Presentation in Sept 2014 in Stockholm Sweden for group of financial managers

1. Crowdfunding
ROBIN TEIGLAND & CLAIRE INGRAM
STOCKHOLM SCHOOL OF ECONOMICS
SEPTEMBER 2014
ROBIN.TEIGLAND@HHS.SE
CLAIRE.INGRAM@HHS.SE

2. Today’s presentation
What is crowdfunding?
Why crowdfund?
Crowdfunding challenges?
Q&A

3. 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

4. Four forms of crowdfunding
Form Benefits for funders
Donation-based
Donation Intangible benefits.
Reward-based
Donation or pre-purchase
Rewards in addition to intangible
benefits.
Equity-based Investment
Return on investment if company
does well. Rewards sometimes also
offered and intangible benefits may
motivate too.
Debt-based Loan
Repayment of loan with interest.
Alternatively intangible benefits if
loan given interest-free.
Ingram & Teigland 2013

5. Market size
Global crowdfunding almost doubled 2012 to
2013 to USD 5.1 bln
March 2014 Kickstarter passes USD 1 bln in total
pledges
FundedByMe raised USD 10.5 mln to date
By 2025, global crowdfunding could reach USD
90 to 96 bln (1.8 times today’s global VC industry)
Growth potential greatest in emerging markets?
USD 50 bln in China by 2025?

6. Some Swedish platforms

7. Local Stockholm success story:
Flippin’ Burgers
Money raised:
SEK 36,502 /
€4,000
Number of
investors: 186
Date funded:
September 2011
Sector: Food

8. Enabling local, small-scale solutions
http://travel.cnn.com/best-americana-restaurants-europe-023346

11. Crowd equity taking off

12. P2P lending in the US and UK…
•>USD 3.8 bln in personal
loans since 2007
• USD 750 mln growth each
quarter
•Now offering business loans
•Strategic alliance with Union
Bank

13. P2P lending in Sweden

14. P2B lending in Sweden

15. Ingram &Teigland, 2013
Why crowdfund?
Test market or establish user base
Marketing & publicity for your product or service
Faster time to market
Funding (may not be large amount of money
though)
Screening device for investors
Access greater pool of investors: further afield or
people without right “connections”
Skills, connections, and other resources?

16. Investment Role and Type Investment Value 2012
Angel
Investors
Invest large amounts, make few
investments, take equity share.
3.3-3.9 billion SEK p.a.
(approximation based on 2008
data)
Soft Loans
State loans at high interest rates
that can be written off if enterprise
dissolution.
2.4 billion SEK p.a. (ALMI alone)
Venture
Capitalists
Invest large amounts, make few
investments, take equity share.
1.8 billion SEK p.a. (2010 data)
Crowdfunding
Donation, pre-purchase/reward, or
equity, depending on platform and
entrepreneur’s preferences.
Estimated 37 million SEK p.a.
Ingram & Teigland 2013

17. “It’s not just about the money.”
685 people talking
about product on
social media
Australia’s “Major Disaster Department”
World’s largest telecom

18. Measuring demand in advance

19. One step in the financing chain

20. Nesta

21. Democratizing innovation
through access to capital
Kickstarter
• Women 13% more likely to to meet
crowdfunding goals than men
• 67% of women-led technology ventures
reached goals vs 30% of male-led
ventures
Indiegogo
• Women 61% more likely than men to
meet goals
• Women account for 41% of projects
that meet goals
http://online.wsj.com/articles/kickstarter-closes-the-funding-gap-for-women-1407949759

22. Toborrow.se

23. For all ages - including teenagers
http://www.indiegogo.com/projects/afripreneurs-and-the-leapfrog-effect

24. “Made in Africa” 3D printer (Togo)
Winner of International
Space Apps Challenge
http://www.engineering.com/3DPrinting/3DPrintingArticles/ArticleID/5712/E-Waste-3D-Printer-to-Mars.aspx

25. Crowdfunding challenges?
Skills: How to ensure knowledge/awareness and necessary skills
for crowdfunding?
Lack of support and strategic advice for funders/investors, entrepreneurs,
public sector?
How to deal with many small investors in equity crowdfunding?
Regulation: How to protect investors without stifling
innovation?
Cross border investments?
Secondary markets for crowd equity shares?
Taxation issues for investors and entrepreneurs?
Local market: How to protect/ensure local markets against
foreign competition?
Local platforms vs global platforms?
Significant/sufficient level of funding from local market?
How to better leverage “crowd” for resources?
Source: Own research, Nesta

26. http://www.slideshare.net/eteigland/crowdfunding-in-sweden

27. Thank you!
Questions?
Image via NewYorker.com

28. If you love knowledge,
set it free…
Robin Teigland
robin.teigland@hhs.se
www.knowledgenetworking.org
www.slideshare.net/eteigland
@RobinTeigland
If you like this presentation and would like to contribute to our
research, we accept bitcoins:
14hs4JbnQLXE87GGzu84uXGaspmxmnLpwC.
Thank you!!!!!

29. Appendix

30. Crowdfunding 2012
Massolution 2013
Est. 5.5 mln
(Oct 2013)
Worldwide
$2.7 bln
470k projects
800+ platforms

31. Most popular crowdfunding activities
Massolution 2013

32. Sold 400,000 watches already

40. Who are the funders?
Educated experts(?)
University degree
Knowledge and previous experience in same field
“In-crowd”
“Entrepreneurs”
Risk lovers
Skoglund & Stiernblad 2013

41. Who are the funders?
Educated experts(?)
85% respondents have university degree (vs 16%
women/22% 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
“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

42. Crowd equity raising its head…
• Politicians generally
positive -> entrepreneurs
+ job creation
• But regulation is lagging
in most countries
• US, Italy, Denmark
changing regulations
enabling equity
Massolution 2013
Millions of dollars

43. Equity crowdfunding
EU/EEA
No country can require a prospectus to be prepared
for rounds of <EUR 100 000
For rounds of >EUR 5 million, EU prospectus always
required
Sweden
For rounds of >EUR 2.5 million, EU prospectus
always required
<150 ‘non-qualified’ investors without prospectus

45. http://www.fundable.com/blog/crowdfunding-infographic---the-jobs-act-explained

46. How to succeed?
Choose right platform– and crowdfunding form
Going global or local?
What do you give in return (thank you, reward, pre-purchase,
shares)?
Keep in mind platform fees
Define the concept
Make it easily understood
Make it personal?
Feed the crowd
Ensure initial critical mass (social media, newspapers)
Keep followers up to date
MAGIC

47. Lots to think about....
Going global? Going local?
Reward-based? l Niche product or
service?
l Global appeal?
l What are rewards?
l How do you reach
international audience –
and stand out?
l Community-specific
product or service?
l Local appeal?
l What are rewards?
l Does community know
about you – can you
reach them?
l Local benefits
Equity-based? l Looking to scale up?
l How much equity?
l How to value your
project?
l Looking to establish
foothold?
l How much equity?
l How to value your
project?
l Local benefits –
experience, connections
etc?

48. Trends in crowdfunding
Peer to peer lending
Niche
Community
Hybrid platforms
Enterprise sponsored
Internal corporate crowdfunding
LIVE!
Economic development
Celebrities
…

49. Crowdfunding for research

50. Strategic partnership
+

51. Celebrities entering the scene
Executive Producer Robert Redford
Narrated by Jodie Foster
Donald Trump’s crowdfunding site
Open to anyone

52. 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

53. Enabling entrepreneurs anywhere
Ushahidi of Kenya
Kenya

54. Venture capitalists are the
travel agents of yesterday –
here today, gone tomorrow.
Venture capitalist
in Silicon Valley –
June 2013

55. What’s next?