Crowdfunding Overview

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My presentation on crowdfunding for Finansliv and Tieto Capital Markets in October 2014.

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  • 1. Entrepreneurs and technologychallenging the Banks?-------CrowdfundingROBIN TEIGLAND & CLAIRE INGRAMSTOCKHOLM SCHOOL OF ECONOMICSOCTOBER 2014ROBIN.TEIGLAND@HHS.SECLAIRE.INGRAM@HHS.SEWWW.SLIDESHARE.NET/ETEIGLAND

2. In just a few years in Sweden aloneCompany Founded BusinessKlarna 2005 E-commerce payment servicesMyLoan 2006 Loan brokerTrustly 2008 Online paymentsTrustBuddy 2009 P2P lendingiZettle 2010 Mobile paymentsFundedByMe 2011 Crowdfunding, crowd equityTink 2012 Personal financeSafello 2013 Cryptocurrency exchangeKnC Miner 2013 Cryptocurrency miningequipment 3. Local Stockholm success story:Flippin BurgersMoney raised:SEK 36,502 /4,000Number ofinvestors: 186Date funded:September 2011Sector: Food 4. Enabling local, small-scale solutionshttp://travel.cnn.com/best-americana-restaurants-europe-023346 5. What is crowdfunding?Accumulation of small investments in individualprojects by large number of individuals (thecrowd) via or with help of Internet and socialnetworks (De Buysere et al., 2012)Picture: FundedByMe 6. Four forms of crowdfundingForm Benefits for fundersDonation-basedDonation Intangible benefits.Reward-basedDonation or pre-purchaseRewards in addition to intangiblebenefits.Equity-based InvestmentReturn on investment if companydoes well. Rewards sometimes alsooffered and intangible benefits maymotivate too.Debt-based LoanRepayment of loan with interest.Alternatively intangible benefits ifloan given interest-free.Ingram & Teigland 2013 7. Investment Role and Type Investment Value 2012AngelInvestorsInvest large amounts, make fewinvestments, take equity share.3.3-3.9 billion SEK p.a.(approximation based on 2008data)Soft LoansState loans at high interest ratesthat can be written off if enterprisedissolution.2.4 billion SEK p.a. (ALMI alone)VentureCapitalistsInvest large amounts, make fewinvestments, take equity share.1.8 billion SEK p.a. (2010 data)CrowdfundingDonation, pre-purchase/reward, orequity, depending on platform andentrepreneurs preferences.Estimated 37 million SEK p.a.Ingram & Teigland 2013 8. How big is crowdfunding?Global crowdfunding almost doubled 2012 to 2013 toUSD 5.1 blnMarch 2014 Kickstarter passed USD 1 bln in totalpledgesFundedByMe raised USD 10.5 mln to dateSwedish market to be SEK 100 mln in 2014By 2025 global crowdfunding could reach USD 90 to 96bln (1.8 times todays global VC industry)Growth potential greatest in emerging markets?USD 50 bln in China by 2025? 9. Some Swedish platforms 10. P2P lending in the US and UK>USD 3.8 bln in personalloans since 2007 USD 750 mln growth eachquarterNow offering business loansStrategic alliance with UnionBank 11. Toborrow.se 12. Ingram & Teigland 2013Why crowdfund?Difficulty in raising funds from traditional sourcesTest market or establish user baseMarketing & publicity for your product or serviceFaster time to marketFunding (may not be large amount of money though)Screening device for investorsAccess greater pool of investors: further afield orpeople without right connectionsSkills, connections, and other resources? 13. Measuring demand in advance 14. One step in the financing chain 15. Nesta 16. Democratizing innovationthrough access to capital?Women in USA