The crowdfunding market in Russia grew by 108.64% in 2023, or much higher than the most daring expert predictions. In 2024, the segment may preserve its impressive growth rate. What caused this popularity and how can businesses benefit from others pitching in?
Higher and higher
The previous year was a success for the Russian crowdfunding market as it exceeded the threshold of 24 bln rubles ($259 mln), according to the Money Friends investment platform. The amount of crowdlending loans also grew by almost 20%. The platform analyzed data received from major market players that account for 95% of the segment.
As the digital economy is experiencing rapid growth and development, this dynamic in the FinTech industry is quite logical, and market players remain quite optimistic in 2024. Although the high key rate is holding the segment back, it is expected that a new record of 50 bln rubles ($540.5 mln) will be set, catalyzed by reducing the key rate, a measure already under discussion. Moreover, despite the fact that, due to the strict monetary policy, the interest rates in the niche are almost as high as the interest rates offered by banks, crowdfunding and crowdlending still look like a more beneficial alternative to conventional sources of funding.
Transparent and convenient: The crowdfunding market drivers
The main reason why crowdlending is an appealing option for borrowers is its convenience and more flexible conditions. The interest rates in this segment have remained at the same level despite the Central Bank’s rate hikes – the key rate has doubled by now. Furthermore, when exposed to economic problems, banks tend to cut back on lending or in any case, become less likely to approve loans, strictly evaluating any potential borrower. Therefore, crowdlending has literally become the “road of life” for Russian businesses these days.
Another driver is the growing supply side. In 2023 alone, the number of investment platforms increased to 64, only to reach 78 in January 2024. Crowdfunding is also supported by the Ministry of Economic Development and the Bank of Russia.
Transparency of processes is no less important. Crowdlending platforms rule out fraudulent schemes by putting each project through a thorough and multi-stage examination before the application can be placed. Potential investors have access to information about possible risks and projected returns.
The interest of large businesses is also spurring the crowdfunding market growth. Giant brands increasingly initiate joint projects with crowdfunding platforms to support various initiatives, both business projects and socially significant ones.
Benefits for businesses
Small and medium-sized businesses are more likely to resort to crowdfunding/ crowdlending to quickly increase working capital. Startups use this option to raise investment for their projects when the team has limited funds.
In addition, crowdfunding is a low-risk way of evaluating the market viability of a new product. It might look promising on paper, but when you bring it to the market, a lot of things can go wrong, and your business may incur significant losses. In a situation of economic uncertainty, this may be critical. With most crowdfunding platforms, the potential project’s commercial success will be thoroughly evaluated, since all applications are verified. The funds raised can be used to finance a test run; if it goes well, the business can announce a new fundraiser to expand the offering. This is what the team that created Bivan (a multifunctional inflatable sofa bed) did. During the first round, they raised almost 4 mln rubles ($43.2K) to implement their idea, and another 3 mln a year later.
Crowdfunding can also be used as a PR tool: the wider the campaign, the higher the brand awareness among a wider range of potential customers and partners. This may be an opportunity to take the business to a completely new level. Therefore, this segment is in demand and will continue to grow.
By Margarita Bylinina, marketer, entrepreneur, founder of the Digital Marketing Academy, public figure