Fears new funding rules could hobble Swedish startups

Fears new funding rules could hobble Swedish startups
Elin Olsson funded the development of her innovative smoke detector through crowdfunding. Photo: Anders Andersson/TT
Sweden is to launch a major review of crowdfunding, the growing but largely unregulated sector that helps private individuals invest in small companies. But business groups warn that new rules could "kill" the fledgling sector – and make it harder for Swedish startups to get capital.

Finance Markets Minister Per Bolund said on Thursday that he wanted the review to stop “unserious” companies.


“All investments are a form of risk-taking. But we should ensure that the rules are clear and straightforward and that people know what they can expect. That they don’t feel that they are at risk of being cheated,” he told news agency TT.


Crowdfunding has grown partly in response to banks’ inability to lend to small businesses, particularly as regulations tightened following the 2008 financial crisis.


Because crowdfunding companies are less heavily regulated than banks it has enabled them to fill some of the gap. 


Günther Mårder, head of the Swedish Federation of Business Owners, said he was pleased the rules were being looked at, but feared that regulations could make it harder for companies to access financing.


“If they were regulated like banks it would kill this kind of initiative,” he told The Local.


Mårder said he hopes the government’s review will provide a “clear framework” for crowdfunding, so companies in the sector know what kind of information to serve investors with.


“The best thing would be to have the inquiry and find rules that work, then the rest of the EU can use them as an example when it looks to do something in common.”


But, he warned, bad regulation could be negative for Stockholm’s burgeoning start-up scene. 


“In the long perspective it could definitely threaten it, especially if markets like Berlin, London and Tel Aviv have better regulation.”


The review will be complete in December 2017.


The photo at the top of this article shows Elin Olsson, founder of Elinnovation, a Swedish company that used crowdfunding to develop a smoke detector that detects fires earlier than other models.