Crowdfunding and Alternative Finance

Crowdfunding refers to the process of raising capital from a large number of individuals, typically via online platforms. Alternative finance encompasses non-bank and non-capital-market mechanisms, providing channels for personal, business, and project financing.

Key models include donation-based (philanthropy), reward-based (pre-selling products), lending-based (P2P/marketplace lending), and investment-based (equity or convertible instruments). Each model has distinct regulatory and investor protection considerations.

Equity crowdfunding allows startups and SMEs to raise equity capital from retail and professional investors. Investors receive ownership stakes, and platforms must perform due diligence, risk disclosures, and regulatory compliance under ECSP and MiFID II.

P2P lending platforms facilitate direct loans between borrowers and lenders, bypassing traditional banks. Credit scoring, default risk, and liquidity management are key considerations. Platforms are subject to consumer lending and anti-money laundering regulations.

Invoice trading enables businesses to sell receivables to investors. Revenue-based financing allows repayment based on future revenue streams. These models require careful structuring to avoid hidden credit or liquidity risks.

ICOs and token-based fundraising involve the issuance of digital assets for project financing. Depending on structure, these may fall under securities laws. EU regulators assess substance over form in determining legal classification under MiCA and national frameworks.

The ECSP Regulation (EU) 2020/1503 establishes a harmonized framework for crowdfunding service providers operating across the EU. It sets rules for authorization, investor categorization, disclosure, default statistics, and the use of bulletin boards for secondary trading.

Platforms must inform investors of capital loss risk, illiquidity, and lack of guarantees. The ECSP Regulation imposes pre-contractual key investment information sheets (KIIS), cooling-off periods, and simulated ability-to-bear-loss tests for non-sophisticated investors.

Crowdfunding relies on digital platforms governed by IT security, data protection (GDPR), and platform liability standards. Operational resilience and conflict-of-interest policies are crucial for trust and scalability.

Platforms must comply with anti-money laundering (AML) and counter-terrorist financing (CFT) obligations, including customer due diligence (CDD) and suspicious activity reporting. Cross-border operations must account for local supervisory coordination.

In Slovenia, crowdfunding platforms are subject to the ECSP Regulation, supervised by the Securities Market Agency (ATVP). Depending on business models, platforms may also require licenses under ZTFI-1, ZBan-3, or the Consumer Credit Act.

Crowdfunding democratizes access to capital, especially for early-stage companies and innovative projects. It complements traditional VC and bank lending, offering founders control over valuation and community engagement.

Risks include platform insolvency, fraud, lack of secondary markets, poor due diligence, and concentration risk. Investors may face total loss of capital and limited recourse in case of disputes or platform failure.

Emerging models combine crowdfunding with decentralized finance (DeFi) protocols, using smart contracts, DAOs, and token issuance to automate funding and governance. Legal enforceability, investor rights, and data integrity remain under regulatory scrutiny.

Regulatory sandboxes, AI-driven credit models, tokenized securities, and ESG-linked crowdfunding are shaping the next generation of alternative finance. The evolving EU digital finance strategy will continue to influence platform licensing and innovation boundaries.