Crowdfunding for SME by FriendsClear

Crowdfunding for SME

EFMA Retail Credit Conference 20-21 june 2013

Nicolas Guillaume – Financial Breakthrough

[email protected]

Blog : http://nicolasguillaume.fr/ Twitter : http://twitter.com/NicolasMax Mobile : +33 6 19 98 57 65

Financial Breakthrough

Blog : http://finthru.com/

Twitter : http://twitter.com/finthru 1

EFMA CONFERENCE – RETAIL CREDIT 20-21 June 2013 - Amsterdam

mailto:[email protected]

http://nicolasguillaume.fr/

http://twitter.com/NicolasMax

http://finthru.wordpress.com/



http://twitter.com/finthru


Agenda

• Key points • Global Market • SME Focus • FriendsClear’s case • Feedback • Marketing • Regulation • US Crowdfunding Act • Competition vs Complementarity

2 EFMA CONFERENCE – RETAIL CREDIT 20-21 June 2013 - Amsterdam

Key Points

• Free and extended access to projects to be funded by investors (funders)

• Direct choice of funding by investors

• Full Transparency


Key Points (detailed)

• Free and extended access to projects to be funded by investors (funders) – Projects individualy identified and described (information disclosure)

– Defined amount requested with predefined use of funds

– Projects reviewed by platforms

– Usually through Internet

• Direct choice of funding by investors – Limited amount by investor

– Directly assigned to a project

– Assessment carried by each investor

– Large number of investors requiring a collective approval (collective intelligence)

• Full Transparency – Amounts funded

– Amounts collected and fundings granted

– Returns


Key Points (continued)

• Each point very differenciating from traditional finance product

• Social Media (info disclosure, virality, interactivity, internet accessibility)

• Funding is not the point – Multiple funding models : reward, no return

allocation, loan without interest, loan with interest, equity, bond

– Third party (direct funding) or own account (mirroring funding)

– Funding, Refunding, Additional funding


Global Market

Source : Massolution, May 2012 6

780 M$ loans originated (2012)


SME Focus

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Kickstarter Babyloan FriendsClear Funding Circle

Crédit Agricole

Smartangels

Funding Type Reward Loan without interest

Loan with interest

Loan with interest

Loan with interest

Equity

Project sample 3Doodler 3D Plastic melted pencil 2,3M$ (30K$ requested)

Tilagavady & Djeasridar Indian restaurant 5K€

Matériel Forestier Woodcutter 8K€

Score a Hole in One Events Organization 50K£

Eolienne Loué Windmill 1,2M€ (on a total of 17M€)

Sentinelo Mobile application 500K€

Funders Nb 26.457 82 26 24 250 33

Av. funder amount

88 $ 68 € 307 € 2.084 £ 4.800 € 15.000 €

Funder counterpart

Delivery Promise

Funding Account (mirroring)

Term Bank Account (with securities)

Loan part Term Bank Account (mirroring)

Ad hoc Offer

Equity

Risk Delivery default

MicroFinance Institute Default

Loan default Loan default No risk •Operation •Valorization • Liquidity EFMA CONFERENCE – RETAIL CREDIT 20-21

June 2013 - Amsterdam

Kickstarter

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88$ / funder

http://www.kickstarter.com/projects/1351910088/3doodler-the-worlds-first-3d-printing-pen

Reward















Babyloan

9

68€ / funder (82 funders) Loan without interest (cf Kiva)

Nicolas Guillaume – FriendsClear / Finthru EFMA CONFERENCE – RETAIL CREDIT 20-21 June 2013 - Amsterdam

FriendsClear

EFMA CONFERENCE – RETAIL CREDIT 20-21 June 2013 - Amsterdam 10

Requested : 8.000€ 307€ / funder (26 funders)

Loan with interest

Nicolas Guillaume – FriendsClear / Finthru

Funding Circle

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2.083£ / funder (24 funders) Loan with interest


Smartangels

12

15.000 € / funder 33 funders

Equity


FriendsClear’s case

• Professional Projects funded by loan (3K€-25K€, 3 years, 8,5% fixed rate + 4% flat fees)

• Selected & funded by internauts through a dedicated crowdfunding account with Term Deposit (interest rate 4,5%) mirroring projects (and guarantee)

• Money collecting, account management and loan origination performed by a banking partner Credit Agricole

• Projects reviewed (FriendsClear) and banking controls (Credit Agricole)


FriendsClear Regulation frictions

• Regulator remarks (Quiet period) – No discretionary refusal for loan – Direct selection – Risk fully supported by funders

• Modified model – Discretionary refusal for loan – « Projects Basket » : choice of a project into a « basket » of

projects – Capital guarantee by Credit Agricole

• Risk on interest not capital (4,5% default rate OK) • Double selection process not convergent (timing cycle, criterias,

segment addressed) => not scalable


FriendsClear Feedback

• Projects are the product • Very attractive product (for funders, project owners,

media) • 2 levels of client involvement

– (Non financial) « contribution » (vote, recommend, virality, comment)

– Funding

• 2 models of virality – Ad hoc communities (Social Media) – Recurrent funding communities

• High impact of funding tools and regulation (client communication, legal, risk management,…)


Clients profiles

16

Funders Project owners

• Emerging phase projects • Non standard profiles (young, without

experience, professional change,…) • Small size projects (commerce ambulant,

service à la personne, internet) • Assessment problem projects (innovation,

unknown indutry) • Scoring flag projects (excluded industries,

unfilled ratios) • Risky projects (startup, retournement,...) • No accounting or bank relationship history • Equity « Funding gap » (100K€ to 2 M€) • Bank reluctance • Internet based quick and packaged (less

paper) process => not in FriendsClear’s case

• Wide client profiles diversity • Motivation

• Project support • Active selection • High yield • Transparency / Traceability

• « Power users » • Favored segment : experienced

executives or managers closed to retirement • Time • Money • Expertise


Crowdfunding Regulation

• Collecting money : eMoney, KYC, AML

• Client qualification & protection : MIFID / PRIPS, Prospectus

• Middle-man : eMoney, Broker, ?

• Funding tools : Prospectus (equity), Loan,…

• Regulation is an issue but not a problem (except if you are a bank)


US Crowdfunding Act

• Exemption 2000$/ year / funder

• Funding Portal (Middleman)

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Source : Forbes, Sept 2012


Competition vs Complementarity

• High involvement product for special needs and segments

• Small amount

• Can be « packaged » to be retailed by traditional banks

• Much more complementarity than competition


Thanks for your attention


Questions


Nicolas Guillaume


[email protected]

Blog : http://nicolasguillaume.fr/ Twitter : http://twitter.com/NicolasMax Mobile : +33 6 19 98 57 65


Blog : http://finthru.com/

Twitter : http://twitter.com/finthru

Ressources : Blog : http://nicolasguillaume.fr/ Twitter : http://twitter.com/NicolasMax Cours Social banking & Fin Part : http://fr.slideshare.net/NicolasMax/2012-cours-social-banking-prt-participatif

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mailto:[email protected]








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Crowdfunding for SME by FriendsClear

Economy & Finance

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