This document discusses crowdfunding as a potential source of funding for research projects. It notes that crowdfunding involves small investments from a large number of individuals via the internet. While traditional research funding in Sweden amounts to billions annually, crowdfunding could help fund "unorthodox" projects and experiments that fall in the "valley of death" between basic and applied research. Crowdfunding benefits funders through donations, rewards, equity shares or loans. Successful crowdfunding requires an authentic persona, credible details about the project and its creators, and use of marketing and storytelling principles to engage the "crowd" of potential funders.

1. Crowdfunding:
A role for “the
crowd” in
research?
Claire Ingram, Stockhom School of
Economics
Robin Teigland, Stockholm School of
Economics

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Image: http://blog.getnarrative.com/

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Accumulation of small investments in
individual projects by large number of
individuals (the “crowd”) via or with help of
the Internet and social networks
(De Buysere et al., 2012)
Image: FundedByMe

6. Investment Role and Type Investment Value, 2012
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Angel
Investors
Invest large amounts, make few
investments and take equity
share.
3.3-3.9 billion SEK p.a.
(approximation, based on 2008
data)
Soft Loans
State loans at high interest rates,
but which can be written off on
enterprise dissolution.
2.4 billion SEK p.a. (ALMI
alone)
Venture
Capitalists
Invest large amounts, make few
investments and take equity
share.
1.8 billion SEK p.a. (2010 data)
Crowdfunding
Either donation, pre-purchase/
reward-based or equity,
depending on platform and
entrepreneur’s preferences.
Estimated 100 million SEK
(2014)
Ingram & Teigland, 2013

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Research Funding in Sweden?
 Research funding in Sweden is worth about
0.87 percent of Swedish GDP.
 It is predicted to increase to an estimated total
of 32.9 billion SEK in 2014.
 The Swedish Research Council will receive an
estimated combined total of 22.1 billion SEK
worth of R&D funding in 2014

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Where are the gaps?
 “Unorthodox” projects
 Small projects, including experiments
 Purchasing software
 Commercialisation?
 Human trials?
“The Valley of Death”

9. Form of Funding Benefits for Funders
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Donation Donation Intangible benefits.
Reward Donation or pre-purchase
Rewards in addition to
intangible benefits.
Equity Investment Return on investment if
company does well.
Rewards sometimes also offered
and intangible benefits may
motivate too.
Debt Loan Repayment of loan with
interest. Alternatively
intangible benefits if loan given
interest-free.
Royalty Royalty Royalties on creation. Also
potentially intangible benefits.

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Why Crowdfunding?
Obtain funding
Screening device for investors
Test the market or establish a user base
Market your product or service
Reach investors further afield or people without the right
“connections”
Because you think it’s easy (it’s not!)
Source skills and connections?
Because you can’t find other funding (be careful)
Ingram & Teigland, 2013

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Setting it all up
http://youtu.be/vdi-Lg9pwkY

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Skoglund & Stiernblad 2013

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A real, credible person
 “I want to see a Facebook page being connected.
Basically, the more social services are connected the
better because that adds to credibility, you can check up
on the person and see if they are who they say they are
and if they’re cheating.”

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Who are the funders?
 Educated experts?
 85 % of respondents have university degree (vs 16% of
women and 22% of men in general population, 2013)
 42% had knowledge in same field as project they funded
 49 % reported to have been better at judging project
quality due to previous experience
 The “in-crowd”
 47 % of “the crowd” classified themselves as entrepreneurs
– compared to only 7 % of Swedish population (2012)
 77 % never bought shares in unlisted company before
 41 % risk lovers
Skoglund & Stiernblad 2013

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Agrawal et al, 2011

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Where are the funders?
 A study of funders of music through ”Sellaband” in NL
 The average distance between artists and investors is
about 4 800 kms (3 000 miles
 Still, distance does play a role. Local investors invest
relatively early, and they appear less responsive to
decisions by other investors.
 Early investors are typically local (friends and family?),
later invester thought to respond to this ”signal”
Agrawal et al, 2011

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Marketing principles still apply
 Make the project easily understood
 Make it personal
 Often, means telling a story
 This also helps with sharing and social media
 But when you attract a crowd, you need to keep them
happy too – so keep in touch!

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Thank you!
Image via NewYorker.com
Claire Ingram
Stockholm School of
Economics
claire.ingram@hhs.se
@Claire_EBI