4. anne strachan - crowdfunding
TRANSCRIPT
Agenda
Introduction to crowdfunding• the three models• the process
The crowdWhat investors, lenders or donors are looking for
Key tips for crowdfunding
Q&A
Why crowdfunding
StatisticsGlobally 2012 £1.8 billion 2013 Set for £3.5 billion
Kickstarter £22 million pledged for UK projects in one year£17.1m for successful projects
Crowdcube2013 £12.2m invested - 54 businesses, 10 second roundOver 43,000 membersRaised £1.5 million for its own growth 2013 (partner Crowdfunder raised £648,890)
Crowdfunding models
Equity = crowd-investingWorks best for larger investment in the whole business model.Must be able to offer share capital (also Community Shares)Loans/debt = crowd-lendingWorks best for business or enterprise that does not wish to give away equity – but can repay a loan, with interest.Social lending possible.
Donations or rewards = crowd-fundingWorks best for a well connected enterprise/entrepreneur with a clearly defined product and deadline.All-or-nothing or all you raise you can keep
Equity
Loans
Donations
Plan project
ChoosePlatform
The Pitchvideowritten pitchrewards
Campaigntime!
Target reached or
not
How crowdfunding works
The Pebble$10.26 million (donations)
£40,000 (donations)
Baker’s Toolkit£175,000
Draw Like a Boss£51,833 donations
Successful campaigns
£310,800 (equity)
Bonk of Pants£56,865 (debt)
Failed projects40-50% succeed (20% equity)
Sending dynaspheres to Europe
World’s first Apple Museum
Open Source Death Star
11% receiveno pledges at all
Why crowdfunding
It gives access to capital
But - its not just about the money
loyal customers (evangelists) pre-sales marketing and PR different inputs and ideas Incubation - proof of concept can be easier than obtaining grants or loans free – if it fails
And what it isn’t ….
Why do people donate or invest?
• Personal contact - family and friends, wider personal/organisational networks (they like you or believe in what you are doing)
• Closeness values, professional or geographical (what’s in it for them)
• Support creators or causes (community of interest)
• Seek rewards (they want the product)
AND for equity and loans
A financial return on their investment
Incentives
Tax breaks
• Enterprise Investment scheme (EIS)
• Seed Enterprise Investment Scheme (SEIS)
Managed Funds – first is from Crowdcube
Shares – dividends or sale (direct or nominee)
Rate of return on a loan (P2P ISAs coming)
Rewards – gadget, tech or game
Crowdfunding – equity
Strength of the business case
Tax relief
Quality of the pitch
Experience of the team
CEO personal investment in the business
Crowdfunding – loans
Ability to repay debt in medium term
• Strength of the business
• Director’s track record
Crowdfunding – donations/rewards
Strength of the idea
Quality of the pitch
Credibility of the project owner
Value of the rewards
AND MOST IMPORTANT
Social capital - wide engaged social networks
Near DeskThe oyster card for desks: rent office space by theHour at various locations around the UK
£134,500 for 7.71% equity139 investors – investments from £10-£51,00025% of investors had invested in crowdfunding campaigns beforeEIS eligible
Something Indie
Campaign on Seedrs£20,000 raised for 10% equity
Handpicked online selection of indie brands
67 investorsClear concise business plan and (understandable) business modelWell-defined target marketTrack record
Some key tips
Communicate your business
Reasonable value for the business
Have a great idea
Have an unfair advantage
Offer incentives
Network like crazy
• Register for free• Post projects• Search for platforms or projects• News and information
Thoughts or questions?