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Slides from Charles Armstrong's presentation at the British Library event on Crowdfunding held on 27th April 2010

Slides from Charles Armstrong's presentation at the British Library event on Crowdfunding held on 27th April 2010

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  • Provisions in pending financial reform legislation in US Congress significantly raises the requirements for net worth provision for qualified investors and could substantially reduce the pool of investors for F&F and early stage funding--which would include crowdfunding. There seem to be no advocates of the provisions and many opposed including angel groups and investors in small early stage funds.
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Crowdfunding for High-Growth Ventures Presentation Transcript

  • 1. Crowdfunding
    for growth ventures
    27 April 2010
  • 2. Changes in the funding landscape
  • 3. The funding ladder
    £50 million
    £2 million
    £1 million
    £500,000
    £100,000
    Angels
    VC
    IPO
    Private
    equity
    Friends
    & family
  • 4. Global VC in freefall
    • $46.5 billion in 2008
    • 5. $29.6 billion in 2009
    • 6. 36% reduction
    Source: Dow Jones VentureSource
  • 7. “Total capital managed by VC funds will contract by 50% from $24 billion to $12 billion.”
    Source: “Right-Sizing the Venture Capital Industry”, Kauffman Foundation, June 2009
  • 8. Changing pattern of investment
    • Support existing portfolio
    • 9. Fewer, larger deals
    • 10. Lower risk, closer to profitability
  • The old landscape
    £50 million
    £2 million
    £1 million
    £500,000
    £100,000
    Angels
    VC
    IPO
    Private
    equity
    Friends
    & family
  • 11. The new landscape
    £50 million
    £2 million
    £1 million
    £500,000
    £100,000
    Angels
    VC
    IPO
    Private
    equity
    Friends
    & family
  • 12. The new landscape
    £50 million
    ?
    £2 million
    £1 million
    £500,000
    £100,000
    Angels
    VC
    IPO
    Private
    equity
    Friends
    & family
  • 13. The new landscape
    ?
    £50 million
    ?
    £2 million
    £1 million
    £500,000
    £100,000
    Angels
    VC
    IPO
    Private
    equity
    Friends
    & family
  • 14. New seed funds are being created, but do they have the scale to fill the gap?
  • 15. Crowdfunding
  • 16. Crowdfunding uses the internet to aggregate smaller investments from a large group of investors
  • 17. Benefits
    • Scales friends & family network
    • 18. Connects professional investors from outside network
    • 19. Greater transparency, more information in public domain
  • “Club” model is dominant
    • Investor pays membership fee
    • 20. No equity ownership
    • 21. Members have right to share in profits
  • Club crowdfunding examples
    • Sellaband(music)
  • Clubcrowdfunding examples
    • Sellaband (music)
    • 22. Spot.us (journalism)
  • Club crowdfunding examples
    • Sellaband(music)
    • 23. Spot.us (journalism)
    • 24. Kickstarter (arts & non-profits)
  • Club crowdfunding examples
    • Sellaband(music)
    • 25. Spot.us (journalism)
    • 26. Kickstarter (arts & non-profits)
    • 27. GrowVC (startups)
  • But is such a weak link between investor and business viable for high-growth ventures?
  • 28. Why not equity crowdfunding?
    • Illegal to promote investment in public
    • 29. Can’t circulate business plan to more than 99 people
    • 30. Unlimited criminal liabilities for Directors
  • Trampoline’s crowdfunding experience
  • 31. Trampoline funding history
    • £100,000 from friends & family (2003-04)
    • 32. £200,000 from angels (2006)
    • 33. £3 million from a US hedge fund (2007)
  • Then in Q4 2008 our main investor withdrew from the market
  • 34. We decided Trampoline would be the first technology business to finance itself through equity crowdfunding
  • 35. Trampoline’s solution
    • Raise £1 million over 12 months
    • 36. Self-certification for high net-worth individuals & expert investors
    • 37. All the main information provided online
    • 38. Investors initiate discussion
    • 39. Investors receive equity with full rights and minority protections (BVCA articles)
  • The plan
    • £250,000 October 2009
    • 40. £250,000 in UK, April 2010
    • 41. £250,000 in USA, June 2010
    • 42. Final £250,000 July 2010
  • In practice
    • £250,000 closed in October 2009
    • 43. £650,000 closing May 2010
    • 44. Final £100,000 shortly afterwards
  • Three tips for success
    • Get really clever lawyers
    • 45. Your network is the foundation
    • 46. Work mainstream & social media as hard as you can
  • Good luck!
    http://crowdfunding.trampolinesystems.com
    @tramp0