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Tieto's Capital Markets Day 2014- presentation Robin Teigland, Stockholm School of Economics
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Crowdfunding
ROBIN TEIGLAND & CLAIRE INGRAM
STOCKHOLM SCHOOL OF ECONOMICS
OCTOBER 2014
Local Stockholm success story:
Flippin’ Burgers
Money raised: SEK 36,502 / €4,000
Number of investors: 186
Date funded: September 2011
Sector: Food
Enabling local, small-scale 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 Internet and social networks (De Buysere et al., 2012)
Picture: FundedByMe
Four forms of crowdfunding
Form Benefits for funders
Donation-based Donation Intangible benefits.
Reward-based Donation or pre-purchase
Rewards in addition to intangible benefits.
Equity-based InvestmentReturn on investment if company
does well. Rewards sometimes also offered and intangible benefits may
motivate too.
Debt-based LoanRepayment of loan with interest. Alternatively intangible benefits if
loan given interest-free.
Ingram & Teigland 2013
Investment Role and Type Investment Value 2012
Angel Investors
Invest large amounts, make few investments, take equity share.
3.3-3.9 billion SEK p.a. (approximation based on 2008
data)
Soft LoansState loans at high interest rates
that can be written off if enterprise dissolution.
2.4 billion SEK p.a. (ALMI alone)
Venture Capitalists
Invest large amounts, make few investments, take equity share. 1.8 billion SEK p.a. (2010 data)
CrowdfundingDonation, pre-purchase/reward, or equity, depending on platform and
entrepreneur’s preferences.Estimated 37 million SEK p.a.
Ingram & Teigland 2013
How big is crowdfunding?Global crowdfunding almost doubled 2012 to 2013 to USD 5.1 bln March 2014 Kickstarter passed USD 1 bln in total pledgesFundedByMe raised USD 10.5 mln to dateSwedish market to be SEK 100 mln in 2014By 2025 global crowdfunding could reach USD 90 to 96 bln (1.8 times today’s global VC industry)Growth potential greatest in emerging markets?USD 50 bln in China by 2025?
Crowd equity taking off
P2B lending in Sweden
Toborrow.se
Ingram & Teigland 2013
Why crowdfund?Difficulty in raising funds from traditional sourcesTest market or establish user baseMarketing & publicity for your product or serviceFaster time to marketFunding (may not be large amount of money though)Screening device for investorsAccess greater pool of investors: further afield or
people without right “connections”Skills, connections, and other resources?
“It’s not just about the money.”
685 people talking about product on
social media
Australia’s “Major Disaster Department”World’s largest telecom
Measuring demand in advance
One step in the financing chain
Nesta
Democratizing innovation through access to capital?
Women in USA<30% of business owners <15% of angel investors<10% of venture capitalists
But…Women on Kickstarter 35% of project leaders44% of investors on platform>40% of projects women invested in had female
project leaders
Marom, Robb and Sade 2014
“Made in Africa” 3D printer (Togo)
Winner of International Space Apps Challenge
http://www.engineering.com/3DPrinting/3DPrintingArticles/ArticleID/5712/E-Waste-3D-Printer-to-Mars.aspx
What are the limits?EU/EEA No country can require a prospectus for round of <100
000 EURFor round of >5 million EUR an EU prospectus is always
required
In Sweden 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
Crowdfunding challenges?Skills: How to ensure knowledge/awareness and necessary skills?
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?Risk assessment?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?
Source: Own research, Nesta
http://www.slideshare.net/eteigland/crowdfunding-in-sweden
Thank you!
Questions?
Image via NewYorker.com
Robin [email protected]
www.knowledgenetworking.org
www.slideshare.net/eteigland
@RobinTeigland
If you love knowledge, set it
free…
If you like this presentation and would like to contribute to our research, we accept bitcoins: 14hs4JbnQLXE87GGzu84uXGaspmxmnLpwC.Thank you!!!!!
Appendix
Crowdfunding 2012
Massolution 2013
Worldwide $2.7 bln
470k projects 800+ platforms
Est. 5.5 mln (Oct 2013)
Most popular crowdfunding activities
Massolution 2013
Sold 400,000 watches already
Who are the funders?Educated experts(?)University degree Knowledge and previous experience in same field
“In-crowd”“Entrepreneurs”Risk lovers
Skoglund & Stiernblad 2013
Who are the funders?Educated experts(?)85% respondents have university degree (vs 16%
women/22% men in general population, 2013)42% had knowledge in same field as project they
funded49% reported to have been better at judging project
quality due to previous experience“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 loversSkoglund & Stiernblad 2013
Crowd equity raising its head…
• Politicians generally positive -> entrepreneurs + job creation
• But regulation is lagging in most countries
• US, Italy, Denmark changing regulations enabling equity
Massolution 2013
Millions of dollars
http://www.fundable.com/blog/crowdfunding-infographic---the-jobs-act-explained
How to succeed?Choose right platform– and crowdfunding form
Going global or local?What do you give in return (thank you, reward, pre-
purchase, shares)?Keep in mind platform fees
Define the concept Make it easily understoodMake it personal?
Feed the crowdEnsure initial critical mass (social media, newspapers)Keep followers up to date
MAGIC
Going global? Going local?Reward-based? l Niche product or
service?l Global appeal?l What are rewards?l How do you reach
international audience – and stand out?
l Community-specific product or service?
l Local appeal?l What are rewards?l Does community know
about you – can you reach them?
l Local benefits
Equity-based? l Looking to scale up?l How much equity?l How to value your
project?
l Looking to establish foothold?
l How much equity?l How to value your
project?l Local benefits –
experience, connections etc?
Lots to think about....
Trends in crowdfundingPeer to peer lendingNicheCommunityHybrid platformsEnterprise sponsoredInternal corporate crowdfundingLIVE!Economic developmentCelebrities…
Crowdfunding for research
Strategic partnership
+
Celebrities entering the scene
Executive Producer Robert RedfordNarrated by Jodie Foster
Donald Trump’s crowdfunding siteOpen to anyone
Internal corporate crowdfunding
iFundIT
More than 300 participantsEntry-level workers to VPs
Given $2,000 to invest over 8 week period Choose internal projects in which to invest
Enabling entrepreneurs anywhere
Ushahidi of Kenya
Kenya
Venture capitalists are the travel agents of yesterday – here today, gone tomorrow.
Venture capitalist in Silicon Valley –
June 2013
What’s next?