crowdfunding in sweden

Crowdfunding in Sweden

Claire Ingram, Stockholm School of Economics

Robin Teigland, Stockholm School of Economics

Stockholm success story: Flippin’ Burgers

Money raised: SEK 36,502 / €4,000

Number of investors: 186

Date funded: September 2011

Sector: Food

Enabling local solutions

Top 5 Best American Restaurants in Europe

http://travel.cnn.com/best-americana-restaurants-europe-023346

What is crowdfunding?Accumulation of small investments in individual projects by large number of individuals (the “crowd”) via or with

help of the Internet and social networks (De Buysere et al., 2012)

Picture: FundedByMe

  Form of Funding Benefits for Funders

Donation Donation Intangible benefits.

Reward Donation or pre-purchase

Rewards in addition to intangible benefits.

Equity Investment Return on investment if company does well.

Rewards sometimes also offered and intangible

benefits may motivate too.

Debt Loan Repayment of loan with interest. Alternatively

intangible benefits if loan given interest-free.

Royalty Royalty Royalties on creation. Also potentially intangible

benefits.

  Investment Role and Type Investment Value, 2012

Angel Investors

Invest large amounts, make few investments and take

equity share.

3.3-3.9 billion SEK p.a. (approximation, based on

2008 data)

Soft LoansState loans at high interest

rates, but which can be written off on enterprise dissolution.

2.4 billion SEK p.a. (ALMI alone)

Venture Capitalists

Invest large amounts, make few investments and take

equity share.

1.8 billion SEK p.a. (2010 data)

Crowdfunding

Either donation, pre-purchase/reward-based or equity, depending on platform

and entrepreneur’s preferences.

Estimated 37 million SEK p.a. (end of 2013)

Ingram & Teigland, 2013

Who are the funders?

Educated experts? 85 % of respondents have university degree (vs16% of

women and 22% of men in general population, 2013) 42% had knowledge in same field as project they funded 49 % reported to have been better at judging project

qualitydue to previous experience

The “in-crowd” 47% of “the crowd” classified themselves as entrepreneurs

– compared to only 7 % of Swedish population (2012)

77 % never bought shares in unlisted company before 41 % risk lovers

Skoglund & Stiernblad 2013

Skoglund & Stiernblad 2013

Democratising?

• Women make up less than 30 percent of business owners in the United States, and fewer than 20 percent of businesses that have any employees other than the business owner herself (U.S. Census Bureau 2010).

• Women make up less than 15 percent of angel investors and less than 10 percent of venture capitalists (Coleman and Robb 2012).

• On Kickstarter, women made up about 35% of the project leaders and 44% of the investors on the platform.

• About 23% of projects that men invested in had female project leads.

• More than 40% of projects that women invested in had female project leads.

Marom, Robb and Sade 2014

What are the limits?

EU/EEA No country can require a prospectus to be

prepared for rounds of less than 100 000 EURFor rounds of 5 million EUR or more, an EU

prospectus is always required

In Sweden The limit is 2.5 million EUR without a prospectusLess than 150 ‘non-qualified’ investors without a

prospectusALSO shares in non-publicly traded companies

cannot be advertised in Sweden

Chris Devers on Flickr.com, available here: https://flic.kr/p/9NEwpU

A true storyThat made 2 million GBP for cancer research at Uppsala University

Why crowdfund?

Test the market or establish a user baseMarket your product or serviceObtain funding Screening device for investorsReach investors further afield or people without the

right “connections”Because you can’t find other funding (be careful)Because you think it’s easy (it’s not!)Source skills and connections?BUT in Equity crowdfunding: Lots of small investors –

a problem?

Ingram & Teigland, 2013

Requirements to succeed?

What kind of project is it?Choose the right platform – and crowdfunding

type – for your project (keep in mind platform fees)

Make the concept easily understoodMake it personal?Ensure that you have initial critical mass (social

media, newspapers) – NB in donation- and reward-based

“Feed the crowd”Keep followers up to date

Some ”big” questions

Skills: How to ensure knowledge/awareness and necessary skills for crowdfunding?

Lack of support and strategic advice for funders/investors, entrepreneurs, public sector?

How to deal with many small investors in equity crowdfunding?

Regulation: How to protect investors without stifling innovation?

Cross border investments? Secondary markets for crowd equity shares? Taxation issues for investors and entrepreneurs?

Local market: How to protect/ensure local markets against foreign competition?

Local platforms vs global platforms? Significant/sufficient level of funding from local market? How to better leverage “crowd” for resources?

What’s Next?

Claire IngramStockholm School of Economics

claire.ingram@hhs.se@Claire_EBI