1. Entrepreneurs and technology
challenging the Banks?
-------
Crowdfunding
ROBIN TEIGLAND & CLAIRE INGRAM
STOCKHOLM SCHOOL OF ECONOMICS
OCTOBER 2014
ROBIN.TEIGLAND@HHS.SE
CLAIRE.INGRAM@HHS.SE
WWW.SLIDESHARE.NET/ETEIGLAND
2. In just a few years in Sweden aloneâŠ
Company Founded Business
Klarna 2005 E-commerce payment services
MyLoan 2006 Loan broker
Trustly 2008 Online payments
TrustBuddy 2009 P2P lending
iZettle 2010 Mobile payments
FundedByMe 2011 Crowdfunding, crowd equity
Tink 2012 Personal finance
Safello 2013 Cryptocurrency exchange
KnC Miner 2013 Cryptocurrency mining
equipment
3. Local Stockholm success story:
Flippinâ Burgers
Money raised:
SEK 36,502 /
âŹ4,000
Number of
investors: 186
Date funded:
September 2011
Sector: Food
6. What is crowdfunding?
Accumulation of small investments in individual
projects by large number of individuals (the
âcrowdâ) via or with help of Internet and social
networks (De Buysere et al., 2012)
Picture: FundedByMe
7. 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
8. 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
entrepreneurâs preferences.
Estimated 37 million SEK p.a.
Ingram & Teigland 2013
9. How big is crowdfunding?
ïGlobal crowdfunding almost doubled 2012 to 2013 to
USD 5.1 bln
ïMarch 2014 Kickstarter passed USD 1 bln in total
pledges
ïFundedByMe raised USD 10.5 mln to date
ïSwedish market to be SEK 100 mln in 2014
ïBy 2025 global crowdfunding could reach USD 90 to 96
bln (1.8 times todayâs global VC industry)
ïGrowth potential greatest in emerging markets?
ïUSD 50 bln in China by 2025?
12. P2P lending in the US and UKâŠ
âą>USD 3.8 bln in personal
loans since 2007
âą USD 750 mln growth each
quarter
âąNow offering business loans
âąStrategic alliance with Union
Bank
14. Ingram & Teigland 2013
Why crowdfund?
ïDifficulty in raising funds from traditional sources
ïTest market or establish user base
ïMarketing & publicity for your product or service
ïFaster time to market
ïFunding (may not be large amount of money though)
ïScreening device for investors
ïAccess greater pool of investors: further afield or
people without right âconnectionsâ
ïSkills, connections, and other resources?
18. Democratizing innovation
through access to capital?
ïWomen in USA
ï§<30% of business owners
ï§<15% of angel investors
ï§<10% of venture capitalists
ButâŠ
ïWomen on Kickstarter
ï§35% of project leaders
ï§44% of investors on platform
ï§>40% of projects women invested in had female
project leaders
Marom, Robb and Sade 2014
19. âMade in Africaâ 3D printer (Togo)
Winner of International
Space Apps Challenge
http://www.engineering.com/3DPrinting/3DPrintingArticles/ArticleID/5712/E-Waste-3D-Printer-to-Mars.aspx
20. Crowdfunding challenges?
ïSkills: How to ensure knowledge/awareness and necessary skills?
ïLack of support and strategic advice for funders/investors, entrepreneurs,
public sector?
ïHow to deal with many small investors in equity crowdfunding?
ïRegulation: How to protect investors without stifling innovation?
ïRisk assessment?
ïCross-border investments?
ïSecondary markets for crowd equity shares?
ïTaxation issues for investors and entrepreneurs?
ïLocal market: How to protect/ensure local markets against foreign
competition?
ïLocal platforms vs global platforms?
ïSignificant/sufficient level of funding from local market?
ïHow to better leverage âcrowdâ for resources?
Source: Own research, Nesta
22. If you love knowledge,
set it freeâŠ
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!!!!!
34. Who are the funders?
ïEducated experts(?)
ï§University degree
ï§Knowledge and previous experience in same field
ï§âIn-crowdâ
ï§âEntrepreneursâ
ï§Risk lovers
Skoglund & Stiernblad 2013
35. Who are the funders?
ïEducated experts(?)
ï§85% respondents have university degree (vs 16%
women/22% men in general population, 2013)
ï§42% had knowledge in same field as project they
funded
ï§49% reported to have been better at judging project
quality due to previous experience
ïâIn-crowdâ
ï§47% of âthe crowdâ classified themselves as
entrepreneurs â compared to only 7% of Swedish
population (2012)
ï§77% never bought shares in unlisted company before
ï§41% risk lovers Skoglund & Stiernblad 2013
36. Crowd equity raising its headâŠ
âą Politicians generally
positive -> entrepreneurs
+ job creation
âą But regulation is lagging
in most countries
âą US, Italy, Denmark
changing regulations
enabling equity
Massolution 2013
Millions of dollars
39. How to succeed?
ïChoose right platformâ and crowdfunding form
ïGoing global or local?
ïWhat do you give in return (thank you, reward, pre-purchase,
shares)?
ïKeep in mind platform fees
ïDefine the concept
ïMake it easily understood
ïMake it personal?
ïFeed the crowd
ïEnsure initial critical mass (social media, newspapers)
ïKeep followers up to date
ïMAGIC
40. 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 â
and stand out?
l Community-specific
product or service?
l Local appeal?
l What are rewards?
l Does community know
about you â 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 â
experience, connections
etc?
41. Trends in crowdfunding
ïPeer to peer lending
ïNiche
ïCommunity
ïHybrid platforms
ïEnterprise sponsored
ïInternal corporate crowdfunding
ïLIVE!
ïEconomic development
ïCelebrities
ïâŠ
44. Celebrities entering the scene
Executive Producer Robert Redford
Narrated by Jodie Foster
Donald Trumpâs crowdfunding site
Open to anyone
45. Internal corporate crowdfunding
iFundIT
ïMore than 300 participants
ïEntry-level workers to VPs
ïGiven $2,000 to invest over 8 week period
ïChoose internal projects in which to invest