ON LOCATION met with Jamal El Mallouki, Managing Director of KENSINGTON Crowd GmbH and Chairman of the German Crowdfunding Association.
Mr. El Mallouki, you are one of the pioneers in the crowd investment scene in Germany and as chairman of the Crowdfunding Association, are considered to be one of the experts in the industry. What has developed in the industry over the last 5 years?
The industry has developed enormously in recent years. The crowd investing market has grown continuously since 2011 and has made another big leap forward in the last two years. In 2018 alone, the volume of successfully placed crowd investments amounted to almost 300 million euros. The number of platforms has also almost tripled in the past five years. The real estate sector in particular acts as the driving force. Another important step was the entry into force in 2015 of the law on the protection of small investors, which provided a framework for crowd investments for the first time. The fact that this year there will be an evaluation of this, and thus further possibility for improvements for investors and issuers to invest and collect capital , confirms the positive development of the industry.
What role do institutional investors, such as family offices, play among investors?
Institutional investors often act as corporations. They are interesting for crowd investing projects because they are able to invest larger sums. For issuers, this in turn has the advantage that the funding sums can be reached more quickly.
What market potential do you still see in Dtl. for the Crowdinvest industry?
I would rate the market potential for the future as very good. Many savers are looking for new investment opportunities due to the permanently low interest rates. Crowdinvesting offers an alternative to conventional financial investments, whereby every investor knows exactly in which product or company money is invested, unlike some funds, for example. The aforementioned evaluation of the Small Investor Protection Act also gives investors and companies new opportunities to invest in crowd investing projects or to consider them as an alternative financing option.
What is the motive for a project developer to seek capital through the crowd?
There can be various reasons for this. For many, going to the bank often proves to be too lengthy. Startups or project developers often need capital quickly and unbureaucratically. In terms of speed, transparency and flexibility, crowd investing offers significant advantages over traditional financial institutions. The crowd can help others to strengthen their equity ratio in order to obtain loans more easily with which projects can then be realised. And some want to actively involve the public, for example by giving employees the opportunity to participate in the economic success of their company. In this way, you not only collect capital, but also strengthen your brand image.
How can you ensure that you are not investing in the wrong projects?
The most important thing is to find out as much as possible about the project and the company or project developers behind it in advance. You can also write directly to the supplier of a project and ask questions. Much can also be found in the Investment Information Sheets (VIB) of the respective projects. Another important point, which applies to all types of investment, is the diversification of one’s own portfolio: i.e. spreading one’s capital as widely as possible and investing in many different projects. This reduces the overall risk and makes it easier to cope with a single default.
What exactly is stated in the Asset Investment Information Sheets (VIB) and what is the benefit for the investor?
VIBs are a kind of “package insert” for investors. There you will find the most important information, characteristics and risks relating to the investment offered. These include, among other things, the type and exact designation of the investment, the term and period of notice or the conditions for interest and repayment. This not only increases transparency, but also offers investors a good basis for comparison with other financial investments.
More and more investors are investing via crowd platforms, and the trend is rising. From your point of view, why is that?
Platforms offer many solutions from a single source that make you attractive for investors and companies. Before the start, you carry out a detailed examination of the project plan and then prepare all the necessary legal and sales documents. This increases security and transparency for investors. During the funding phase, they also take over various services, such as investor support or the publication of reports to investors. A further advantage for investors is that they can invest in various projects on a crowd platform and thus diversify their portfolio.
You are the managing director of the KENSINGTON Crowd platform. What exactly is the role of a managing director of such a platform?
In addition to the classic entrepreneurial and commercial tasks, in the case of a crowd investing platform like Kensington Crowd, my tasks also include the comprehensive plausibility and feasibility check of the project plans. I also represent the platform to external investors. In doing so, I address both the needs of the investors and those of the issuers.
What motivated you to join the KENSINGTON Group and help develop this new business segment?
Real estate project development plays a major role in the growth of crowd investing in Germany. Both sectors complement each other very well with their respective advantages. We want to exploit this growth potential. In addition, with Kensington Crowd, we can act independently as a 100% subsidiary of CrowdDesk GmbH, whereby CrowdDesk can rely on its strengths, such as marketing, handling and administration of crowd investing projects, while at the same time having access to the large real estate network of the KENSINGTON Group.