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Crowdfunding<br />for growth ventures<br />27 April 2010<br />
Changes in the funding landscape<br />
The funding ladder<br />£50 million<br />£2 million<br />£1 million<br />£500,000<br />£100,000<br />Angels<br />VC<br />I...
Global VC in freefall<br /><ul><li>$46.5 billion in 2008
$29.6 billion in 2009
36% reduction</li></ul>Source: Dow Jones VentureSource<br />
“Total capital managed by VC funds will contract by 50% from $24 billion to $12 billion.”<br />Source: “Right-Sizing the V...
Changing pattern of investment<br /><ul><li>Support existing portfolio
Fewer, larger deals
Lower risk, closer to profitability</li></li></ul><li>The old landscape<br />£50 million<br />£2 million<br />£1 million<b...
The new landscape<br />£50 million<br />£2 million<br />£1 million<br />£500,000<br />£100,000<br />Angels<br />VC<br />IP...
The new landscape<br />£50 million<br />?<br />£2 million<br />£1 million<br />£500,000<br />£100,000<br />Angels<br />VC<...
The new landscape<br />?<br />£50 million<br />?<br />£2 million<br />£1 million<br />£500,000<br />£100,000<br />Angels<b...
New seed funds are being created, but do they have the scale to fill the gap?<br />
Crowdfunding<br />
Crowdfunding uses the internet to aggregate smaller investments from a large group of investors<br />
Benefits<br /><ul><li>Scales friends & family network
Connects professional investors from outside network
Greater transparency, more information in public domain</li></li></ul><li>“Club” model is dominant <br /><ul><li>Investor ...
No equity ownership
Members have right to share in profits</li></li></ul><li>Club crowdfunding examples<br /><ul><li>Sellaband(music)</li></li...
Spot.us (journalism)</li></li></ul><li>Club crowdfunding examples<br /><ul><li>Sellaband(music)
Spot.us (journalism)
Kickstarter (arts & non-profits)</li></li></ul><li>Club crowdfunding examples<br /><ul><li>Sellaband(music)
Spot.us (journalism)
Kickstarter (arts & non-profits)
GrowVC (startups)</li></li></ul><li>But is such a weak link between investor and business viable for high-growth ventures?...
Why not equity crowdfunding?<br /><ul><li>Illegal to promote investment in public
Can’t circulate business plan to more than 99 people
Unlimited criminal liabilities for Directors</li></li></ul><li>Trampoline’s crowdfunding experience<br />
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Crowdfunding for High-Growth Ventures

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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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Transcript of "Crowdfunding for High-Growth Ventures"

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

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