crowdfunding, sharing economy, p2pfinance,

Strictly Confidential 1

Entrepreneurial Finance, September 19th 2016 Crowdfunding – still a niche financial product?

Stockholm School of EconomicsCenter for Competitiveness and Strategy

Michal GromekResearcher on Crowdfunding

Strictly Confidential

V. Get your message accross

IV. Practical aspect of a campaign (Does and Don‘t)

III Be successful in Crowdfunding

2

Let’s do this J

I. Personal Background

II. How do you benefit from Crowdfunding?

VI. Bonus


EDUCATION JOURNALISM PUBLIC SERVICE PROJECT MANAGMENT

OUTLOOK

3

Michał Gromek – Researcher at HHS

[email protected]

6+ years experienceFounding member of the EYP Head of int. affairs German Youth PressTrainer, Photograph

3+ years experienceInvest in Poland Ministry of Foreign Affairs InvestGDAInvest in Pomerania

5+ years experienceEuro2012Rocket Internet FundedByMe> Bayer & WNS, Scania

To be continued PhD student in Fintech & CrowdfundingFunded

Two Postgraduatestudiesin project mgt. Bachelor of EuropeanEconomicsMaster of Science, Int. Management


Recent publications / projects

co founderFinTechPartner.net

“It is high time for public authoritiesin Sweden to define Crowdfunding by law, create a national discussionforum and lead us out of thismedieval dungeon of shadylegislation.”

Current State of Crowdfunding in Europe – Sweden

Link to the report

Link to the report


“I am collecting money for a car”

I have a brilliant idea, but …

“I can’t because”

“I can’t …”

“Almi, said NO” “I have to get a good job

first”

“nobody will give me funding anyway ”

“I have to save funding first”

Those who - really want, search for a way. Those, who don’t look for a reason

- Miłosz Brzeziński


CROWFUNDING IS:

accumulation of small investments in individual projects by large number of individuals (“the “crowd”) with the help of internet or social networks (De Buyer et al, 2012)

+2009 > Credit crunch increased the need for sharing economy


CROWFUNDING IS:

144% - GROWTH RATE OF ALTERNATIVE FINANCE 2013>2014449% - CAGR GROWTH EQUITY CROWDFUNDING – NORDICS 122 706 EUR – AVERAGE MONEY RAISED IN SE (ECF)46 – AVERAGE AMOUNT OF NEW INVESTORS PER CAMPAIGN

551 EURO – MEDIAN INVESTMENT 5935 EURO – AVERAGE INVESTMENT

Source: Understanding Alternative Finance, University of Cambridge 2014Successful Equity Crowdfunding Campaigns – A Nordic Review, FundedByMe, 2015





8

Let’s do this J



VI. Bonus


Crowdfunding left it’s niche and it is a real tool

VCBussinessAngelsF&FPublicFunds

Strictly Confidential 10Source: Zeit Online, Bank de Espana, Financial Times Online, The Guardian Online, Liberum

Crowdfunding

Corporate Social Responsibility Crowdfunding – you back ideas from companies to give something to the “society” (plus their PR J)

Real Estate Crowdfunding The Crowd collects funding for construction of a Real Estate and shares profit from sales.

B2C Crowdlending -Companies receive a cheaper loan and knowledge from investors and investors solid ROR. Legal entity vs. natural persons.

Peer-to-peer loan based crowdfunding for consumers (C2C) People lend money directly to the other people. Both are natural persons.

Reward based crowdfunding. People back up projects and expect a reward in return.

Equity based crowdfunding. Entrepreneurs are willing to split the shares of the company in order to get know-how or financial support from investors.

– FT.com

Donation based crowdfunding. You back up project and expect nothing in return.

Lending and equity-based crowdfunding are disruptive technologies for the banking industry with the potential to displace banks as primary source of funding.

– Bank de Espana

Crowdfunding is more than one product & one customer


Crowdfunding is more than one product & one customer

Source: Zeit Online, Bank de Espana, Financial Times Online, The Guardian Online, Liberum

Corporate Social Responsibility Crowdfunding – you back ideas from companies to give something to the “society” (plus their PR J)

Real Estate Crowdfunding The Crowd collects funding for construction of a Real Estate and shares profit from sales

B2C Crowdlending -Companies receive a cheaper loan and knowledge from investors and investors solid ROR. Legal entity vs. natural persons.

Peer-to-peer lending for individual crowd. People lend money directly to the other people. Both are natural persons.

Reward based crowdfunding. People back up projects and expect a reward in return.

Equity based crowdfunding. Entrepreneurs are willing to split the shares of the company in order to get know-how or financial support from investors.

Donation based crowdfunding. You back up project and expect nothing in return.

Lending and equity-based crowdfunding aredisruptive technologies for the banking industry with the potential to displace banksas primary source of funding.


Example of FundedByMe’s development

Example: FundedByMe Crowdfunding time-line in Sweden:

2Q 2013 20152Q2Q2012 2014 2Q 4Q2011

Reward basedProduct

Equity based product

Singapore investment

18th of February 2015 – Crowdlending SE

Crowdlending project in DE

FBM supported 423 projects since Q4 2011, with 58 440 investors from 171 countries


Types of Crowdfunding Rewardbased crowdfunding

Reward based crowdfunding = average backing 50 Euro

Reward-based = the review of the proof of concept

•19-25 years•mostly no entrepreneur•no real business experience•some networks •usually not profitable

– report 05.2016



Strongcauseandextensivesocialnetwork

Blank Spot Projects (reward-based crowdfunding)


Types of crowdfundingEquitybased crowfunding

Equity-crowdfunding = average investment 5935 Euro

Equity based Crowdfunding – registered companies before growth phase

•25- 33 years •Entrepreneurs •Struggle to understand the process •How much is my company worth? •Usually still not profitable

– research 10.2015

Equity



CompanyhasbeenincorporatedinDecember2015

Foover (equity-based crowdfunding overfunded now)


Types of crowdfunding in case you have a data base of your clients start with data mining

Loan based crowdfunding – average lending 557 Euro

Peer-to-peer lending

•82%- male•33-44+years•alreadyentrepreneursinceatleast1,5years•Predictablebehaviourvs.scoring•Turnoverovernotlessthan120.000SEK

– research 12.2016

Equity

Loans



Proofofconcept+Profitability

AddMovement AB (loan based crowdfunding)


Example: Payments curve of Rewardbased projects

§Entrepreneurs are getting very engaged in the first five days.§§Plan your marketing tasks for 45 days

§Marketing is not only social media. And social media is not only Facebook.

Payment curve - Nordic Projects

This is a natural payment curve of Rewardbased projects

1 45Time in days

$ -

Amou

nt o

f fun

ding

pro

cess

ed v

ia th

e FB

M

$$$


Example: Alternative payment curve = activities

§This project plannedfour activities.

§What would happenin case they wouldplan 15 activities.

§Try to reach as many“target groups” as possible with differentcommunication.

Payment curve - Nordic Projects

The user is responsible to drive his/her campaign, and they do J

1 45Time in days

$ -

Amou

nt o

f fun

ding

pro

cess

ed v

ia th

e FB

M

$$$

Newsletter

Interview DI

Offline presentation at school

Investors Pitch


Example: Alternative payment curve = gender

§Female treat campaignsmore like elections

§Male user tend to treatcampaigns more like a “Master thesis”

Gender differences of entrepreneurs You need to this this:

There are gender differences between entrepreneurs– new report 20.10.2015 (in cooperation with Ali M, KTH)

1 45Time in days

$ -

Am

ount

of fu

ndin

gpr

oces

sed

via

the

FBM

$

$$

Investors Pitch


In which segment is your business idea?

§25-33 years (AB public / private) §entrepreneurs do struggleto understand the shareissue process§How much is my company worth? §usually still not profitable

§19-25 years mostly not entrepreneurs yet.§no real business experiencesome networks usually not profitable

Reward baseduser

Equity based user

Crowdlending user SE

2+ years experiencein business

1-5 experiencein business

§30+ Entrepreneurs Needfunding to develop the business §Rather service and not production§Have a track record and positive feedback from scoring agencies likeBisnode (Solidited) / UC §usually still not profitable§– research 06.2016





23

Let’s do this J



VI. Bonus


How to choose a right platform:

International connection? –From how many countries

investors can invest into yourproject?

PR / Offline marketing activities

Which types of PR and Offline marketing activities does the

platform offer.

Ofterta Offline Which offline service is beingoffered (additional investors

pitches, offline meetings with VC etc.)

How many project have beenfinanced? How many project

are being financed out of 100% and which types of projects are

they?

Success fee –. How high the success fee for the platform for a financed project.

Taxes and supportWhich types of support do youreceive in terms of tax and legal

services?

Listing feeHow high is the listing fee for your

project (between 0 Euro and 14.500 Euro)

Available staffHow strongly available is the staff

of the platform, can you visit them?


6 Stages of Crowdfunding

Fundspayout

Decision stage

Delivery

Project is live on the platform live

45 days

Pitch Creation

Pitch

Investor management

stage





26

Let’s do this J



VI. Bonus


Example: Rewardbased Crowdfunding examples

Steps to follow:

§Upload a campaign Present the product Set the goals for rewards§Choose the team Do plenty of offline and online promotion for 45 days.§ Don’t give up; a campaign is more like an election campaign and not a Bachelor thesis.§ It takes you about 12 days to prepare a good campaign. §It takes the platform about 2 x 7 days to give you feedback.

Campture your Mind - SSE example (change of the name: Nacka)

You can upload a campaign with your idea …. today.


Example: Rewardbased Crowdfunding examples

§Products, that the user can identify with

§Convincingpresentation

§Common- senserewards for the product

§Show that you a passion towards the product..

§Keep in mind thatusers are located in different types of the world.

Passionplanner.com - US experience You need this:

It is every time more efficient, in case you can present a prototype

Target: $ 19.000

Final result: $48,030 – the comission of the platform.

Pay in $25 and receiveyou own personal passionplanner


Example: RAW World (rewardbased kickstarter)

§Make sure, that your title is understandable

§You main picture should be convincing

§Your video should be straight forward, telling what do you want to achieve and why.

RAW World You need this:

It is not enough to upload a campaign and wait for a miracle





30

Let’s do this J



VI. Bonus


Sour

ce: h

ttps

://w

ww

.link

edin

.com

/pul

se/b

usin

ess-

star

tup-

failu

re-r

easo

ns-le

arni

ngs-

kevi

n-vy

avah

are


Summary of the key aspects

§Contract key messages. §Give your best to bringyour messages across. §The most expensivesolutions are not everytime the best.§Use your time wisely for online and offline communication.

§Choose the right platform for your project. §Make sure, to choose the right time for your project. Make sure that you met with former platform winners / losers. §Review the research thatexists on your topic. §Make sure that you candeliver on time.

§Adjust different types of crowdfunding to a differentstage of your company. §Start early and approachthe project with long-term preparation. §Think about your possibleinvestor groups.

KNOW YOUR NEEDS

Work on communication

Make smart choices

crowdfunding, sharing economy, p2pfinance,

Economy & Finance