.”
“Secondly, you notice that the do-it-yourself mentality is on the rise. New generations are now so accustomed to making their own choices that they also research and arrange things themselves. I no longer go to a travel agency to book a weekend in Barcelona. I arrange my own flight, my accommodation, and my itinerary. That trend is also happening in the world of investing: people want more control over where their money goes and want to give it their own signature.”
“Thirdly, crowdfunding ensures a direct match between the investor and the company looking for investment. This removes several expensive intermediaries from the financial chain, which results in a better return.”
What are the advantages for companies to start with crowdfunding?
“Thanks to crowdfunding, a company not only gets the financing it is looking for but also immediately creates a community, or crowd. That is important. Suppose you are developing a sustainable energy project; it is essential to involve the region in the project. Crowdfunding is the ultimate way to achieve that public participation. After all, you are making people co-owners of the project.”
“In addition, it is a powerful marketing tool. Snappcar called the first crowdfunding campaign on our platform their most successful marketing campaign. That is because everyone who co-financed the project also became a customer of Snappcar.”
“More importantly: anyone who co-finances a project tells at least ten others about it. The exposure of the project is tenfold. With crowdfunding, you don’t just create a community; you create ambassadors.”
Are there also risks involved in crowdfunding?
“Of course. If you put your savings in a savings account, the risk is naturally a bit lower. Crowdfunding is therefore certainly not an alternative to saving or investing on the stock market. It can, however, be a complementary form of investment that adds extra sustainable return to your investment portfolio.”
“It is then important that private investors apply crowdfunding correctly. Our advice is therefore the ’10 out of 10′ rule. We advise private individuals not to put more than 10 percent of their investable assets into crowdfunding. In addition, we recommend spreading the risk by investing in at least 10 different companies. The investor must also, of course, read the project information carefully before investing.”
“Alternative forms of financing, such as crowdfunding, are only becoming more popular and larger”
What will crowdfunding look like in the future?
“Alternative forms of financing, such as crowdfunding, are only becoming more popular and larger. In the UK, for example, it is moving very fast. There you see that successful crowdfunding platforms are also becoming marketplaces for larger funds. In some cases, even pension funds. That trend is slowly but surely becoming visible in the Netherlands as well. Professional investors are increasingly using crowdfunding to build their own portfolios. Where we are heading with direct matching (crowdfunding, ed.) is towards large, high-quality platforms where private and professional investors can jointly buy into energy projects or innovative companies.”
“I expect that trend to continue and to take up a significant position in the financial landscape. But always alongside banks and regular forms of financing; crowdfunding will never replace those. And it doesn’t have to. Think of the 10 out of 10 rule: people will continue to invest the rest of their assets with banks.”
“That does not, however, diminish the impact that crowdfunding can make. Total savings in the Netherlands are estimated at approximately €340 billion. Ten percent of that is €34 billion; you can finance a lot of sustainable transitions with that.”
What needs to happen to make crowdfunding possible on such a large scale?
“You see that there are currently many discussions going on about crowdfunding. That is good. It is a relatively new phenomenon, and we must all look at it critically. The early adopters have been doing it for a while, but crowdfunding is now in the exciting transition phase to the early majority. You simply need a few years for that. Large changes are, rightly so, always accompanied by caution among private individuals. Online shopping is the norm today, but it took ten years to get there.”
“The early majority wants the same as early adopters but asks for a certain degree of certainty and also wants to have the right information. This is only possible if good regulations are established and the pioneers undergo a professionalization phase. Then the wheat will naturally be separated from the chaff. That is why, for example, the members of the European branch organization of crowdfunding platforms decided to communicate their performance every quarter, ahead of regulations. That is how you build trust.”
Why do crowdfunding and sustainability go so well together?
“Sustainability is only possible through collaboration. It is a complex transition, and people realize that. If you want to create that sense of togetherness, financing is an incredibly powerful tool. You involve all stakeholders on the financial side. In doing so, you share not only the burdens but also the financial benefits. You are truly doing it together.”
