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Startup Financing and Crowdfunding Lecture

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Startup Financing and Crowdfunding Lecture

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Overview of the potential financing options available to Cypriot startups based on their stage of growth. Exploring the key information investors are looking for in a startup by exploring a pitch deck.

Overview of the potential financing options available to Cypriot startups based on their stage of growth. Exploring the key information investors are looking for in a startup by exploring a pitch deck.

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Startup Financing and Crowdfunding Lecture

  1. 1. Crowdbase Startup Financing and Crowdfunding
  2. 2. Who we are Startup financing options Crowdfunding 01 CONTENTS Bonus Topics Q&A 02 03 04 05
  3. 3. WHO WE ARE 01
  4. 4. Frixos Larkos Panayiotis Kakourides BSc Economics & Finance from University of Surrey, Master’s in Financial Analysis from London Business School, Experienced in investment banking, insurance, wealth management and technology sector. Passed CFA Level I and II exams. BSc Business Mathematics & Statistics from London School of Economics, Master’s in Financial Analysis from London Business School, Experienced in Strategy & Transactions Advisory. Passed CFA Level I and II exams. The first investment-based crowdfunding platform in Cyprus, regulated by the Cyprus Securities and Exchange Commission. Founded in October 2020 by Frixos Larkos (CEO) and Daniel Koudouna (CTO), and gained its Cyprus Investment Firm license from CySEC in January 2022.
  5. 5. STARTUP FINANCING OPTIONS 02
  6. 6. What they do Who they are for Support startups during the very early stages of their development. They provide valuable resources such as office space, infrastructure and facilities, access to an executive mentor’s network, and legal, financial, and other types of consultation. Startups that are still in the idea stage, or in the process of turning their idea into a viable business, would benefit greatly from applying to these organisations and leveraging everything they have to offer. These startups are usually called Pre-Seed. IDEA Innovation Center Cyprus Seeds ARIS A Really Inspiring Place Accelerators & Incubators Examples
  7. 7. What they do Who they are for Provide funding without asking for an equity stake in return, provided the specific conditions are met. These programs typically have high levels of competition amongst applicants, as the total funding amount available is usually below the needs of the market. Wide range of businesses, from very early-stage startups to established Small-Medium-Enterprises (SMEs). Research and Innovation Foundation IRIS Portal Ministry of Finance Information Portal for Funding Programmes Ministry of Energy, Commerce and Industry Digitalisation Grant Grants Examples
  8. 8. What they do Who they are for Angel investors are typically high-net-worth individuals that provide financing to startups for an equity stake in the company. These investors are usually well-established entrepreneurs themselves, with wide-reaching networks that can help you reach the right people as well as give advice and guide you to success. Quite limited presence of angel investors in Cyprus in comparison with other countries. Can invest very early in a startup or in a later financing round as a combination with other funding sources (e.g. crowdfunding, venture capital). Typical investment sizes range from €25,000 to €100,000 per angel investor, but in some cases can be more than that. Cyprus Business Angels Network (CYBAN) Angel Investors Examples
  9. 9. What they do Who they are for Pooled investment funds that look to invest in startups and SMEs in return for an equity stake. They typically employ a more active role in their investments by providing guidance, networking opportunities and often assume a board seat in the company. Venture Capital (VC) Funds usually invest after the Seed stage of a startup (Series A and later). Typical investment sizes range from €200,000 to €1,000,000. KV Fund by Kinisis Ventures Whitebeam Cyprus Equity Fund (expected to launch February/March 2023) Venture Capital Funds Examples
  10. 10. What they do Who they are for Provide financing to startups by pooling investments from a large number of individual investors. A crowdfunding campaign is created for every startup that seeks financing, with all information presented in one centralised location – the campaign page. Investors have a chance to review all available information and take their decision whether they want to invest or not. Depending on the type of crowdfunding campaign, they can finance startups from their very early stages through to their later stages, either as a single financing source or a combination with other funding sources (such as angel investors and VC funds). Crowdbase Kickstarter Crowdcube Seedrs Crowdfunding Platforms Examples
  11. 11. CROWDFUNDING 03
  12. 12. Introduction Crowdfunding is the method of raising capital from a large number of individuals to support a new business venture or project. Each individual invests a relatively small amount of money, which is pooled together to provide the funds needed for the project. In return, investors receive financial and/or non- financial benefits, depending on the type of crowdfunding campaign.
  13. 13. The 4 types of crowdfunding 1. Equity Crowdfunding Allows investors to acquire an ownership stake in a private business, proportional to the amount invested. As shareholders in the business, investors enjoy financial benefits in dividends or returns (e.g. company acquisition). This type is popular among startups that struggle to secure financing through traditional sources due to their high risk-return profile.
  14. 14. The 4 types of crowdfunding 2. Debt Crowdfunding With this type, companies borrow money from investors (like they would from a bank) and repay them over time with interest. Popular among SMEs, with at least 2 - 3 years of financial history and relatively stable cash flows.
  15. 15. The 4 types of crowdfunding 3. Rewards-based Crowdfunding Backers receive different non-financial benefits in exchange for their money. This could range from a small thank you note to a final product delivered to a backer’s doorstep. Kickstarter is one of the most established platforms worldwide for this type of crowdfunding. A Cypriot startup, Hegemonic Project, has managed to raise €600,000 from 10,801 backers through Kickstarter!
  16. 16. The 4 types of crowdfunding 4. Donation-based Crowdfunding Individuals donate money to specific causes and charities. With a donation, individuals have the opportunity of effecting positive change in their communities, indirectly receiving non-financial benefits. An example of such crowdfunding platform is GoFundMe.
  17. 17. Why raise capital with crowdfunding? Concept Validation A successful campaign is the perfect proof of concept and validation of a potential market for your product or service. Using the momentum of a successful campaign, the entrepreneur can later raise additional funds from institutional investors. Although raising money is usually the main goal of a crowdfunding campaign, it also comes with additional benefits to complement your funding round.
  18. 18. Why raise capital with crowdfunding? Regardless of the campaign’s outcome, your business will gain significant exposure to Crowdbase’s customer base. Intense marketing efforts from both the company and the crowdfunding platform to attract investments work together to increase the company’s exposure and visibility across its target market(s). Marketing Exposure
  19. 19. Why raise capital with crowdfunding? By presenting your business ideas in front of thousands of potential investors, customers, and community members, you can source suggestions and feedback from all kinds of different perspectives. Then, it is up to you to evaluate the information and update your plan accordingly. Crowdsourcing of Ideas
  20. 20. Why raise capital with crowdfunding? The crowdfunding platform will help you centralise all information required for the campaign that potential investors would need. Having all investors gathered at a single contact point eliminates the need for the entrepreneur to contact, explain and send/receive documents to multiple individuals about the project. You can just redirect them to the campaign page where all of the information they need is in, allowing you to focus on running your business. Efficiency
  21. 21. How Crowdbase works Crowdfunding companies approach Crowdbase with their proposal. Our team analyses each application in detail and selects only the companies it believes in. Our selection methodology is simple; we do not accept proposals that we wouldn’t invest in ourselves. Screening
  22. 22. How Crowdbase works Crowdbase performs its KYC checks and due diligence process to ensure that, to the best of its knowledge, all the information that the company presents to investors is fair and truthful. KYC & Due Diligence
  23. 23. How Crowdbase works Crowdbase works alongside the fundraising company to create a representative campaign page, marketing material and roll-out strategy. Campaigns are usually live for one to three months, depending on the size of the fundraising round. Campaign Launch
  24. 24. How Crowdbase works While the campaign is open, anyone can invest from as little as €100 in certain campaigns. The funds are pooled together by Crowdbase until the campaign closes successfully. Pooling of Investments
  25. 25. How Crowdbase works Once the campaign is successful, the company issues the shares to the crowdfunders based on their invested amount. Then, Crowdbase transfers the collected funds to the company. Investment Certificate
  26. 26. BONUS TOPICS 04
  27. 27. Key Pitch Deck Components Problem Solution Target Audience Team Competition Financials Use of Funds Roadmap Business Model Market Size
  28. 28. Structuring your funding rounds Make a plan Make a long-term plan of your financing needs until profitability. Split into phases Split your financing needs into phases. Do not make the mistake of raising all financing needed until profitability from the beginning. Implement your plan Start your first round with enough funding to complete Phase 1. Once Phase 1 is completed, THEN go and acquire further funding for Phase 2. Rinse and repeat.
  29. 29. Q&A
  30. 30. Thank you! Want to learn more? Contact us at: frixos.larkos@crowdbase.eu panayiotis.kakourides@crowdbase.eu www.crowdbase.eu

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