The Emergence of Start-ups

3Equity Crowdfunding of Start-ups in France

3.1. Introduction

Fundraising in French start-ups¹ exceeded $2 billion in 2016 and reached just over $3 billion in 2017 according to the CB Insights barometer (Les Echos Entrepreneurs 2018). Maddyness (2018a) announced that the average amount of funds raised is €3.3 million. In addition, transactions worth less than €1 million represent only 34% of rounds of funding.

Despite the importance of these figures, the failure rate of new businesses is 90% (Journal du Net 2017). This is due, among other things, to a funding problem. However, there is a variety of financing options. Alongside investment funds and business angels, the company has other alternatives to support it in launching its project: bank loans, grants, assistance from public bodies or equity financing.

But even though the opening to external investors is becoming more and more democratic, this solution is still rarely used by many entrepreneurs who do not want to lose their decision-making power within their company. However, only by opening up capital, very large amounts can be raised and, thus, quickly create strong growth in the company.

Equity crowdfunding (ECF) involves opening the company’s capital to the “crowd”. This new financing alternative is experiencing a remarkable growth, with €154 million raised in 2014. Experts estimate that €6 billion will be raised by 2022 (Poissonnier and Bès 2016).

In addition to financial needs, the role of the entrepreneur is central ...