ENTER2018 eTourism Conference presentation

1. Crowdfunding
Where Engagement, Content and Network Meet –
Trends, Opportunities and Challenges for the Travel Industry
January 2018
Shneor, Rotem

2. What is Crowdfunding?
Definition:
• “The practice of funding a project or venture by raising many small
amounts of money from a large number of people, typically via the
Internet”. (Oxford Dictionary)
What is it good for?
• Alternative source of early seed funding for entrepreneurial ventures.
• Conceptual fine-tuning through real-time interaction with stakeholders.
• Opportunity to recruit initial customer base and brand promoters.
Democratization
• Alowing more entrepreneurial ventures to launch.
• Allowing more investors to contribute to venture growth.

3. Platform
Supporter/
Backer
Creator/
Campaigner
Patronage
Market influence
Products/Services/Investments
Funding
Feedback
Fans/ Customers
Win-Win Situation

4. Crowdfunding Types
Equity-based
Lending-based
- Funders receive an interest in the form of equity in the venture
they fund or, alternatively, revenue or profit-share arrangements.
- Funders often receive fixed periodic income and expect
repayment of the original principal investment. Split between:
- Peer-2-Peer consumer lending.
- Peer-2-Peer business lending.
Reward-based
Donation-based
- Funders receive non-monetary rewards often take the form of a
token of appreciation or the pre-purchasing of products or services.
- Funders donate to causes that they want to support, with no
expected compensation.
(Based on: Crowdsourcing LLC Report, 2012; EY-Cambridge Alternative Finance Report, 2015)
- Non-equity revenue-sharing - funders receive a fixed share of
revenues and/or profits.

5. Chronic shortage of funding to critical groups including
entrepreneurs, artists and social activists, especially at
early stages of their venture and project development.
Departure Points
Market
Funding Gaps
Waves of crises in traditional financial institutions.
Digitization of industries and transactions.
Internet and rise of Social Media drives a Crowd economy.
Market
Evolution
CF Platforms as innovative solution providers to gaps.
CF Platforms as startups with limited resources.
CF Platforms as players seeking legitimacy.
Fast growth and market adoption in environments
governed by pre-Internet and crowd-economy rules
New Industry
Emerging

6. When to do Crowdfunding?
Amountofcapitalneed
Idea/
Inception
(based on: World Bank (2013) “Crowdfunding Potential for the Developing World”)
Prototype Startup Early
Growth
Expansion
FundingGap
Reward and
Donation
Crowdfunding
Equity and
Business lending
Crowdfunding
Venture Capital
Institutional
Investors and
Investment Banks
Angel Investors
Crowdfunding
Early Stage Crowdfunding

7. Sources of Financing
Internal
Funds
Debt
- Income from sales.
- Organic growth + retained earnings.
- Asset-based financing.
- cash flow financing.
Equity
- Insider equity (bootstraping):
- Founders/ entrepreneurs
- Friends and family.
-External equity:
- Angel Investors
- Venture Capital (VC)
- Public Offering (IPO)
Support
- Government support agencies.
- Industry support agencies.
Crowdfunding
Reward CF
P-2-P
Lending
Equity CF
Matching
Programs

8. The Size & Growth of Alternative Finance in Europe
Total Volume (Excluding UK) Total Volume (Including UK)
(Source: Zielger et al. 2018 Expanding Horizons: the 3rd Cambridge Alternative Finance Report)

9. (Source: Zielger et al. 2018 Expanding Horizons: the 3rd Cambridge Alternative Finance Report)
Europe Growing
but far behind rest
of the world
Challenge 1:
Regulation
Challenge 2:
Education

10. Volume by
European Regions
2016
(Source: Zielger et al. 2018 Expanding Horizons: the 3rd Cambridge Alternative Finance Report)

11. Total Volume by European Country – 2016 and growth rate from 2015
(Source: Zielger et al. 2018 Expanding Horizons: the 3rd Cambridge Alternative Finance Report)
29%
39%
29%
76%
123%
162%
302%
63,399%
260%
548%
162%
2,173%
40%
272%
247%
81%
16,355%
806%
76%
265%
-30%

12. (Source: Zielger et al. 2018 Expanding Horizons: the 3rd Cambridge Alternative Finance Report)
Total Alternative
Finance Volume per
Capita vs GDP per
Capita - 2016

13. Alternative Finance Model 2016 Market Share
P2P Consumer Lending € 696.81m 34%
P2P Business Lending € 349.96m 17%
Invoice Trading € 251.87m 12%
Equity-based Crowdfunding € 218.64m 11%
Reward-based Crowdfunding € 190.76m 9%
Real Estate Crowdfunding € 109.45m 5%
P2P Property Lending € 95.15m 5%
Balance Sheet Business Lending € 59.13m 3%
Donation-based Crowdfunding € 32.40m 2%
Debt-based Securities € 22.85m 1%
Balance Sheet Consumer Lending € 16.74m 1%
MiniBond € 10.16m .5%
Profit Sharing Crowdfunding € 8.36m .41%
Balance Sheet Property Lending € 1.00m .05%
(Source: Zielger et al. 2018 Expanding Horizons: the 3rd Cambridge Alternative Finance Report)
The Diversity of Models –2016 Taxonomy

14. The Vitality of Alternative Finance for Business Funding
(Source: Zielger et al. 2018 Expanding Horizons: the 3rd Cambridge Alternative Finance Report)

15. (Source: Zielger et al. 2018 Expanding Horizons: the 3rd Cambridge Alternative Finance Report)

16. (Source: Zielger et al. 2018 Expanding Horizons: the 3rd Cambridge Alternative Finance Report)
Perceived Adequacy of Existing Local Regulation vs. Volume per Capita 2016 (Log Scale)

17. Nordic Crowdfunding Platforms 2014

18. Nordic Crowdfunding Platforms 2018

19. Launched own crowdfunding platform in Finland in May 2016.
Has formal cooperation with Invesdor in Finland, where the bank
sends relevant clients for equity crowdfunding services through the
partner platform.
Has a team working on the banks crowdfunding engagements.
- Launched VippsStarter reward and donation platform technically
supported by Bidra.no.
- No formal policy taken about equity and lending YET.
All other major banks looking into this in one form or another, mostly under veil of secrecy.
But what about the banks ? …
Launching own platforms:
- Reward/donation – Spleis.
- Lending – Monner.no

20. But what about the banks ? … examples outside Norden
Santander UK provides £200,000 to community projects, charities
and enterprises that are focused on social change across the UK.
Santander will donate half the funding target of a project once it
raises 50 per cent from the public online.
Allianz France set up a dedicated investment fund on the Smart
Angels platform to co-invest on a par with its clients. Allianz France
co-invests automatically the same amount within a limit of 50,000
euros per investor per company.
BNP France has invested in the Ulule platform itself, and has
established a fund where each euro contributed by the crowd
to selected projects, is automatically doubled by the
foundation (up to 1,000 euros).
BNP Belgium established, owns and runs the HelloCrowd.
Commerzbank Germany launched own P2P Business lending
platform in June 2016. Facilitating loans ranging between €200,000
and €10 million.

21. (Source: Zielger et al. 2018 Expanding Horizons: the 3rd Cambridge Alternative Finance Report)
Market Dynamics by
Models –
Institutionalization
2015-2016

22. Nordic Alternative Finance Volumes and Growth 2013-2016
(Source: Zielger et al. 2018 Expanding Horizons: the 3rd Cambridge Alternative Finance Report)

23. Nordic Crowdfunding Alliance - Facts and Figures 2012-Dec 2016
Booomerang
(Denmark)*
Bidra.no**
(Norway)
Karolina
(Iceland)
Mesenaatti
(Finland)
Type Reward Reward+
Donation
Reward Reward
# Successful
campaigns
511* 187** 272 323
Success rate 36%* 31%** 73% 68%
• * for period mid-2012 to Nov-2015
• ** Take what you raise model (vs. standard “of all or nothing” model).
Invesdor
(Finland)
Equity +
Lending
68
45%

24. Record Breaking Campaigns (2012- 2017)
Booomerang
(Denmark)
Bidra.no
(Norway)
Invesdor
(Finland)
Karolina
(Iceland)
Mesenaatti
(Finland)
Resistence
(Modtand)
(Book Production)
EUR 62.133
(DKK 462,270)
Fair & Square
(Fashion brand)
EUR 51.000
(NOK 476,258)
Injeq IQ-Needle™
(Needle for treating
childhood Leukemia)
EUR 1,653,360
Stundin
(newspaper)
EUR 45,520
The Rally Museum
(Museum)
EUR 86,420
Ahola Transport
(logistics firm)
EUR 2,017,858
The Motorcycle
Museum
(museum)
EUR 108,100
Reykjavik Media
(news website)
EUR 100,170
Red Anholt Kyst
(Seashore protection)
EUR 149,690
(DKK 1,113,700)

25. Where did money go to? (Jan 15-Dec 16)
Campaign category %
Music, Arts and Entertainment 35,8%
Social and political initiatives 14,3%
Production of Books and Magazines 14,3%
Lifestyle, Leisure and Sports 9,7%
Charity causes 9,0%
Consumer goods 7,1%
Restaurants and cafes 2,7%
Software and apps 1,7%
Other 5,5%
Reward+Donation campaigns on NCA member platforms Jan 15-dec 16
(Total 1325 campaigns)
The higher the average
sum collected by
successful campaigns.

26. Where did money go to? (Jan 15-Dec 16)
Campaign category %
Software and apps 22,7%
Lifestyle, Leisure and Sports 15,2%
Consumer goods 10,6%
Bio, Health and Medical 9,1%
Restaurants and cafes 6,1%
Games and gaming 4,5%
Music, Arts and Entertainment 1,5%
Other (hardware, transport and
logistics, real-estate, energy, etc.)
30,3%
Equity campaigns on NCA member platforms Jan 15-Dec 16 (total 66 campaigns)

27. Alternative Finance by country and model –Nordics 2015-2016
(Source: Zielger et al. 2018 Expanding Horizons: the 3rd Cambridge Alternative Finance Report)

28. Alternative Finance by country and model –Nordics 2015-2016
(Source: Zielger et al. 2018 Expanding Horizons: the 3rd Cambridge Alternative Finance Report)

29. Reasons for refusing campaigns
Purpose
• Moral, Ethical and social aspects.
• Unbacked claims of dubious nature.
1
• Up to 55% of proposed reward-based campaigns, and up to 80% of
equity-based campaigns are refused publication.
Goals
• Unrealistic targets and goal sums.
• Excessive valuations of own project.
2
Project
• Unorganized and non-responsive project owners.
• Verification problems and little information about project.
3

30. Main campaign success factors
Pro-active
Networking
• Dedication and persistence in social media interactions.
• Active networking throughout campaign process.
• Capitalize on existing fan and network base.
1
Attractive
Presentation
• Attractive, good and clear project description.
• Use of images and videos.
• Highlighting unique aspects of concept.
2
Good
Preparation
• Attractive and fairly priced rewards.
• Reasonable valuations and target/goal sums.
• Plan for communication via multiple media channels.
3
Based on qualitative analysis of 241 evaluation statements about the 73
best campaigns, and 195 evaluation statements about the 71 worst
campaigns in Jan 2015- Dec 2016:

31. Main campaign success factors
Campaigner
Characteristics
• Females vs. males.
• Non-profit vs. for-profit (in non-
investment models).
• Prior crowdfunding success record.
1
Campaign
Quality
• Visual elements (videos, images).
• Informative texts (not too long).
• Frequent updates.
2
Social capital
• # of members in social network.
• record of contribution to others.
• achieved visibility via social media.
3
Based on literature review of some 90 articles published between 2010 and 2017:
Rewards and
Returns
• Higher interest rates (in lending).
• Community belonging and public
acknowledgement rewards (in reward).
• Higher share price and low equity
share on offer (in equity).
4
Risk and
uncertainty
• Lower goal sums.
• Shorter campaign durations (in all
models except lending).
• Social network endorsements.
• Inclusion of lead investors (in equity)
5
Barriers and
Thresholds
• Including low priced rewards (in
reward).
• Volume of early stage backers
(enhancing herd effect).
6
(Source: Shneor, Vik & Lauvdal (forthcoming) “Crowdfunding Success: A Literature Review 2010-2017”)

32. Crowdfunding Campaign Process
Preparation Execution Relationship
Pre--campaign Campaign Post--campaign
• Define the project’s purpose and
needs clearly.
• Review and learn from similar earlier
projects.
• Chose platform.
• Build mailing lists.
• Warm-up existing network.
• Invest in quality content.
• Build social media reach out plan.
• Build attractive rewards/returns or
compensation schemes.
• Contribute to others’.
• Provide constant updates and
information.
• Reply quickly to comments, questions
and requests from the crowd.
• Activate network for contribution and
social media and WoM reach out.
• Contact media, bloggers, experts and
influencers.
• Follow up on promises to contribute.
• Ensure dynamic process and
developments.
• Provide constant updates and
information.
• Continue replying to comments,
questions and requests from the
crowd.
• Deliver on campaign promises on
time.
• In case of delays, problems report
honestly and timely.
• Invest in learning about new members
in network.
• Reciprocate by contributing to others’
campaigns.

33. Some interesting facts and figures
• According to an interview with Indiegogo founder in 2011 (HuffingtonPost 2011):
- Campaigns with video receive 122% more funding than campaigns with only text.
- Campaigns involving teams raise 70% more than those with just one person involved.
• Spelling errors in crowdfunding campaign texts decrease the chance of
success by 13% (StartupInnovation.org).
• Once crossing the 30% milestone, statistics suggest that crowdfunders have
nearly a 90% rate of success (Crowdclan 2013).
• On Kickstarter, about two-thirds of women-led projects reach their funding
goals, which is compared with a little less than one-third of male-tech ventures.
The research showed that women are 13% more than likely to meet their goals
on the crowdfunding giant (Crowdfundinsider 2014).

34. Crowdfunding and Testing Concepts
Rewards
• If possible, offering a variety of products as rewards with
different features and price ranges, to check market preferences.
• Introduce suggested changes matched by supporter aggregate
demands (encourage creation of demand).
1
• Beyond raising funds, crowdfunding also plays important role in market
validation, and can be used as platform for concept/product
development and fine-tuning.
• Your fans and supporters are an asset to learn from and engage.
Dialogue and
Surveys
• Monitoring unsolicited requests and suggestions from crowd.
• Monitoring solicited requests for feedback via own social media
channels, where supporters are invited to join.
• When relevant, create exclusive access to product development
forums, labs and presentations to selected supporters.
2

35. Crowdfunding and Testing Concepts
Gamification
• Invite supporters to vote on designs and features via surveys.
• Reward top supporters for social shares and feedbacks.
• Create reward/loyalty systems, certifications and visual
acknowledgements of contributions as achievements.
3
Meet physically
• Invite top supporters to exclusive company events, where they
can test and review products.
• Offer physical meeting and access as a potential reward to
contributors.
4
• Platform communication tools – internal mail, and message system.
• E-Mail communication.
• Social media channels.
• Dedicated websites with different levels of access.

36. A Note about Crowdsourcing
Key ingredients
(1) an organization that has a task it needs performed;
(2) a community that is willing to perform the task voluntarily;
(3) an online environment that allows interaction between the
community and the organization as the work takes place;
(4) mutual benefits for the organization and the community.
• “An online, distributed problem-solving and production model that
leverages the collective intelligence of online communities to serve
specific goals” (Brabham, 2006)
Fundamentals
• Projects initiated with an open call by an organization.
• At the end of the process, the organization owns the
crowdsourced solutions, which have profit making potential, but
also incurs all associated costs.
• Members of the community that contributed to the creation of the
solution enjoy a variety of benefits as specified in the original call
for solutions (i.e. usage rights, income sharing, etc.)

37. All models relevant for Tourism - Example
Lending
Construction of new hotel in Bad Kleinkirchheim
funded by raising EUR 1,203,800 from 417 investors .
1
Equity
2
Reward
3
Donation
4
Construction of new Helsinki Sea Pool and Spa
funded by raising EUR 1,117,600 from 751 investors .
Construction of a uniquely designed barefoot luxury
concept hotel in the Mexican Mayan Riviera funded by
raising USD 73,028 from 374 supporters.
The Louvre museum in France has raised EUR
1,130,000 from 7,615 donors for bringing back to
France a lost national treasure – King Francois I’s
“Book of Hours” (campaign ongoing)

38. The Case of the Finnish Armour Museum
https://mesenaatti.me/en/pa
nssarimuseon-tankkikatos/

39. https://www.youtube.com/
watch?v=Qd091kJitoU
https://www.youtube.com/
watch?v=bSMCDAWPUrs
(Source: Presentation by Timo Jalo, Nordic Crowdfunding Event, Helsinki 16 march 2017)
The girls and the Panzer – animation films

40. 410
365
38
JAPAN
FINLAND
OTHERS
NUMBER OF PARTISIPANTS / COUNTRY
(Source: Presentation by Timo Jalo, Nordic Crowdfunding Event, Helsinki 16 march 2017)

41. EUROS / COUNTRY
35975
44650
1750
JAPAN
FINLAND
OTHERS
(Source: Presentation by Timo Jalo, Nordic Crowdfunding Event, Helsinki 16 march 2017)

42. 1. Regulatory amendments.
2. Increasing professionalism of platforms and campaigners.
3. Platform innovations in AI and CRM functionalities.
4. From domestic to international expansion of platforms.
5. Front and/or back-end consolidation of small platforms.
6. Ongoing rise of equity-crowdfunding and niche platforms (real-estate,
renewable energy, sports).
Reflections …. What next?

43. Thank you for the attention…
Rotem Shneor
School of Business and Law
University of Agder, Norway
E-mail: rotem.shneor@uia.no