In 2016, I decided to start an experiment. Could I convince Belgians to take 1 million euros off their savings accounts and invest it in local, socially responsible start-ups. I’m happy to report that even if the target of 1Meur hasn’t been reached yet, the experiment has been a success with both Little Food (http://www.lecho.be/actualite/archive/Little_Food_quand_les_grillons_levent_des_fonds.9844193-1802.art?ckc=1&ts=1483363972) and https://www.lechampignondebruxelles.be/cooperative/ both successfully raising funds using the Belgian start-up tax shelter.
Building a bridge:
There is way too much money depreciating on Belgian savings accounts. Unfortunately, many of the people who own the money have no track record at investing in start-ups. They don’t know where to find them and even if they did, they have neither the time nor all of the skills needed to evaluate the risk or opportunity of investing in one. I’m talking about your uncle, your neighbour, doctors, accountants, real estate investors etc… They are not “Business Angels” but when you put them all together, it represents a huge investment opportunity.
On the other side, there are the start-ups. Almost all need money. They generally turn to the 3F’s (Friends, Fools and Family) to begin with and follow that with a trip to a bank, a local investment fund (public and private) and of course, the business angels. There is nothing wrong with any of those options but in many cases, the start-ups also lack skills and time to evaluate which is the best route. They would love to access the doctors, accountants etc… who may be susceptible to invest in their business but they don’t always know who they are, where they are or what to tell them to enable them to invest.
Hence the need for a bridge or bridges. Money on one side, projects on the other and a huge gap in connecting them.
The tax shelter:
I’ve written about this before so don’t want to repeat myself other to say that I now know it works (more info via this link http://ccff02.minfin.fgov.be/KMWeb/document.do?method=view&id=287b65a1-3d61-4700-8e52-3ecf97889331&caller=1#findHighlighted)! You can invest through a crowdfunding platform (law passed in Dec 2016), an investment fund (not many around doing this yet) or direct into a start-up (where you still need the bridge as described above).
According to my sources, the Belgian government set aside close to 100 million euros to give tax deductions to your uncle, neighbour etc…who invests in Belgian start-ups. They want to reduce the ridiculously high level of savings in Belgium and use some of that money to create jobs and stimulate the local economy. It makes sense, right? I imagine that very few start-ups have actually used it or have even heard of it. The same goes for the guys with the money. That is why I’m writing this blog, to raise awareness and inform people of the possibility to do so this year.
What I learnt from the Little Food and Champignon de Bruxelles experiences:
- You need to understand the FSMA rules and respect them. The rules for crowdfunding and “placement privé” are not the same. The limits on the amounts of money start-ups can raise and investors can individually invest are different depending on which route you take. Choose wisely.
- Most people I have met and discussed this with are keen to invest. I could easily have raised 250k for both of those start-ups had we wanted to but we didn’t. We had to refuse some people who wanted to invest. There is a real desire but there are not enough bridges. The government is not doing enough to raise awareness about it or to educate both the start-ups and the investors. Though https://www.mymicroinvest.com/en/press are doing their bit, we need other channels and the DIY direct channel is definitely another option.
- If you just want to raise money, it is a wasted opportunity. The people investing in social businesses such as Little Food and Champignon de Bruxelles, also want to get actively involved in supporting the businesses, not just get a tax benefit. This is something which seems to be easier when you invest directly as opposed to via a fund or crowdfunding platform. They have valuable skills and knowledge which the start-ups need and getting involved also provides them with opportunities to get actively engaged in the social entrepreneurship revolution.
Now that I have understand how it works, where to find the investors and the start-ups, I’d like to continue with the goal of reaching 1 million euros. Finding the money is easier than finding good projects. This is what a lot of equity and lending platforms struggle with. I happen to know a few so my first goal will be to reach out to them and see if they are interested in pursuing this avenue. The advantage of the “direct” route is also that it is cheaper for the start-up than going via a platform or fund.
If you know of any projects, let me know? If you are interested in joining the investors “club”, also contact me.
Lots of opportunities out there and I would like to continue playing the role of bridge builder, not in competition with other bridges but in addition to them. The more bridges there are, the more connections we can make and the bigger the impact on tapping into that 100 million which the government has set aside.
Let’s face it, we can either get wrapped up in all of the negativity around Trump, Brexit, terrorism, financial crisis etc… or we can get off our assess and actively contribute to building a better society and economy via start-ups and companies who share that goal.
Thanks to Little Food and Le Champignon de Bruxelles for inspiring this post!