Crowdfunding in a Pandemic

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Heads of state are currently advising businesses to prepare for an imminent second wave of Covid-19, so we decided to take a step back and look at the effects that the first one had on the crowdfunding industry. History tends to repeat itself, so we should take note of any lessons that can be learned, especially as many businesses are only just opening up after the first wave.

Three Stages of Lockdown and Their Impact on Crowdfunding


Back in March, as more and more countries around the world started announcing national lockdowns, the first emotion that people often experienced was fear. An unpredictable future ahead, fear of losing their friends or relatives to the virus, fear of losing jobs and even fear of mass revolts were on many people’s minds at the time. Consequently, they stocked up on non-perishable food items and other necessities, locked themselves safely indoors and kept scrolling through endless news stories of the evolving situation online or watched 24/7 news coverage of how the pandemic was affecting various parts of the world, only further fuelling their fears.

During this initial stage, many businesses saw their operations brought to an abrupt halt, being forced to close their doors without even the slightest hint as to when they might be able to reopen. Due to their online nature, crowdfunding platforms were not among the businesses forced to close, but this did not mean that they were not affected. Because crowdfunding platforms are mere mediators between businesses seeking finance and investors looking for good investment deals, they suddenly found themselves in unchartered territory – investors en masse were too scared to make investments, while businesses, who had borrowed money were suspending operations, consequently unable to meet their impending debt obligations.

Financial squeezes naturally pop any fraud balloons, which have been able to fly during the preceding economic booms. Same seems to have happened in the crowdfunding industry. As investor money dried up, several platforms closed down or suspended their operations indefinitely, while many others, hoping for better times to come, announced the suspension of all outgoing payments. Investors were left to their own devices on their quest to recover any outstanding debts owed to them and the crowdfunding industry suffered another blow, having just started to rebuild investor trust after the collapse of several other platforms earlier in the year.


After the relatively short period of fear, came the enjoyment stage of the lockdown. As governments stepped in to provide reassurances to businesses in the form of securing bank loan repayment holidays and security to employees in the form of extensive furlough schemes, people switched from watching the news to binge-watching their favourite series on Netflix and spending money on equipping their homes with various accessories (anything that could be ordered online).

During the enjoyment stage of lockdown, crowdfunding investors realized that although many sectors may have been suffering, there were just as many that were growing exponentially, and new ones were also emerging. All these businesses, including the ones that were going through a downturn, needed money and many were willing to offer higher returns to their investors for the risk they were taking.

Contrary to what was often portrayed in the press at the time, banks were reluctant to lend money to businesses and many previously agreed loans were withdrawn at the last minute due to the uncertainty of the economic environment. Those, who were able to secure bank loans, did so on less favourable terms than was possible only a few weeks ago.

For many businesses, crowdfunding was the only lifeline left for survival.

This can be described as the revival period for the crowdfunding industry after the terrible start of the year. Many crowdfunding platforms set up separate sections for good-cause projects, waving fees for struggling businesses and speeding up the verification processes for businesses looking to serve newly established or under-served market sectors, emerging from the Covid-19 demand. Others invested in automation of the processes, propped up their communication channels and made other improvements to their platforms.

During this stage of the pandemic, investors let go of their fears, admitting to themselves that the surviving platforms were unlikely scams and new crowdfunding investors emerged – those that were previously too busy to explore the possibilities that crowdfunding investing offers.    


Three to four months into the pandemic, together with the arrival of the Summer, fatigue was setting in. The extent of fun that could be had via Zoom socialising was exhausted, all the shows on Netflix, Amazon Prime and any other available entertainment platform were seen, parents were growing extremely tired of home-schooling their children and were increasingly willing to risk catching the virus, if that meant they could have some normality restored to their lives. The numbers of confirmed cases were declining, and governments turned to the next big challenge – resurrecting the economies.

For crowdfunding platforms this meant that investors gained more confidence. Those, who had experienced delayed payments from any of the projects that they had invested in, had the hope that payments would resume. For those projects, where payments would not resume, the possibility to initiate insolvency proceedings, which was suspended with the onset of the pandemic across much of Europe, would become available, enabling investors to push the businesses to either pay up or face the responsibility.

Depending on the size of the crowdfunding platform, the amount of work trying to work through the backlog of payments from businesses to investors will obviously vary. Investors will have to be prepared to wait and in some cases also face the possible default of the businesses that they had invested in. Businesses that are only just re-opening their operations may still be unable to restart loan repayments, creating another dilemma for the investors – wait it out and give the businesses a chance to build themselves up again or force for an insolvency process to be initiated.

Preparation is Key for TFGcrowd

TFGcrowd believes that the next wave of the virus, although in many ways probably similar in the way it will affect the health of people, will be very different from the first one in the way that the governments, the businesses and the people will have knowledge of what to expect. Governments will do their utmost to prevent national lockdowns, trying instead to efficiently contain local outbreaks, businesses will have worked out possible back-up plans and people will know that any sort of lockdown will end at some point in time.

Although it certainly does not boost investor trust in crowdfunding platforms in the short term, and has caused significant losses for many investors, the collapse of the un-viable platforms earlier in the year, as well as during the beginning stages of the pandemic, actually paves the way to increased security for the investors in the future, as the crowdfunding sector is heading for EU-wide regulation now. Also, crises, such as this one, sift out the fraudsters from the market – the platforms that survive the pandemic, will benefit from increased investor trust in the long term, as they will have passed the test of going through a financial squeeze.

Automation and communication have proved to be the two pillars that are of utmost importance in this pandemic. As investor fears set in during the initial phases of the pandemic, financial markets worldwide faced a downwards slope. Crowdfunding was no exception for investor flight to safer havens, leading to a surge of money withdrawals. The more automated the withdrawal process, the less of a strain this was on the crowdfunding platforms, allowing them to fulfil the increased demand. TFGcrowd has been working hard behind the scenes on setting up an integrated system for IBAN accounts and debit cards for the TFGcrowd users, which should allow for a truly integrated and automated withdrawal process for all investors in the near future.

Communication, on the other hand, was key with the businesses struggling to get through the effects brought on by the pandemic. While several crowdfunding platforms believed it was safer to suspend all outgoing payments due to the increased number of businesses failing to meet their obligations,

TFGcrowd believed that each business was affected differently and applying a one-fits-all solution was neither fair towards the investors, nor necessary to protect the borrowers.

Many hours were spent trying to negotiate with each business that was struggling, in order to secure the best possible outcome for the investors. This meant that many borrowers, even through the toughest times of the lockdown, made repayments on time, or kept making regular partial repayments.

Having learned the lessons from the first wave of the pandemic, TFGcrowd feels confident in facing the arrival of any waves that follow. Keeping the trust of the investors high, while serving the businesses that are looking to raise funding through the platform is at the heart of their business. Letting down either of those parties would be against any of the principles that are held high in the TFGcrowd office. Constant improvements to the user experience, more and more automation for all the parties involved and open communication channels, especially through the toughest of times, as well as embracing the EU-wide regulatory framework will make sure that TFGcrowd is able to flourish in the years to come.