Crowdfunding is a way to raise funds for a project or venture by asking people (the ‘crowd’) for contributions, typically online.
The gap in legislation presents a pitfall for both platforms and projects. “It also puts Ireland at a disadvantage in terms of encouraging new start-ups in the space and protecting investors,” added Doyle.
A legal framework or guidelines would boost mainstream acceptance of crowdfunding, provide certainty to platforms and projects, and enable Ireland to leverage its start-up community.
If Ireland can sell itself as a location for trustworthy crowdfunding, it could attract more businesses and, in turn, create more jobs. One study cited by the European Commission estimates that, in Spain, 7,500 direct ‘crowd-jobs’ were created through some 2,800 successful crowdfunding projects.
Irish legislators can either take action now to establish a more regulated crowdfunding market, or they can wait and see how recently adopted models in countries such as France, the UK and the US pan out.
“The risk with (this approach) is that we lose competitive advantage,” said Doyle. “On the flip side, we can obviously learn from any mistakes and adopt a regime in a more mature environment.”
It’s hard to say which would be the best approach, as the crowdfunding market is in its infancy both in Ireland and globally.
For Doyle, the key is striking a balance, with minimum disclosure requirements to assess credit risks that don’t over-burden project owners or platforms.
“I believe that some form of vetting is required. As to how far this should go – that’s a tough one,” he said. “We need to be careful not to make compliance for platforms and project companies overly expensive or it will kill the potential in this space.”