4. anne strachan - crowdfunding

Anne Strachan CrowdfundUK@CrowdfundUK

CrowdfundUK.organne@Crowdfunduk.org

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?