Equity crowdfunding : current state & perspectives of a secondary market in Belgium

The emergence of equity crowdfunding as a potential funding option not only attracted the “FFF” (Family, Fools and Friends) to finance projects, but attracted experienced investors as well. Unlike the “FFF”, these investors do not fund projects based on a sentimental or social approach. They expect a real financial return out of these high risk investments, which can only be achieved through exit strategies such as selling their securities, like venture capitalists or business angels. However, these exit strategies can only be executed through a liquid market. In other words, it would require a market with a sufficient amount of money and transaction volume. Two years ago, this market did not even exist in Belgium. Investors were stuck with their high risk shares issued from equity crowdfunding with no organized market to settle them. The equity crowdfunding-issued securities were totally illiquid. Today, initiatives to organize this secondary market for equity crowdfunding-issued shares have been launched in Europe. This master thesis is meant to provide information and describe the current state of equity crowdfunding in Belgium in one hand and on the other hand to investigate the different alternatives being developed to open a secondary market for equity crowdfunding-issued securities in our country. For an exploratory study, we decided to make a qualitative research by interviewing different stakeholders in the industry with MyMicroInvest, the Belgian equity crowdfunding platform leader, as a focus point. From our empirical analysis, we could highlight three major opportunities for an equity crowdfunding secondary market: the Expert Segment of NYSE Euronext, the emergence of a third party of the extension of an existing crowdfunding platform (SSX markets). According to our representatives, the Expert Segment of NYSE Euronext is meant to emerge as the main secondary market on the short term. Indeed, this market has important features that investors are looking for: liquidity, transparency, security and neutrality. Furthermore, Euronext is Multi Trading Facility, which is a legal status that a third party or an existing platform would have difficulties to obtain. Finally, they surely have the required expertise to develop and organize a secondary market. Nevertheless, even if the Expert Market is meant to grow on the short term, this concept is relatively recent which makes it hard to predict on the long run.