Interview of Zoran Rajn for the ‘Forbes’ magazine and ‘Jutarnji list’ newspaper

The interview was made within the framework of an article about crowdfunding for the Croatian edition of ‘Forbes’ and ‘Jutarnji list’ newspaper.

1. Can you introduce yourself?

I am the founder and head of the Center for Social Innovation and Sustainable Development, and initiator of several social – entrepreneurial projects. In parallel with the development of local crowdfunding platform, I work on the analysis of legislations of countries in the region with the aim of launching the region’s first reward-equity crowdfunding platform for entrepreneurs, civil society organizations and members of the public sector. Also, I’m currently finishing the CroMall, Croatia’s first e-commerce oriented to promoting and connecting Croatian manufacturers and service providers with abroad.

2. What does your Center, and what people it gathers?

Center for Social Innovation and Sustainable Development is an independent, non-governmental organization established with the aim of designing and implementing new models that contribute to solving social problems in an innovative and sustainable manner. I founded it independently in late 2012, and brought together young people, mostly between 25 and 35 years of age. Center covers a wide range of topics, but is mostly concerned with economic issues.

3. What are the legal and financial preconditions for the establishment of crowdfunding platform in the Republic of Croatia? What are the institutions familiar with the programme and do you have Hanfa’s approval?

Legal and financial requirements will vary depending on how the platform will be structured. This stems from the fact that in Croatia, as in most of the world, no specific legislation related to crowdfunding exists, but it must be interpreted in the context of other legislations, in particular the Capital Markets Act, Corporations Act as well as the Civil Obligations Act. With the existence of the platform is familiar the whole range of the state institution’s, and among them is Hanfa (Croatian Financial Services Supervisory Agency), and so far non of them point objections to the platform.

4. Considering the Croatian regulations, do you expect interest in equity crowdfunding?

For the equity model to be successful, it is necessary to make a few changes to the Corporations Act. First of all, it is necessary to reduce costs and facilitate the establishment and transfer of ownership of shares in a limited liability company, by introducing the possibility that all investors do not have to be physically present at the founding of the company and for the changes enforceable in the social contract, but that the entire process can be done by one member of society. There are also some other legal solutions possible, but I think at the beginning, the legal changes should be as simple as possible.

5. Do you consider it would be desirable to enact specific legislation for crowdfunding?

Similarly as in most of the world and Europe, in Croatia still has not been established enough practice which is related to crowdfunding. Due to this, a certain amount of time is required, during which is preferably to refrain from enforcing special regulations. It is important to allow crowdfunding to be developed with no restrictions under the existing legislation, in order to denounce its true nature, and then to intervene legally where this proves necessary. Legal gaps can always be better to fill up with the interpretation and adaptation of the existing regulations, then to bring premature, and therefore what is the most common case – bad special laws.

6. You planning the possibility of investing money in exchange for a share of the profits by signing a contract with a secret company. You give it an advantage over equity model. Why? How great impact investors have on the project in that case? introduces a new funding model that has not yet been known on a global crowdfunding scene, namely the share of profits on the basis of a silent partnership. The key advantage of this model is that the investor does not bear obligations to the third parties; he does not enter his relationship into the court registry and doesn’t have any additional costs. The project leader still holds his independence in decision-making, but a secret member retains the right to supervise operations, access to financial records and obtaining the necessary clarifications.

7. Does platform is special by something else than the possibility of investing money through a contract of the secret company?

Besides using the institute of the silent company, platform is also specific that it combines all the models of financing – donations, rewards, loans and equity interests, it connect crowdfunding with EU funds, stresses the importance of cooperation between crowdfunding and traditional financial sector, and pays equal attention to the civic, business and public sectors. Also, in consideration is the introduction of several innovative billing systems to eliminate the current weaknesses of e-business in Croatia.

8. You are now in the pilot phase, you have announced new campaigns in the autumn. Is there any interest from entrepreneurs, start-ups? What does mean info from your site that the platform will be available to all citizens of January next year?

For participation in the pilot program can apply to all natural and legal persons from the civilian, business and the public sector; the applications should be sent by 1st of September. For most local entrepreneurs crowdfunding is a new concept, but nevertheless there is no lack of interest. The pilot program is divided into two stages. During the first stage, which is currently being implemented, a one project from the Center for Social Innovation and Sustainable Development has been presented. As a project is selected Adria Dunk Tank, an innovation which offers education of citizens about endangered plant and animal species of Adriatic in a funny and proactive way. During the second stage, that will start during the fall, will be presented few campaigns from other natural and legal persons. From January next year, everyone will be able to independently create an account and lead a crowdfunding campaign.

9. Have you visited the European crowdfunding platforms? Did you use someone else’s experiences? As far as I know, the first platforms in the region exist only in Italy and Austria, and there are more developed platforms in the UK, France, Germany, and so on.

Given that the legislations are completely different, foreign experiences have not been helpful to me. Also, crowdfunding for most of the world, with the exception of North America and Western Europe, it is still quite unknown. This trend is slowly but surely changing, so in the future period it will be interesting to see the experiences of other countries.

10. Will someone join you with experience in the so-called conservative financial waters?

Interest in the project has been demonstrated by the traditional financial sector, but also the state. It is possible that on that route will be established certain forms of cooperation. Personally, I see a large area in combining Croinvest, EU funds, government tenders, Hamag guarantees (Croatian agency for SMEs, Innovations and Investments), and loans from the commercial banks and also from the CBRD (Croatian Bank for Reconstruction and Development). The possibilities are indeed numerous, and with the very basic interventions in the current legislation, it could give a strong impetus to the economy. The story of crowdfunding is still in its infancy, and it is an opportunity for Croatia to profile as a leader of good practice which then could be recognised by the other countries.

Journalist: Gordana Grgas
Interlocutor: Zoran Rajn, founder of the platform