Lawmakers in Germany have settled on a compromise regarding new rules for start-ups looking to raise funds via online crowdfunding platforms.
The German government has requested that new companies provide detailed information about their business, including any potential risks attached to an investment in their proposal. The intention is to protect investors from fraud whilst supporting innovation.
Under revised rules, companies seeking to raise over €2.5 million through crowdfunding would have to provide detailed information of their venture for the benefit of retail investors.
These parties have the right to demand a refund of their money within 14 days after agreeing to provide it.
Initially a draft law was compiled following the bankruptcy of wind farm operator Prokon last year, in which investors lost some of the money they’d pledged to the company’s future.
However, many supporters of new business in Germany expressed concerns that the new rules would prevent investors from coming forward, and the draft law was amended to take the needs of start-ups into consideration.
“We welcome the compromise because it establishes a functioning framework for crowd investing,” said Florian Nöll, chairman of the German Startup Association.
“Crowd investing has become an important funding source for founding of innovative companies over the past two years.”
Currently the new law is still awaiting approval from the German parliament.
As retail investors rapidly seek to cash in on the booming German tech market, online platforms which allow new businesses to raise funds have surged in popularity across Europe in recent years.
Aiding the influx of start-ups in Germany, crowdfunding platforms such as Companisto provide small companies with the opportunity to raise money at little cost to themselves.
Home to the likes of SoundCloud and Wooga, Berlin is an especially notable startup hub. A report from multinational management consulting firm McKinsey & Co. found that 100,000 jobs could be created in the city by 2020, as a result of the funding, support and enthusiasm for new business.
Last year Berlin-based tech startups raised over €600 million in funding, more than three times the amount generated the previous year and over six times the figure raised the year before that, according to CB Insights.