Crowdfunding counters France's culture of caution

Curry or cumin-flavoured insects with your aperitif? Clement Scellier and Bastien Rabastens knew they were on to a winner as soon as the idea hit them while watching a reality TV show. But the concept sent shivers down some spines, including France's famously risk-averse banks, so the 24-year-olds decided to try out crowdfunding to help develop their firm, "Jimini's." This new form of funding, which allows people with project ideas to go online and solicit money directly from other individuals, is fast rising in a country where entrepreneurs are seen as key to kickstarting growth but face considerable financing difficulties. "In France, there's a culture of caution. If you fail with a company, it's almost impossible to get a bank loan again whereas in the United States, it's considered a 'guarantee'... that you won't make the same mistake again," said Scellier. "Crowdfunding in France is a very good thing, it will make access to funds easier for entrepreneurs." Globally, the crowdfunding market grew 81 percent in 2012 and raised $2.7 billion, a figure expected to shoot up to $5.1 billion this year, according to research firm Massolution. North America is by far the leader in this innovative form of funding, which broadly falls under three categories -- donation-based financing, peer-to-peer lending and buying equity in a company. In France, the trend emerged around 2008 with the rise to fame of Gregoire, a singer who financed his first album via the My Major Company crowdfunding platform. It has slowly gathered momentum. Some 33 million euros ($45 million) were raised in the first six months of 2013 -- more than the whole of last year -- with more to come. "Growth (in France) will be around 150 percent this year, compared to around 100 percent at a global level," said Francois Carbone, head of the French crowdfunding association. "This shows that there is strong interest in France for this mode of funding, and that it is rising quickly." Last week, the country's Socialist government announced a series of new proposals aimed at facilitating crowdfunding, which until now was in regulatory limbo. These include the creation of a new legal status that would ease regulatory burdens for online crowdfunding platforms -- a first in Europe according to innovation minister Fleur Pellerin. "We all know how much banks can be unadventurous, scared of new ideas from inventors and those with projects," Pellerin said at a conference announcing the measures, which if adopted will kick in in early 2014. "This is a problem, particularly in a context of crisis where we actually need to encourage audacity, and test groundbreaking solutions to create more jobs. "For young or new entrepreneurs, (for) all those who... refuse to bow to the dictums of banks, crowdfunding is a real boon." Scented made-in-France underpants, a wind turbine that looks like a tree, customised prosthetic limbs, films, emerging singers... The projects are snowballing, with several examples of meteoric success. Buzcard is a case in point. The French firm that makes innovative, scannable business cards raised 260,000 euros in just three days this year after months of unfruitful talks with angel investors, who traditionally provide capital for start-ups. On the lower end of the spectrum, beekeeper Thomas Cambassedes raised more than 27,000 euros to buy much-needed hives -- over three times his initial target. The government itself has also jumped onto the bandwagon to help renovate its national monuments at a time of dwindling funds. The Pantheon, the famed resting place for French national heroes, the Mont-Saint-Michel, the medieval city of Carcassonne... all raised more than they had initially asked for. But analysts caution that only half of all projects submitted on crowdfunding websites get financed in full. Scellier and Rabastens, for instance, have so far only raised half of the 10,000 euros they need to pay back machinery used to make the insect snacks -- due to be commercialised from December -- although they still have a month left to reach their target. Oliver Gajda, head of the European Crowdfunding Network, warned that inexperienced investors needed to understand that there were risks involved and that those expecting a return could be disappointed. "Best practices need to be established," he said, adding that more transparency would be needed on online platforms.