minivation

Notes on:Crowd Funding

We are interested in theentrepreneurial use of crowd funding

NOTP2P consumer lending.

P2P consumer lending=

to individualsby individuals

(often for a small return).

An organisationwants

funding fora project.

Let’s saythey need£2,000.

First, the basic idea…

Organisationwants

funding fora project.

They need£2,000.

The basic idea…

funding

£100

£100

£100

£100 £100 £100

£100 £100

£100

£100

£100

£100£100

£100£100

£100

£100

£100£100

£100

fundin

g

funding

Individuals provide funding.

funding

funding

Wow,£2,000,

thank you.xxx

Happyorganisationbecause they

can starttheir project.

The basic idea…

happyfunders

Definition of Crowd Funding:

Crowd funding (which is also sometimes calledcrowd financing and crowd sourced capital)simply means raising money for a project or abusiness from a large number of funders, eachof whom generally contributes a relatively smallamount.

1: p.5

Definition of Crowd Funding:

However, the term crowd funding isused quite widely to refer to three quite differentmethods of raising finance.

1: p.5

Three different methods of raising funds:

1) Donations or sponsorship

2) Lending

3) InvestmentInvestment has two models:Securities Model

&Collective Investment Scheme Model

1: p.2

Three different methods of raising funds:

No financial return on money given.

May however have somenon-monetary reward.

i.e. t-shirts or other goods, credits, attendance, networking opportunities, kudos…

1: p.2

1) Donations or sponsorship

Three different methods of raising funds:

1) Donations or sponsorship

Good for social causes - no returns expectedby the donator(s).

Lots more on the horizon which focuson specific areas (i.e. film, games, apps…)

1: p.5

Three different methods of raising funds:

2) Lending

Interest on money = financial return.

Alternative to banks.

Cannot provideconsumer creditunder UK laws.

1: p.5

Three different methods of raising funds:

High level of risk / returns.

May not be an appropriate way to raise moneyfor the development of creative

products and services.

1: p.7

2) Lending

Three different methods of raising funds:

Money provided for return on investmentas a share of any profits.

3) Investment

1: p.5

Three different methods of raising funds:

Takes one of two forms.

1) Securities model

2) Collective Investment Scheme Model

1: p.5

3) Investment

Three different methods of raising funds:

1) Securities Model

A funder invests money in a companyand receives shares in that company.

3) Investment

1: p.5

Three different methods of raising funds:

1) Securities Model

Organisationwants

funding fora project.

funding

Fundersget shares

in the organisation.

project

3) Investment

Three different methods of raising funds:

2) Collective Investment Scheme Model

A funder invests money in a projectin return for a right to a share in theprofits or in the revenues generatedby that project, but does not receiveshares in the company undertaking

that project.

3) Investment

1: p.5

Three different methods of raising funds:

Organisationwants

funding fora project.

funding

Fundersget shares

in the project.

Project

2) Collective Investment Scheme Model

3) Investment

Organisationwants

funding fora project.

funding

Fundersget shares

in the project.

Project

2) CIS Model

Organisationwants

funding fora project.

funding

Fundersget shares

in theorganisation.

1) Securities Model

Project

3) In

vest

men

t

Is this a good method of raising financefor the creative sector?

Before we can answer this question,we need to know the needs of the sector.

Is this a good method of raising financefor the creative sector?

What capital investment do they need?

When and why?

Is this a good method of raising financefor the creative sector?

What alternatives are there?

What would be the best model to useif funding was required?

Is this a good method of raising financefor the creative sector?

Could there be consequences

for finance provided at 0% interest?

Is there such a thing as free money?

With 0% interest financing and low feesto pay, could this result in things being

produced that were cost sensitivein the past?

New technologies could be more accessible.

What would be the effects on this sector?

Could this result in greater numbers ofindividual pieces being made?

3D printing for example.

If greater numbers of small batch productionis happening in the creative sector

where will the demand be?

Could we see a move to the

mass market business model?

Units

Products

Mass market

Long tail

If we see a move to the

mass market business model

what might be the consequences

for the creative industries?

All these areas (& more) need addressing:

value creation

value capture

quality

local handicraft

hand-made

labour

ethics

crafts

arts

tradition

place

market quantity

love

needs social

politics

economics

passion

We, in the creative industries,do not operate in a vacuum (thankfully).

These issues need considering if we areto be a credible and sustainablecontributor to our communities.

Reference 1:

The Association for UK Interactive Entertainment (2012)A Proposal to Facilitate Crowd Funding in the UK

London: Osborne Clarke

Online: http://ukie.org.uk/sites/default/files/UKIE%20Crowd%20Funding%20Report%20-%20A%20Proposal%20to%20Facilitate%20Crowd%20Funding%20in%20the%20UK%20-%20%20

February%202012.pdf[Accessed 12/04/12]

Reference 2:

http://crowdfundingtoday.co.uk/

[Accessed 12/04/12]

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