Presentation on Crowdfunding

Presentation by Vignesh P Kudva

Under Guidance ofProf. Janeswar Pai Maroor

CROWDFUNDING

Crowdfunding is a way of raising finance by asking a large number of people each for a small amount of money. Until recently, financing a business, project or venture involved asking a few people for large sums of money. Crowdfunding switches this idea around, using the internet to talk to thousands – if not millions – of potential funders. Typically, those seeking funds will set up a profile of their project on a website. They can then use social media, alongside traditional networks of friends, family and work acquaintances, to raise money (social media integration).

Crowdfunding has the potential to increase entrepreneurship by expanding the pool of investors from whom funds can be raised beyond the traditional circle of owners, relatives and venture capitalists.

Source: JUSTICE K S HEGDE INSTITUTE OF MANAGEMENT, NITTE.

In the United States, crowdfunding is restricted by regulations on who is allowed to fund a new business and how much they are allowed to contribute. Similar to the restrictions on hedge fund investing, these regulations are supposed to protect unsophisticated and/or non-wealthy investors from putting too much of their savings at risk. Because so many new businesses fail, their investors face a high risk of losing their principal.

Source: http://www.investopedia.com/terms/c/crowdfunding.aspJUSTICE K S HEGDE INSTITUTE OF MANAGEMENT, NITTE.

http://www.investopedia.com/terms/c/crowdfunding.asp

TYPES OF CROWDFUNDINGDonation/Reward crowdfunding

People invest simply because they believe in the cause. Rewards can be offered (often called reward crowdfunding). Returns are considered intangible. Donors have a social or personal motivation for putting their money in and expect nothing back, except perhaps to feel good about helping the project.

Debt crowdfunding

Investors receive their money back with interest. Also called peer-to-peer (p2p) lending. Returns are financial, but investors also have the benefit of having contributed to the success of an idea they believe in.

Source: http://www.ukcfa.org.uk/what-is-crowdfundingJUSTICE K S HEGDE INSTITUTE OF MANAGEMENT, NITTE.

Equity crowdfunding

People invest in an opportunity in exchange for equity. Money is exchanged for a shares, or a small stake in the business, project or venture. As with other types of shares, apart from community shares, if it is successful the value goes up. If not, the value goes down.

Source: http://www.ukcfa.org.uk/what-is-crowdfundingJUSTICE K S HEGDE INSTITUTE OF MANAGEMENT, NITTE.

JUSTICE K S HEGDE INSTITUTE OF MANAGEMENT, NITTE.

A little bit of history

The first online crowdfunded project is thought to haveoccured in _________. _________________were unable toafford to tour after the release of their seventh albumso American fans used the then fledgling internet toraise $60,000 so they could play in the US. Althoughthe band wasn’t involved in the first round offundraising, they have since used the same techniquesto successfully fund the production of their followingthree albums. Other creative projects soon followedsuit, such as films and journalism, and the firstcrowdfunding website appeared in 2001. In 2012,there were over 500 crowdfunding platforms online,and February of that year saw the first crowdfundedproject raise over £1,000,000.

Source: http://www.ukcfa.org.uk/what-is-crowdfunding


1997 Rock band Marillion

According to estimates from crowdfunding platform Fundable, “ By the end of 2014, crowdfunding is estimated to add at least 270,000 jobs and inject more than $65 billion into the global economy”

In eight months, Fundable has been able to help startups raise $50 million worth of commitments, either in the form of donation-based or equity crowdfunding. A law has been passed and provisional rules written which, when final, will allow entrepreneurs to equity crowdfund from anyone with the cash and the interest.

Source: Article by - Catherine Clifford http://www.forbes.com/sites/vanessagrout/2014/09/10/move-over-kickstarter-real-estate-equity-crowdfunding-is-catching-on-with-investors/



Top 10 CrowdfundRaising Websites

Compete Rank

US Alexa Rank Fee GK

Go fund me428 365 5%

Over $440M raised for personal fundraisers. Processing fee of 2.9% + $0.30 applies.

Kick Starter871 321 5%

Personal fundraising not allowed. Creative only. Processing fees of between 3-5% apply.

Indiegogo973 752 9%

Fee is 9%. Only if goal is reached 5% is refunded. 3% processing fee. $25 fee for international wire.

Teespring1086 616 10%

T-shirt crowdfunding site.Fees vary based on t-shirts selected for sale.

Youcaring.com2938 3071 5%

5% fee is suggested to campaign donors. Processing fee of 2.9% + $0.30 applies.

Causes4129 4295 4.75%

Allows non-profit and charity fundraising.Only the processing fee of 4.75% applies.

Giveforward4392 4609 5%

5% fee is charged to campaign creators. Processing fee of 2.9% + $0.50 per transaction applies.

Patreon6271 1951 5%

Must pledge an on-going amount. Creative projects only. Additional processing fee of 4%

Crowd rise6681 5157 5%

Free accounts charge 5%, paid accounts are 3%. Processing fee of 2.9% + $0.30 applies.

Fundly8114 7736 4.90%

Recipients pay platform fee 4.9% + credit card processing fee 3.0%.

Source: http://www.crowdfunding.com/JUSTICE K S HEGDE INSTITUTE OF MANAGEMENT, NITTE.


HOW CROWDFUNDING CURRENTLY WORKS

Donation- Based

Rewards

Pledges Toward Goal

Details about the Project. The more information the greater the chances of funding

Open area

comment

section.

Where

backers can

ask

questions.

All or Nothing Financing



ESCROW ACCOUNTDEFINITION OF 'ESCROW'

A financial instrument held by a third party on behalf of the other two parties in a transaction. The funds are held by the escrow service until it receives the appropriate written or oral instructions or until obligations have been fulfilled. Securities, funds and other assets can be held in escrow.

An escrow account can be used in the sale of a house, for example. If there are conditions to the sale, such as the passing of an inspection, the buyer and seller may agree to use escrow. In this case, the buyer of the property will deposit the payment amount for the house in an escrow account held by a third party. This assures the seller - in the process of allowing the house to be inspected - that the buyer is capable of making payment. Once all of the conditions to the sale are satisfied, the escrow transfers the payment to the seller, and title is transferred to the buyer.


B SE

1) FRAUD CHECK

•Your Name, Address, Social Security #, DOB

•Company Name

•What problem does your product/service solve?

•How does it make money?

•How much money do you need?

•How will you use the funds?

•How far will those funds get you?

•How much equity are you willing to give up for this capital?

2) Business Plan

WHO IS AGAINST CFP & WHY?

Why Are they Opposed?

Relevancy

Validity

Turf

THANK YOU

Q&A Time