Laws regulating crowdfunding are still to be written. These developments, however, occur in a legal grey area. Tencent surprisingly remains out of the competition. In the same period, Baidu founded Baifa Youxi (百发有戏) to compete directly with Alibaba’s Yu’ebao on movie-making. Less than a year later, it also launched an equity-based crowdfunding platform. A few months after Alibaba, Jingdong launched its own kickstarter-like platform, Coufenzi (凑份子)-a reward-based crowdfunding platform with a large portfolio of projects. Alibaba, following its 2014 IPO, decided to enter the industry with Yu’ebao (余额宝), a reward-based crowdfunding platform focused on movies, and Zhaocaibao (招财宝), a peer-to-peer loan platform. With such forecasts, it’s no wonder companies have rushed to the opportunity. Consequently, the World Bank estimated that the Chinese crowdfunding market should reach a total value of about US$50 billion by 2025. Household savings are huge – about US$4.6 trillion – and Chinese are increasingly looking for new investment channels at a time of financial uncertainty. Alipay alone has 350 million users, and there’s still WeChat Wallet, Baidu Wallet, etc. If competition is this rough, it is because the potential is real: China counts 650 million netizens, accessing the Internet mostly via smartphones (86% of Internet usage), on which many have electronic money. Demohour, the first Chinese crowdfunding platform, has fallen to 4th place, being responsible for only 7.2% of the total funds raised by all the crowdfunding platforms. The market is therefore highly competitive, led by JingDong (京东) with a 31.6% market share, followed by Zhongchou (众筹) at 11%, and Taobao (淘宝) crowdfunding (part of Alibaba – 阿里巴巴) at 9%. The same year, there were 110 active platforms, 50 of which had been created within the previous 12 months. Since then, the industry has undergone an average year-on-year growth of about 155% in total funds raised, reaching US$70 million in 2014. This article analyses those constraints and explains why China’s crowdfunding is being increasingly driven by its leading e-commerce companies.Ĭrowdfunding is a young industry in China, as it only appeared in 2011 with the creation of the platform Demohour (点名时间). China is witnessing the absorption of crowdfunding activities by its e-commerce platforms, since both the legal and social environments impose constraints unknown in the West. Interestingly, Chinese crowdfunding platforms have adopted a very different approach to crowdfunding compared to standard business models in the West. Fortunately, a new hope is developing: fundraising from crowds. They are still focused on businesses about to scale up. Thirdly, even though venture capitalists are quickly multiplying in China, the total value of venture capital deals has skyrocketed by 80% year-on-year since 2007. Secondly, institutional investors, such as InnoFund, the Chinese equivalent of the French Banque Publique d’Investissement (BPI), decline to fund high-risk ventures. Firstly, commercial banks are reluctant to lend money to small and medium enterprises currently, less than 10% of bank loans are directed towards them. Raising funds for one’s start-up in China is a serious challenge.
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