Crowdfunding: A whirlwind tour

Claire IngramStockholm School of Economics

A true story

That made 2 million GBP for cancer research at Uppsala University

How does it work?• Reduces transaction

costs (e.g. Search costs)

http://sloanreview.mit.edu/article/strategic-decisions-for-multisided-platforms/

• Reduces bargaining costs• Reduces

enforcement costs

Research funding in Sweden

• Research funding in Sweden is worth about 0.87 percent of Swedish GDP.• Approx. 40 billion SEK was spent on research in

Sweden in 2014.• The Swedish Research Council received an

estimated combined total of 22.1bn SEK worth of R&D funding in 2014.

Where are the gaps?

• Small projects, including experiments• Purchasing software• Commercialisation?• Human trials?

“The Valley of Death”

  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.

604m USD 706m USD

3.05bn USD1.2bn USD

Who are the funders?

Educated experts? 85 % of respondents have university degree (vs 16% 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 quality due

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

But Marketing principles apply...

• Make the project easily understood• Make it personal• Often, means telling a story• This helps with sharing and social media• But when you attract a crowd, you need to keep

them happy too – so keep in touch!

Skoglund & Stiernblad 2013

“I want to see a Facebook page being connected. Basically, the more social services are connected the better because that adds to credibility, you can check

up on the person and see if they are who they say they are and if they’re cheating.”

  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.

Claire IngramStockholm School of Economicsclaire.ingram@hhs.se@Claire_EBI