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Crowdfunding for Large Corporations and Professional Investors

My presentation at Crowdcult - Russia on October, 19th, 2013

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Crowdfunding
For Large Corporations and
Professional Investors
Elena Mikhaylova

www.CrowdfundProductions.c
om
October 2013
Crowdfunding is an American word. But
even in the United States less than 20% of
adult population has ever heard about it.
And there are many rumors and unrealistic
ideas circulating among those who have
read about crowdfunding.
M
yth: Crowdfunding=Kickstarter
F
act: There are four types of crowdfunding: Donations,
Rewards, Debt and Equity. Debt, or Р2Р lending is
leading in the growth rates and in the amount of
money raised among all the types. Even considering
the fact that Kickstarter is the largest rewards based
platform, it is responsible for less than 10% of all the
money raised through crowdfunding and there are
over 700 other platforms around the world.
M
yth: Crowdfunding only useful for those who can’t get
a bank loan or to raise money from venture capitalists.
F
act: More and more inventors and startups use
crowdfunding campaigns as a part of their marketing
and PR strategy, to crowdsource product design and
development, to validate market demand, to pre-sell
the product and to find potential partners, distributors
and investors. And those are the tasks every business,
a startup or an established company, has to work on
constantly in order to succeed and grow.
M
yth: Equity Crowdfunding is important for startups
only
F
act: Out of 40 companies which were raising money
in August on Crowdcube, the largest British equity
crowdfunding platform, only 14 were startups. All
others were companies at their later stages of
development.
And this is the data about the raises on Crowdcube over
last two years:
M
yth: Equity Crowdfunding creates unlimited
opportunities for fraud
F
act: Equity crowdfunding has been in presence in
several countries (Australia and France, for instance)
for several years. But there is zero cases of fraud
registered. Out of more than 160 companies that have
raised funds through ASSOB in Australia over last
seven years, 85% are still in business, which is a much
better result than investments made by major VC
firms.
Ad

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Crowdfunding for Large Corporations and Professional Investors

  • 1. Crowdfunding For Large Corporations and Professional Investors Elena Mikhaylova www.CrowdfundProductions.c om October 2013
  • 2. Crowdfunding is an American word. But even in the United States less than 20% of adult population has ever heard about it. And there are many rumors and unrealistic ideas circulating among those who have read about crowdfunding.
  • 3. M yth: Crowdfunding=Kickstarter F act: There are four types of crowdfunding: Donations, Rewards, Debt and Equity. Debt, or Р2Р lending is leading in the growth rates and in the amount of money raised among all the types. Even considering the fact that Kickstarter is the largest rewards based platform, it is responsible for less than 10% of all the money raised through crowdfunding and there are over 700 other platforms around the world.
  • 4. M yth: Crowdfunding only useful for those who can’t get a bank loan or to raise money from venture capitalists. F act: More and more inventors and startups use crowdfunding campaigns as a part of their marketing and PR strategy, to crowdsource product design and development, to validate market demand, to pre-sell the product and to find potential partners, distributors and investors. And those are the tasks every business, a startup or an established company, has to work on constantly in order to succeed and grow.
  • 5. M yth: Equity Crowdfunding is important for startups only F act: Out of 40 companies which were raising money in August on Crowdcube, the largest British equity crowdfunding platform, only 14 were startups. All others were companies at their later stages of development. And this is the data about the raises on Crowdcube over last two years:
  • 6. M yth: Equity Crowdfunding creates unlimited opportunities for fraud F act: Equity crowdfunding has been in presence in several countries (Australia and France, for instance) for several years. But there is zero cases of fraud registered. Out of more than 160 companies that have raised funds through ASSOB in Australia over last seven years, 85% are still in business, which is a much better result than investments made by major VC firms.
  • 7. M yth: Equity crowdfunding is too dangerous for inexperienced investors, so the Government should protect them from going broke. F act: According to the currently discussed in the US crowdfunding law (JOBS Act, Title III), people who have an annual net income below $100,000, can invest in private companies no more than $2,000 or 5% of their income in a period of 12 month. So their chance of substantial loss from investing through crowdfunding is significantly lower than from gambling.
  • 8. The re a re two o the r m y ths Ia m g o ing to d is c us s in this p re s e nta tio n: Crowdfunding is a threat to banks, VCs and business angels, so they should protect themselves from its influence, Large established businesses shouldn’t “depend on the crowd”
  • 9. The Goal of this Presentation Is to demonstrate how established businesses with multi-million dollar revenues, large banks and investment groups already use crowdfunding to grow their market share.
  • 10. Four Approaches: •Creation of your own crowdfunding platform to post projects from outside of the company to attract new talents and to build new partnerships, •Partnership with existing crowdfunding platforms, Development of internal crowdfunding projects inside of a corporation, • Crowdfunding as an investment.
  • 11. Dragon Innovation (Boston, MA) Uses its expertise and industry connections to help bring on market new hardware products
  • 12. Coca-Cola Subsidiary in Mexico Has created a crowdfunding platform Transformadora Ciel to support local community projects
  • 13. Complete Corporate Philanthropy and Employee Volunteering Platform (США)
  • 14. Square Enix (UK) Has combined two approaches by creating its own platform where anybody can post a new game for public vote. The games which get the most votes will be presented and promoted on Indiegogo.
  • 16. Philips Uses Indiegogo to support its image of an innovative company and to discover ideas for new products
  • 17. +
  • 18. Crowdfunding to mitigate market risks for new products
  • 19. IBM – internal crowdfunding The company tries to encourage new ideas creation by initiating crowdfunding contests among the employees
  • 22. Investments by Venture Capital Firms in Crowdfunding Platforms  Lending Club – more than $215 Million (incl. Google)  Prosper - $45 Million  Indiegogo - $16,5 Million  Crowdtilt - $14,1 Million  Kickstarter - $10 Million  CircleUp - $9 Million (Google Ventures)  FundersClub – more than $6,5 Million
  • 23. Institutional Investors Diversify their Portfolios One third of the credit resources on Lending Club is provided by pension funds Another one third – By accredited investors and financial advisers
  • 24. How Banks Can Use Crowdfunding One of the largest European banking groups, ABNAMRO, has created its own crowdfunding platform Seeds. It provides a place for companies to raise money from existing and potential customers. The same time, it provides valuable information for the bank’s credit department and allows it to make better loan decisions by supporting the businesses with more loyal customer base (which means, a better chance to succeed in a long run).
  • 25. Conclusion How Corporations and Professional Investors Can benefit from Crowdfunding: Market validation for new products before investing significant amount of money Reputation Management, positive image creation on new markets, government relations, partnerships with local nonprofits and influencers Head hunting, search for companies for M&A and ideas for new products Innovation development inside of an organization, team building Monitoring of trends in customer demand Investment portfolio diversification Venture investments in crowdfunding industry (platforms and infrastructure)
  • 26. What’s Next?  Active entrance in the market of major financial institutions and investment groups (hedge funds, banking groups),  Adoption of crowdfunding in business practices of global corporations like General Electric,  Synergy of equity crowdfunding and angel investment groups,  Emergence of stock exchange for shares of crowd funded companies and their acceptance as a viable option for alternative investments
  • 27. Want to Be on Top of the Industry News? Join us at Aspen Global Investment Forum on January 6th-7th, 2014. Among the speakers are leaders of AngelList, Prosper, CircleUp, MicroVentures, founders of major debt and equity crowdfunding platforms from Australia, UK, Israel, France and Netherlands. Learn about the latest developments from the industry captains and enjoy your time on the slopes of the famous ski resort.
  • 28. How to contact me: Website: www.CrowdfundProductions.com Email: info@crowdfundproductions.com LinkedIn: www.linkedin.com/in/elenamikhaylova1/ Meetup: www.meetup.com/Crowdfunding_Kickstarter/ YouTube: www.youtube.com/user/CrowdfundProductions Twitter: @Alive_Digital