The Republic of Moldova is witnessing a remarkable transformation in its startup and SME landscape, thanks to the Alternative Funding Conference that took place in Digital Park, on 8th of December 2023. Organized through a collaborative effort by Startup Moldova, Fagura, Investitii.md, Innovate Moldova, USAID Moldova, and the embassies of Sweden and the UK in Chisinau, this conference illuminated the path to innovative financial solutions. At the heart of this movement is the recognition of various alternative funding instruments that can power the growth of Moldovan startups and SMEs. In this article, we’ll explore these alternative funding options and highlight the pivotal role played by Fagura, the only crowdlending platform in the Republic of Moldova.
Moldova’s startup ecosystem is experiencing significant developments, highlighted by the forthcoming legislation governing crowdfunding services, set to take effect from March 1, 2024. This legislation aims to bolster support for newly established enterprises, small and medium-sized businesses, and local public administration authorities through crowdfunding platforms. In this article, we will conduct an in-depth examination of this upcoming legislation and explore various funding sources available to businesses in Moldova, with a focus on the crucial roles of angel investors and venture capital firms.
Effective from March 1, 2024, the legislation outlines the regulations for crowdfunding services within Moldova. Specifically, it defines the requirements for service providers, developers, and investors participating in crowdfunding activities.
- Service Providers: These entities must be legal entities registered in Moldova and authorized to offer crowdfunding services.
- Developers: Developers can be either individuals engaged in entrepreneurial activities or for-profit legal entities based in Moldova that are seeking funding for their projects through crowdfunding platforms.
- Investors: Investors may be either individuals or legal entities that provide loans or purchase equity shares within crowdfunding projects.
The primary objective of this legislative initiative is to foster the sustainable development of small and medium-sized enterprises (SMEs) by enhancing the legal and economic environment, improving competitiveness, and creating an appealing investment climate.
Moldova boasts a thriving community of business angels who are high-net-worth individuals with a keen interest in investing in startups. These investors provide not just financial support but also valuable guidance and industry connections. Platforms like Mozaic and Business Angels Moldova are instrumental in connecting startups with potential angel investors. Startups must present strong business plans and demonstrate growth potential to attract business angels who align with their goals.
Alternative Funding Sources: Moldova’s startup ecosystem has witnessed a substantial influx of capital from various sources, as exemplified by the following figures:
- Angel Investors: Moldova’s burgeoning startup community has attracted active angel investors, including seasoned entrepreneurs and business leaders. These individuals not only provide financial support but also offer mentorship and industry connections. Notably, over the past 18 months, angel investors have invested more than 1.2 million EUR into Moldovan startups.
- Venture Capital (VC) Funds: While Moldova’s VC landscape may not be as mature as in some other countries, it has seen notable investments recently. VC funds play a crucial role by providing substantial capital to high-growth startups in exchange for equity. In the past year, approximately 10 million EUR have been invested in startups by VC funds.
- Private Equity Funds: Private equity funds have emerged as significant funding sources for businesses at various stages of development. These funds typically focus on established companies with substantial growth potential.
- Public Grants: Government grants, accessible through oda.md, play a pivotal role in supporting research, development, and business growth initiatives. These grants are essential for scaling operations and innovation.
To make informed decisions regarding funding, startups should consider various technical factors:
- Business Maturity: The stage of a business significantly influences its funding options. Early-stage startups often seek support from angel investors, while more established companies turn to VC or private equity funding.
- Investment Size: The size of the investment required and the business’s financial needs determine the most suitable funding source. Smaller amounts may come from angel investors, while larger-scale ventures turn to VC or private equity.
- Risk Levels: Different funding sources entail varying levels of risk. Startups must assess their risk tolerance and select funding accordingly.
- Team Expertise: The skills and experience of the management team often influence funding choices. Angel investors may favor entrepreneurs, while institutional investors prefer experienced management.
The Fagura Workshop at the conference provided a comprehensive insight into the critical role played by Fagura as the sole crowdlending platform in the Republic of Moldova. Fagura’s impact can be summarized as follows:
- Crowdlending Platform: Fagura operates as the only crowdlending platform in Moldova, offering a vital alternative financing solution. It enables individuals and businesses to access capital by connecting them with a community of lenders.
- Bridging the Funding Gap: Fagura has successfully addressed the funding gap in Moldova’s startup ecosystem by facilitating loans from the community of lenders to businesses. Over the past year, Fagura has facilitated loans totaling 4 million EUR, supporting numerous entrepreneurial endeavors.
- Supporting Local Businesses: Fagura plays a pivotal role in supporting local businesses and startups. By providing access to crowdlending, it empowers businesses to secure capital for growth, with 1946 Moldovan businesses benefiting from Fagura’s platform to date.
- Diverse Funding Options: Fagura’s platform offers a range of funding options, allowing businesses to tailor their financing needs. Whether it’s for early-stage development or expansion, Fagura has facilitated loans for a variety of purposes.
- Promoting Financial Inclusion: Fagura contributes to financial inclusion by connecting lenders and borrowers across Moldova. It provides an avenue for individuals and businesses to participate in the lending ecosystem.
Overall, Fagura’s crowdlending platform has become a cornerstone of Moldova’s financial landscape, facilitating access to capital, supporting local businesses, and contributing to economic growth.