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Looking to invest? Estonian crowdfunding solutions might be just right for you

There was a time when the word “crowdfunding” meant that someone was probably trying to rip you off. Those days are gone and crowdfunding has become an incremental option on the market, that offers businesses and individuals a good alternative for turning their ideas into reality.

There was a time when the word “crowdfunding” meant that someone was probably trying to rip you off. Those days are gone and crowdfunding has become an incremental option on the market, that offers businesses and individuals a good alternative for turning their ideas into reality.

Estonia has noticed its potential and it should come as no surprise that there are a handful of crowdfunding platforms originating from Estonia, tens, if not hundreds, of successful fundraising campaigns and a countless number of not-so-successful attempts and of course, a lot of investors.

The UK aside, Estonia is ranked first in Europe in “alternative finance per capita (by Fundwise CEO Henri Laupmaa)

And when talking about investors, the Estonian crowdfunding platforms are not limited to locals; e-residents too have every option to invest in Estonian ideas, as is explained by Merit Lind, the Crowdfunding Area Head in Finance Estonia, a public-private financial sector cluster. Lind explained that whether e-residents are permitted to use Estonian crowdfunding platforms or not depends on the idea of the platform and on the execution of it. For example, the equity-based crowdfunding platform Fundwise demands that foreign investors open a local bank account and a securities account.

However, there are platforms where the investment process is much easier. For example, platforms which enable investors to give out loans. Lind explained that e-residents have the possibility to sign documents digitally, which is more than enough for a contract.

€12 M raised in a year through crowd-funding

So, what has this “investment-freedom” lead to? In short: a market, which cannot get enough. “Crowdfunding is an alternative which is being increasingly used for financing in Estonia,” Lind said and added, that via loan-based crowdfunding platforms alone, 17 million euros were raised from 2013 to 2014. In 2015, there were 16,634 investors who used Estonian crowd-funding platforms, raising more than 12 million euros. When looking at the entire crowdfunding market in Estonia, it can be calculated that on average, every Estonian provided 24 euros via alternative financing platforms, Lind explained. Great Britain was in first place with 66 euros per person, Estonia was followed by Finland with 12 euros invested per person.

So, it is clear, that Estonia alone cannot compete with global platforms like Indiegogo or Kickstarter but it’s certain that Estonian platforms can offer a good alternative for people looking for additional investment possibilities or just for ideas that cannot be found elsewhere.

Self-regulating market

Another interesting aspect to note about the Estonian crowdfunding scene is that it is not regulated by laws; instead, the market is mostly regulated by a good practices guide, created by the FinanceEstonia crowdfunding task-force. Platforms that have adopted the guidelines, will be made more open, more transparent and safer. The platforms that are regulated are those dealing with loans, which need a permit from the financial inspection. So, if what you just read caught your attention, then crowdfunding might be for you. And to get started, here are some Estonian crowdfunding solutions from which to find and pick the one that best suits your needs.

Crowdestate

As the name implies, this service crowdfunds real-estate projects. Simply put: someone wants to build an apartment building; you and some other people back the project and once the property is sold, at a profit, everyone makes money. So far, over 14 million euros have been raised via Crowdestate with 32 projects in total. So, if you feel that this could be the right solution for you, then more information can be found here.

Fundwise

If owning part of a company is more to your liking then look no further than Fundwise. This Estonian platform enables investors to back companies and projects while receiving equity in return. Once the funding target is reached, the company can do what it does best and if everything goes to plan, investors will soon be remarkably wealthier than they were going in. So far, over 600,000 euros have been raised. The platform is mostly geared towards businesses looking to raise from about 20,000 euros to 100,000 euros. There are several options how the investors might see a return on their investment, including a buyout, exit or simply a share of the profits. More info can be found here.

Investly

Investly is perhaps one of the most interesting crowdfunding platforms that Estonia has to offer. It provides companies with a chance to receive money for their invoices before the due date, by letting investors buy the invoice. Once the due date for the bill arrives, the debtor pays the invoice in full, plus interest. So far, in Estonia only, 4.3 million euros have been invested. You can find more info here. In addition to these, you could also check out Bondora, which deals with loans and Estateguru, which deals with secured property loans.

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