Crowdfunding
--SSE Alumni Seminar
ROBIN TEIGLAND & CLAIRE INGRAM
STOCKHOLM SCHOOL OF ECONOMICS
DECEMBER 2013
ROBIN.TEIGLAN...
Crowdfunding in Sweden
Dr. Robin Teigland
Associate Professor
Stockholm School of Economics
robin.teigland@hhs.se
@robinte...
Today’s presentation
What is crowdfunding?
From crowdfunding to crowd equity
Why crowdfund?
Trends in crowdfunding
Q&...
What is Crowdfunding?
Accumulation of small investments in individual
projects by large number of individuals (the
“crowd”...
Local Stockholm success story:
Flippin’ Burgers
Money raised:
SEK 36,502 /
€4,000
Number of
investors: 186
Date funded:
Se...
Enabling local, small-scale
solutions

http://travel.cnn.com/best-americana-restaurants-europe-023346
Crowdfunding 2012
Est. 5.5 mln
(Oct 2013)

Massolution 2013

Worldwide
$2.7 bln
470k projects
800+ platforms
Four forms of crowdfunding
Form of funding
Donationbased

Benefits for funders

Donation

Intangible benefits.

Donation o...
Investment Role and Type

Angel
Investors

Soft Loans

Venture
Capitalists

Investment Value 2012

Invest large amounts, m...
Crowd equity raising its
head…
Millions of dollars

• Politicians generally
positive -> entrepreneurs
+ job creation
• But...
http://www.fundable.com/blog/crowdfunding-infographic---the-jobs-act-explained
Increasing focus on Crowd Equity in
Sweden

Sweden 2011

UK 2010

Finland 2011

Equity: 27,8 mln SEK

To Sweden 2013

To S...
Why crowdfund?
Test the market/Proof of concept
“Evangelists” / Ambassadors
Marketing & publicity (int’l platforms, mos...
“It’s not just about the money.”
685 people talking
about product on
social media

Australia’s “Major Disaster Department”...
International expansion
Requirements to succeed?
What do you give in return (thank you,
reward, pre-purchase, shares)?
Choose the right platform...
But there are potential downsides
Project(s) may not be understood by crowd
Not significant amounts of money
•
•

More a...
Trends in Crowdfunding
Niche
Community
Hybrid platforms
Enterprise sponsored
Internal corporate crowdfunding
LIVE!
...
Crowdfunding for research
Strategic partnership

+
Celebrities entering the scene

Donald Trump’s crowdfunding site
Open to anyone
Executive Producer Robert Redford
Narrated...
Internal corporate
crowdfunding
iFundIT
More than 300 participants
Entry-level workers to VPs

Given $2,000 to invest o...
Enabling entrepreneurs
anywhere
Ushahidi of Kenya

Kenya
“Made in Africa” 3D printer (Togo) through
Ulele

Winner of International
Space Apps Challenge

http://www.engineering.com...
But many unanswered
questions
Cross border investments?
Secondary markets for crowd equity shares?
Taxation issues for ...
Venture capitalists are the
travel agents of yesterday –
here today, gone tomorrow.
Venture capitalist
in Silicon Valley –...
http://www.slideshare.net/eteigland/crowdfunding-in-sweden
Thank
you!
Questions
?

Image via NewYorker.com
If you love knowledge, set it free…

Photo: Lindholm, Metro
Photo:
Nordenskiöld

Robin Teigland
robin.teigland@hhs.se
www....
Crowdfunding SSE Alumni Seminar Teigland & ingram
Crowdfunding SSE Alumni Seminar Teigland & ingram
Crowdfunding SSE Alumni Seminar Teigland & ingram
Crowdfunding SSE Alumni Seminar Teigland & ingram
Crowdfunding SSE Alumni Seminar Teigland & ingram
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Crowdfunding SSE Alumni Seminar Teigland & ingram

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Presentation from SSE Alumni Seminar in Dec 2013. Video can be viewed here: http://www.livestream.com/sseresearch.

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  • Entrepreneurs need funding – we give them the chance to test, iterate and grow. Fast.Everyone wants to be part of the next big thing in business – without having to spend millions. Ownership is the best form of participation. Millions of ordinary citizens are a massive force.
  • Snabbutveckling, 600% på 3 årMassolution: Four established types of crowdfunding exist: donation-based, reward-based, equity-based, and lending or debt-based. In May 2013, there were around 800 crowdfunding platforms worldwide, and crowdfunding initiatives raised an estimated 2.6 billion USD in 2012, including about 945 million USD in Europe through 470 000 campaigns. Furthermore, Massolution predicts that in 2013 crowdfunding will reach volumes of 5.1 billion USD worldwide, with about 1.3 billion USD in European markets. To date, business and entrepreneurial activity comprises 16.9% of all crowdfunding activity while Information and Communication Technology projects comprise a mere 4.8% of activity. According to 2010 market data, Sweden’s venture capital firms made the highest value of investments relative to GDP in Europe and had the sixth highest investment value in the world (EVCA, 2012).There are no public statistics for crowdfunding for Sweden as a whole but, as of May 2013, and based on the publicly available numbers, we have estimated the amount raised in Sweden to be around USD 4 million, with 1 million of this through reward-based crowdfunding and 3 million through equity-based crowdfunding. The primary platform that deals with entrepreneurs, FundedByMe, raised around USD 3.8 million of that across 744 successful projects. Excluding FundedByMe itself, 25 of these successes were Technology or Internet related (by the platform’s definition), but only three have been entrepreneurial ICT projects as opposed to the more common social projects. Two raised USD 38 000 through reward-based crowdfunding while the third raised USD 150 000 through equity crowdfunding.Who are Sweden’s crowdfunders (Skoglund & Stiernblad 2013). The survey was sent out by email to 2931 traditionalcrowdfunders (ie not equity) who visited FundedByMe between June 2012 and March 2013 to fund projects. 390 completed the survey - response rate was 13.3 %. The majority of the survey respondents were males with an average age of 38 years.Educated experts?85 % of respondents have university degree42% had knowledge in same field as project they funded49 % reported to have been better at judging project quality based on previous experienceBut first time investors who see themselves as risk lovers77 % never bought shares in unlisted company before 47 % of “the crowd” classified themselves as entrepreneurs – compared to only 7 % of Swedish population (2012)41 % risk lovers
  • Polstjärnaär en insamlingsstiftelsevarsmålärattmotverkautanförskap bland barn ochungdomariSverige. Härpåwebbplatsenhar du en unik möjlighetattskänkapengardirekt till små men viktigalokalaprojekt. Genom demkan barn ochungdomarfåframtidstro, kännadelaktighetochfåförebildersomblirledstjärnorpåvägen mot vuxenlivet. Förnärvarandeärfokuspåprojektistor-Stockholm. Polstjärnahar 90-konto ochärgodkändavSvenskinsamlingskontroll. - See more at: http://polstjarna.se/#sthash.CzyCoesf.dpuf
  • Equity < 10% of total crowdfunding Politicians generally positive -> entrepreneurs + job creationBut regulation is lagging in most countriesUSA passed JOBS Acts ”Jumpstart Our Business Startup Act”Title II for accredited investors this fallTitle III for non-accredited investors later in fall9 mln accredited investors in USA3% invested USD 23 bln in 2012 in startups and growth companies8.8 times more than total global crowdfunding marketNon-accredited investors even larger groupJobs actRobert redford movie – maturing of platformKickstarter as platform for gadgetsEquity vs donation/reward-based?Travel agents Only a complementBitcoin crowdfunding, equityParticipation – but how to leverage resources of crowd in better way?Secondary market for crowd equity?Legislation changes – regulations -, tax..Impact on business – entrepreneurs, new product – donation, , new service… perhaps equity?Africa Togo example of 3d printerBrck –Crowd it – music festival But how to get resources other than financial?
  • It’s not about the money -Trax4you
  • Crowdfunding research
  • Jerusalem, Israel November 4, 2013: OurCrowd, Israel’s leading equity crowdfunding platform for accredited investors, announced today that it has closed a strategic co-investment partnership with GE Ventures, the corporate venture capital unit of GE.Under the agreement, GE Ventures will have the right to co-invest with OurCrowd in select early stage companies in the areas of energy, healthcare, software and advanced manufacturing.OurCrowd’s CEO Jon Medved said, “We are thrilled to partner with GE Ventures on co-investments via our equity crowdfunding platform.  GE brings unequalled expertise and experience in a broad range of technologies and businesses that will add real value to our portfolio companies and to our investor community. To partner with a company of GE’s size and stature will allow OurCrowd to help break new ground in innovation finance”.GE Venture’s CEO Sue Siegel said, “OurCrowd has created a unique platform for dynamic early stage origination and funding. They offer a quality investment environment and the partnership will give GE increased access to early innovation.”OurCrowd recently announced that it has successfully raised over $22 million for its 28 portfolio companies, including eight financings in excess of $1 million. It has already launched eight follow-on rounds for its companies to support expansion of its operation.Jon Medved, concluded, “We believe we have reached a real milestone and transformative moment in the world of high tech finance. We are looking forward to driving innovation forward with GE Ventures, faster and harder than ever before.”http://blog.ourcrowd.com/index.php/co-investment-ge-ventures/About OurCrowdOurCrowd is an equity crowdfunding platform for accredited investors only who wish to invest in Israeli and global early stage companies. Managed by a team of well-known investment professionals and led by serial entrepreneur Jon Medved, OurCrowd selects opportunities, invests its own capital and brings these startups to its accredited membership. Members choose those deals they invest in via OurCrowd-managed partnerships. OurCrowd investors must meet stringent accreditation criteria and invest a minimum of $10,000 per deal. OurCrowd provides post investment support to its portfolio companies, assigning industry experts as mentors and taking board seats.About GE VenturesGE Ventures is an international corporate venture capital unit, based in Silicon Valley, which enables startups, partners and GE to accelerate growth and commercialize innovative ideas that will help make the world work better – to build, power, move and cure. The unique combination of capital, technical and commercial expertise, infrastructure, and the GE global network of businesses and partners, helps our partners to advance industries and improve lives. For more information visit www.geventures.com or follow us on Tumblr.
  • http://www.kickstarter.com/projects/benatural/be-natural-the-untold-story-of-alice-guy-blachehttp://www.prweb.com/releases/FundAnything/DonaldTrump/prweb10700690.htmExec producer robertredford, narrated by jodie foster
  • http://www.bbc.com/capital/story/20131125-sparking-innovation-from-bottom
  • Jon Matonis, Forbes, Rhetorically, I posed the question: “In fifty years, would you rather own 100 euros, 100 Amazon Coins, or 100 bitcoins?” http://www.forbes.com/sites/jonmatonis/2013/05/20/bitcoin-comes-to-swift/
  • Crowdfunding SSE Alumni Seminar Teigland & ingram

    1. 1. Crowdfunding --SSE Alumni Seminar ROBIN TEIGLAND & CLAIRE INGRAM STOCKHOLM SCHOOL OF ECONOMICS DECEMBER 2013 ROBIN.TEIGLAND@HHS.SE
    2. 2. Crowdfunding in Sweden Dr. Robin Teigland Associate Professor Stockholm School of Economics robin.teigland@hhs.se @robinteigland Claire Ingram PhD Student Stockholm School of Economics claire.ingram@hhs.se @Claire_EBI
    3. 3. Today’s presentation What is crowdfunding? From crowdfunding to crowd equity Why crowdfund? Trends in crowdfunding Q&A
    4. 4. What is Crowdfunding? Accumulation of small investments in individual projects by large number of individuals (the “crowd”) via or with help of Internet and social networks (De Buysere et al., 2012) Picture: FundedByMe
    5. 5. Local Stockholm success story: Flippin’ Burgers Money raised: SEK 36,502 / €4,000 Number of investors: 186 Date funded: September 2011 Sector: Food
    6. 6. Enabling local, small-scale solutions http://travel.cnn.com/best-americana-restaurants-europe-023346
    7. 7. Crowdfunding 2012 Est. 5.5 mln (Oct 2013) Massolution 2013 Worldwide $2.7 bln 470k projects 800+ platforms
    8. 8. Four forms of crowdfunding Form of funding Donationbased Benefits for funders Donation Intangible benefits. Donation or preReward-based purchase Equity-based Investment Debt-based Loan Ingram & Teigland 2013 Rewards in addition to intangible benefits. Return on investment if company does well. Rewards sometimes also offered and intangible benefits may motivate too. Repayment of loan with interest. Alternatively intangible benefits if loan given interest-free.
    9. 9. Investment Role and Type Angel Investors Soft Loans Venture Capitalists Investment Value 2012 Invest large amounts, make few investments, take equity share. 3.3-3.9 billion SEK p.a. (approximation based on 2008 data) State loans at high interest rates that can be written off if enterprise 2.4 billion SEK p.a. (ALMI alone) dissolution. Invest large amounts, make few investments, take equity share. Donation, pre-purchase/reward, or Crowdfunding equity, depending on platform and entrepreneur’s preferences. Ingram & Teigland 2013 1.8 billion SEK p.a. (2010 data) Estimated 37 million SEK p.a.
    10. 10. Crowd equity raising its head… Millions of dollars • Politicians generally positive -> entrepreneurs + job creation • But regulation is lagging in most countries • US, Italy, Denmark changing regulations enabling equity Massolution 2013
    11. 11. http://www.fundable.com/blog/crowdfunding-infographic---the-jobs-act-explained
    12. 12. Increasing focus on Crowd Equity in Sweden Sweden 2011 UK 2010 Finland 2011 Equity: 27,8 mln SEK To Sweden 2013 To Sweden 2013 Reward: 6,8 mln SEK Equity only Equity only
    13. 13. Why crowdfund? Test the market/Proof of concept “Evangelists” / Ambassadors Marketing & publicity (int’l platforms, mostly) Raise funds faster Faster time to market Money
    14. 14. “It’s not just about the money.” 685 people talking about product on social media Australia’s “Major Disaster Department” World’s largest telecom
    15. 15. International expansion
    16. 16. Requirements to succeed? What do you give in return (thank you, reward, pre-purchase, shares)? Choose the right platform for you Make concept easily understood Ensure initial critical mass Bring the crowd I have a dream! And “The crowd needs fuel!”
    17. 17. But there are potential downsides Project(s) may not be understood by crowd Not significant amounts of money • • More about publicity But changing with crowd equity Other skills/resources do not seem to be forthcoming
    18. 18. Trends in Crowdfunding Niche Community Hybrid platforms Enterprise sponsored Internal corporate crowdfunding LIVE! Economic development Celebrities
    19. 19. Crowdfunding for research
    20. 20. Strategic partnership +
    21. 21. Celebrities entering the scene Donald Trump’s crowdfunding site Open to anyone Executive Producer Robert Redford Narrated by Jodie Foster
    22. 22. Internal corporate crowdfunding iFundIT More than 300 participants Entry-level workers to VPs Given $2,000 to invest over 8 week period Choose internal projects in which to invest
    23. 23. Enabling entrepreneurs anywhere Ushahidi of Kenya Kenya
    24. 24. “Made in Africa” 3D printer (Togo) through Ulele Winner of International Space Apps Challenge http://www.engineering.com/3DPrinting/3DPrintingArticles/ArticleID/5712/E-Waste-3D-Printer-to-Mars.aspx
    25. 25. But many unanswered questions Cross border investments? Secondary markets for crowd equity shares? Taxation issues for investor and entrepreneur? Lack of support and strategic advice for both investors and entrepreneurs? How to better leverage “crowd” for resources?
    26. 26. Venture capitalists are the travel agents of yesterday – here today, gone tomorrow. Venture capitalist in Silicon Valley – June 2013
    27. 27. http://www.slideshare.net/eteigland/crowdfunding-in-sweden
    28. 28. Thank you! Questions ? Image via NewYorker.com
    29. 29. If you love knowledge, set it free… Photo: Lindholm, Metro Photo: Nordenskiöld Robin Teigland robin.teigland@hhs.se www.knowledgenetworking.org www.slideshare.net/eteigland www.opencrowds.org RobinTeigland För mer information: •Research article: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2263965 •Industry report: http://blog.fundedbyme.com/robin-teigland/

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