Virtual cooperative

Crowdfunding is growing at a whirlwind pace. It gives start-up entrepreneurs the opportunity to actually put their idea into practice. Rabobank is now entering into partnerships with platforms for crowdfunding. Does this mean the bank is shooting itself in the foot?

How does crowdfunding work? It’s very simple. You are a start-up entrepreneur. You have an idea. And you know how much money you need to be able to turn the idea into a reality. You post your idea and the required amount on a digital crowdfunding platform. Everyone can invest in the company from that moment onwards. This usually involves amounts ranging from 10 to 1,000 euros. You can always see online how much money has been raised, by whom and whether the final amount will be reached within a certain period of time, which is usually three months. If the final amount is not attained, the funds will be refunded. It is an open and transparent model. 

Investors can benefit from future profits ensuing from a project or view their investment as a loan that will eventually be repaid. Crowdfunding has just emerged from its infancy and is now continuing to grow rapidly, also in the Netherlands. This growth is being driven by the difficulties many start-up entrepreneurs are currently facing in trying to obtain financing. Crowdfunding offers the solution for them. 

Virtual cooperative

But how does crowdfunding serve Rabobank’s interests? Aren’t crowdfunding platforms actually competitors? Rabobank is, in fact, developing ties with both CrowdAboutNow, which is one of the Netherlands’ most successful crowd funding platforms, and Oneplanetcrowd, which focuses primarily on sustainable initiatives. Why?

Harrie Vollaard, Innovation Manager at Rabobank, explains: ‘You can first of all view crowdfunding as something that is very close in line with the cooperative philosophy. What you can’t achieve alone, you can achieve with others. It works like a virtual cooperative. This is reason enough to make crowdfunding important to Rabobank.’

Additional financing

Rabobank also sees crowdfunding as ongoing market research. Vollaard: ‘You gain a valuable overview of what works, what catches on and what doesn’t. This is naturally important information for a bank to know. But Rabobank should not want to start a platform itself. It is not our core business and there are moreover a number of platforms that have already proven that they work effectively. What we as Rabobank can – and want – to do is help entrepreneurs who have started successfully on a platform to advance to the next stage. This assistance can be furnished through additional financing, but also by providing him or her with access to our knowledge and our network.’

Vollaard calls crowdfunding a form of disruptive innovation. ‘After an initially reluctant attitude, we now see crowdfunding being increasingly embraced and valued. We will find out in the coming period how Rabobank and crowdfunding platforms can work together most effectively. This development also clearly suits a bank that is known for being innovative.’