Curry or cumin-flavored insects with your aperitif? Clement Scellier and Bastien Rabastens knew they were on to a winner as soon as the idea to make insect snacks hit them while watching a reality TV show.
However, 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 spreading quickly in a country where entrepreneurs are seen as key to jumpstarting 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 US, it’s considered a ‘guarantee’ ... that you won’t make the same mistake again,” Scellier said. “Crowdfunding in France is a very good thing, it will make access to funds easier for entrepreneurs.”
Globally, the crowdfunding market grew 81 percent last year and raised US$2.7 billion, a figure expected to shoot up to US$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 in about 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. About 33 million euros (US$45 million) were raised in the first six months of this year — 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.
Last week, the French 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, French Minister of Innovation Fleur Pellerin said.
“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 take effect early next year.
“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,” she added.
Scented made-in-France underpants, a wind turbine that looks like a tree, customized prosthetic limbs, films, emerging singers are several examples of 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.
The government has also jumped onto the bandwagon to help renovate national monuments at a time of dwindling funds.
The Pantheon mausoleum, the Mont-Saint-Michel island commune and the medieval city of Carcassonne all raised more than they had initially asked for.
Yet analysts caution that only half of all projects submitted on crowdfunding Web sites get financed in full.
Scellier and Rabastens 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 commercialized starting in December — although they still have a month left to reach their target.