Crowdfunding in the Nordics

Trends, Challenges and Opportunities for Entrepreneurial Growth

Stavanger, 5 September 2014

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.

(Source: World Bank (2013) “Crowdfunding Potential for the Developing World”)

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.

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)

(Source: http://www.statista.com/chart/1034/funds-raised-through-crowdfunding-in-2012/)

• In 2012, the total volume of funds raised through crowdfunding grew 81% to reach USD 2.7 billion (Massolution 2014) .

• Massolution forecasts an 81% increase in global crowdfunding volumes in 2013, to USD 5.1 billion (Massolution 2014).

• World Bank Report estimates global volumes of investment crowdfunding will reach USD 93 billion by 2025 (World Bank 2013).

• It is estimated that there are over 500 active Crowdfunding platforms operating globally (Forbes.com).

• Reward-based are the largest category, but equity-based platforms are the fastest growing (Massolution 2012).

• Once crossing the 30% milestone, statistics suggest that crowdfunders have nearly a 90% rate of success (Crowdclan 2013).

Global Figures

FØND

Nordic Crowdfunding Platforms

FØND

Nordic Crowdfunding Alliance (Today)

• Crowdfunding in the Nordics is still at infancy, but growing fast.

• Crowdfunding campaigns running on Nordic platforms during the last two years have raised over EUR 10-11 million (excluding CrowdCube).*

• Nordic companies have raised a similar sum by running campaigns on global platforms such as Kickstarter and Indiegogo.

• Overall, it is roughly estimated that Crowdfunding initatives involvoing Nordic companies comprise close to 2% of European Crowdfunding volumes thus far.

Nordic Crowdfunding Facts and Figures

(Based on figures from Booomerang, FundedByMe, Fønd, Invesdor, Karolina, Mesenaatti, and MinAksjon)

Sweden-based Earin raised USD 1,6 million for producing the world’s smallest wireless ear buds.

Norway-based Red Thread Games raised USD 1,5 million for developing a sequel to the successful ‘Longest Journey’ game series.

Sweden-based Laser Unicorns raised USD 630K for producing a film titled “Kung Fury”.

Sweden-based Memoto raised USD 550K for producing the Lifelong Camera and App.

Denmark-based Full Control raised USD 368K for developing the Jagged Alliance game.

Denmark-based Thermodo raised USD 336K for developing a thermometer for mobile devices.

Nordic Stars on

(Source: http://www.kickstarter.com/)

Denmark-based Airtame raised close to USD 1,3 million for developing their wireless HDMI solution.

Finland-based Iron Sky Universe raised close to USD 182K for producing the sequel film “the coming race” to the Iron Sky film series.

Iceland-based MailPile raised close to USD 163K for developing their Open Source Free web-mail client.

Swedish Minna Sundberg raised close to USD 151K for a hard-cover print of the webcomic “Redtail’s Dream”.

Sweden-based 21-Draw raised close to USD 150K for production of a comprehensive book on how to deal with drawing problems.

Finland-based Ambronite raised close to USD 100K for developing the first ‘real-food drinkable supermeal’.

Nordic Stars on

(Source: http://www.indiegogo.com/)

Minna Sundberg

Virtual Starvation for Early Seed Funding in the Nordic Region

Nordic Crowdfunding Alliance – why?

Relative newness and limited resources of local Crowdfunding platforms.

Governmental priority of support for entrepreneurial development.

Rapid international growth and strong global players

The Nordic Crowdfunding Alliance is a partnership of key players in the Nordic crowdfunding scene committed to: (1) developing an ever more crowdfunding-friendly Nordic region, while (2) empowering and facilitating entrepreneurial growth in the region.

• Established in March 2014 as a university-industry partnership.

• Made possible through the support of the Nordic Council’s Nordic Innovation High Growth Entrepreneurship Program

• Within the next three years, the alliance aims to enter self-financing mode.

• The alliance warmly endorses a vision of a wider alliance in the future.

Nordic Crowdfunding Alliance

* National reach-out events for spreading knowledge and understanding of Crowdfunding and its many benefits.

* Developing a thriving Nordic community of Crowdfunders that can become one of the most vibrant in the world.

* Launch of an alliance website that will allow investors to identify interesting projects for backing across the Nordics.

* Opening an option allowing project owners to choose between national and Nordic level campaigns.

* Knowledge sharing between platforms and the public via research.

Nordic Crowdfunding Alliance – Current Activities

National Events

Community Development

Alliance Website

Nordic Campaigns

Knowledge Sharing

The alliance members are jointly responsible for successfully helping entrepreneurs, artists and social ventures raise EUR 3,75 million in period between mid-2012 to mid-2014.

• EUR 2,64 Million in equity-Crowdfunding of 20 projects.

• EUR 1,11 million in reward-Crowdfudning of 370 projects.

Representing a thriving and growing Nordic Crowdfunding community:

Nordic Crowdfunding Alliance - Facts and Figures

Booomerang(Denmark)

Fønd(Norway)

Invesdor(Finland)

Karolina(Iceland)

Mesenaatti(Finland)

# Campaign Owners

855 26 352 62 310

# Investors/ Backers

13,942 1,296 1,203 5,059 1,643

Nordic Crowdfunding Alliance - Facts and Figures

Booomerang(Denmark)

Fønd(Norway)

Invesdor(Finland)

Karolina(Iceland)

Mesenaatti(Finland)

Type Reward Reward Equity Reward Reward

# Successful campaigns

241 14 20 43 72

Success rate 49% 54% 30% 69% 67%

Best Campaign(so far)

Copenhagen Boulders

EUR 42.430 (DKK 314,000)

Prebz og Dennis

EUR 8,960(NOK 71,692)

Iron Sky

EUR 265,800

Sirkús Íslands

EUR 42,482

Huuma Magazine

EUR 28,602

(* for period mid-2012 to mid 2014)

Success Stories

Company name: Iron Sky Universe OyType: Film and TV productionEquity offered: Up to 5.66%Completion percentage: 532%Funds raised: 265,800€Number of investors: 421Round duration: 13 days

Company name: Invesdor OyType: Crowdfunding platformEquity offered: Up to 8.97%Completion percentage: 388%Funds raised: 290,871€Number of investors: 135Round duration: 44 days

Success Stories

Company name: HummaType: MediaProject: Magazine productionCompletion percentage: 143%Funds raised: EUR 28,602Number of investors: 1503Round duration: 22 days

Company name: NuogramType: MediaProject: Funding print of music magazineCompletion percentage: 179 %Funds raised: EUR 23,750Number of investors: 942Round duration: 21 days

Success Stories

Company name: Copenhagen BouldersType: SportsCenterProject: Funding new climbing wallCompletion percentage: 104,75%Funds raised: DKK 314,252Number of investors: 165Round duration: 42 days

Company name: STÅ BAG SØMÆNDENEType: Music bandProject: Funding album productionCompletion percentage: 116,67%Funds raised: DKK 173,003Number of investors: 358Round duration: 120 days

Success Stories

Company name: Sirkús ÍslandsType: EntertainmentProject: Funding new circus tentCompletion percentage: 106%Funds raised: EUR 42,482Number of investors: 669Round duration: 44 days

Company name: DúndurfréttirType: Music bandProject: Funding DVD productionCompletion percentage: 116 %Funds raised: EUR 23,259Number of investors: 358Round duration: 60 days

Success Stories

Project name: Prebz og DennisType: Social causesProject: Support for Cancer SocietyCompletion percentage: 7169%Funds raised: NOK 71,692Number of investors: 447Round duration: 4 days

Project name: En Rose Under SnøenType: Film documentaryProject: Funding film productionCompletion percentage: 219 %Funds raised: NOK 43,960Number of investors: 90Round duration: 6 days

Main campaign success factors

Networking• Dedication and persistence in social media interactions.• Active networking throughout campaign process.• Capitalize on existing fan and follower base.

1

Based on the experience from the alliance’s five platforms running 754 campaigns thus far, we have summarized critical success factors:

Attractive Presentation

• Attractive, good and clear project description.• Use of images and videos.• Highlighting unique aspects of concept.

2

Good Preparation

• Good business and marketing plans.• Reasonable valuations and target/goal sums.• Communication on multiple media platforms.

3

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.• Insufficient planning and information about project.

3

1. Rise of equity-crowdfunding.

2. Rise of niche platforms.

3. Regulatory amendments and adaptations across countries, to better fit a Crowdfunding reality.

4. Increased focus on educating stakeholders in the market about the prospects and practice of Crowdfunding.

5. Increasing competition and consolidation across platforms.

6. Increasing professionalism of campaign management following stronger competition among campaign owners for the Crowd’s attention and support.

Trends and Future perspectives

Thank you for the attention…

Dr. Rotem Shneor

Centre for Entrepreneurship - School of Business and Law, University of Agder, Norway

E-mail: rotem.shneor@uia.no

Nordic Crowdfunding Alliancewww.nordic-crowdfunding.com