Crowdfunding & Alternative Finance

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1 Crowdfunding & Alternative Finance Kieran Garvey

2 Overview Background What is driving the Rise of Future Finance? Crowdfunding and AltFin models Market size and potential Creating a successful crowdfunding campaign Regulation and industry bodies Case studies

3 Crowdfunding? Alternative Finance? Crowdfunding can widely be defined as, raising money, directly, from a large number of people putting in relatively small amounts of money. There is a growing array of platforms globally with a range of different models. A recent article in the Financial Times claimed there are over 2000 crowdfunding and alternative finance platforms worldwide.

4 From Crowdsourcing to Crowdfunding Crowdfunding finds it roots in the broader concept of crowdsourcing - using the crowd to obtain ideas, feedback and solutions. Longitude Prize 1765 Wikipedia 2001

5 Crowdfunding a Brief History Base of Statue of Liberty - over 160,000 donations - most less than $1. Subscription services publishers Public buildings libraries, churches, mosques

6 Where Did Crowdfunding Come From? 1997 UK band Marillion raised $60,000 for their U.S. tour Just Giving online giving platform launches Zopa have lent 565 million to date Kiva has lent more than 320 million+ to 1.2million microentrepreneurs Kickstarter has raised over $1 billion for over 50,000+ projects 2011 Crowdcube: world s first equity crowdfunding platform

7 Key Reasons For The Growth Of Future Finance The INTERNET Social media penetration Hyper connectivity Shortage of capital (global financial crisis) Austerity Barriers to entry falling Rise of peer-to-peer business models Success of crowdsourcing

8 What Can Be Crowdfunded? Self published books, music, art, film Charities, social enterprises Education, research, scholarships Startups, SMEs, well-known brands Hardware, software, cutting-edge technology.. Corporates IBM, Philips What cannot be crowdfunded?

9 Crowdfunding & AltFin Models Donation Rewards Debt Equity Invoice Financing Microfinance Community Shares

10 Crowdfunding Models Rewards Donation Loans Equity

11 Donation & Rewards Donation Crowdfunding supporters offer financial support without any expectation of any kind of return. E.g. Just Giving Rewards Crowdfunding - supporters receive a non-financial reward or recognition for their contributions - often small with little relative value. Compensation typically constitutes a product, service or public recognition in exchange for financial contributions. Kickstarter CrowdfunderUK

12 Loan-Based Crowdfunding Loan-based crowdfunding provides financial return in the form of interest payments in addition to returning the principle investment. Peer-to-Peer and Peer-to-Business lending. Some platforms also offer longer term investments debt based securities e.g. debentures. Zopa Funding Circle Abundance Generation Trillion Fund Crowdcube - minibonds

13 Equity Crowdfunding Provides investors with an equity stake in businesses enabling the crowd to own shares in the companies they invest in. Crowdcube Seedrs Syndicate Room

14 Invoice Trading/Factoring Invoice trading is growing rapidly in the UK. Invoice trading intermediaries enable SMEs to sell their invoices or receivables to many individuals or institutional investors driving down costs of funding. This sector has raised 137 million in finance for businesses in the three years from 2011 to 2013 with an annualised growth rate of 487 per cent. Platform Black Market Invoice

15 Microfinance & Community Shares Microfinance and community shares financed by individuals or businesses in the UK, is still a relatively niche activity. Internationally, microfinance crowdfunding platforms such as Kiva and Lend With Care have provided funds to millions of microentrepreneurs. Kiva Lend With Care MicroGenius

16 Mixed/Hybrid Models Combination of any/all of the above and may be combined with crowdsourcing to harness crowd contributions to develop ventures.

17 Key Players In The UK Zopa Funding Circle Crowdcube Just Giving Abundance Generation Kickstarter Crowdfunder Indiegogo Platform Black Market Invoice

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20 Crowdfunding: Social/Environmental Bloomberg New Energy Finance (2012) estimated that 57 billion could be available through crowdfunding for clean tech alone Abundance Generation Trillion Fund Kiva

21 Motivations

22 Case Study: Crowdcube Crowdcube is the world s first and leading equity crowdfunding platform giving entrepreneurs a new way to raise investment Fully authorised and regulated by the Financial Conduct Authority

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28 The solution

29 What Are The Benefits? Equity and Loans Based Crowdfunding New way to raise finance UK wide investor reach Easier to promote Cost effective Marketing effect Crowd feedback Financial return Armchair Dragon Support friends and family Participation Lower/spread risk Simple to invest

30 What You Need To Apply... Investment description: Around 200 words that outline the idea, the market and the people that will make the business a success Exit strategy: Around 200 words that detail how investors will get their investment back (trade sales, share buy back... Business plan Financial forecasts Video

31 Stage 1: Preparation Realistic value proposition Set an achievable target Business plan Financial forecasts Exit strategy Pitch promotion plan Logo, branding social media

32 Stage 2: Building The Pitch Idea, market, people Use clear, succinct and personable language Video Rewards

33 On Rewards & Crowdfunding Pre-selling Acquiring new customers Building sales channels Showcase your product Support your investors to find new customers for you Beta Testing Involve your investors in your business Creating a long term relationship Franchising opportunities Entice higher levels of investment Achieve key funding milestones with unique rewards 50k, 100k, 150k Achieve a higher overfunding target e.g. if we reach 200% all investors will receive

34 Your Video First Impressions The Idea - The Market The People Business Model/Project clearly explain what you intend to use the funding for Successes to date? Finish with an ask

35 Case Studies - Startups Compare & Share 122k for 5.77% WayV Technologies 150k for 10% Cgon 160k for 10.63% Shamba Technologies

36 Case Studies Early Stage Power Vault 750k for 42.84% The Crowd 450k for 27.25% OpenDesk 310k for 18.59% Farm Drop 750k for 27.72%

37 Case Studies - Growth JustPark 3.5M for 14.94% HAB Housing 1.95M for 26.29% Sustainable Power 1.8M for 15.6% Eden Project 1.5M for 6% minibond

38 Creating a Buzz

39 Crowdfunding Marketing Tips Get 10 supporters lined up before you go public Add your pitch URL to your signature Prepare s to send out and spread the word Organise a launch event Speak to angels and other investors Send regular updates Contact blogs, magazines, online/offline publishers/press Put on a webinar for investors Social media channels

40 Does Crowdfunding Produce Sales? Yes. Tremendously. Across all methods (rewards, debt and equity), the respondents reported average quarterly increase in sales (not including the revenue raised through crowdfunding) of 24%. For equity-based raises the increase was dramatic: an average of 341% increase in post crowdfund quarterly sales. Wow. Does Crowdfunding Create Jobs? Yes, it does. Thirty nine percent of respondents hired an average of 2.2 new people after crowdfunding. An additional 48% reported the intent to use the crowdfunding proceeds to create additional jobs. Does Crowdfunding Deter Follow-On Investment? According to the report, it does not. Within three months of successful crowdfunding, 28% had completed rounds of traditional investment with angels or traditional venture capitalists. Many investors are viewing successfully crowdfunded ventures as already market tested as the recipients come forward with feedback on features, value proposition and price point in addition to checks. What Is The ROI Of Crowdfund Investing? This was perhaps the most compelling finding: Every hour invested in a crowdfund campaign returned $813. Crowdfund Capital Advisors Jan. 2014

41 Kieran @Crowdcube uk.linkedin.com/in/kierangarvey/