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Presentation given by Sherwood Neiss at the Open Source Pharma Conference. Neiss gave this talk at Rockefeller Foundation Bellagio Center in July 2014. Sherwood Neiss Bio: http://www.opensourcepharma.net/participants/sherwood-neiss Conference Agenda: http://www.opensourcepharma.net/agenda.html
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TOWARDS A NEW, OPEN SOURCE PHARMACEUTICAL INDUSTRY FOR THE GLOBAL POORLeveraging the Power of the CrowdJuly 15-18, 2014
Sherwood Neiss: [email protected] @woodien
Vision Combine the power of crowdsourcing with crowdfunding to develop the next generation of open pharma solutions
The 4 Types of Crowdfunding
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1.Contributors get no material return !2. Appropriate for charities !3. Illustrative example: !!!
Crowd giving (donation)
1.Contributors get gift of appreciation or
product pre-‐purchase
2. Appropriate for creative projects and product-‐presales
3. Illustrative example:
Crowdfunding (rewards)
1.Contributors get profits !2. Appropriate for entrepreneurs !3. Illustrative example:
Crowd investing (equity)
1.Contributors get a fixed return !2. Appropriate for SMEs !3. Illustrative examples:
Crowd lending
4
Money
Knowledge/Experience
Demand
Market Opportunity
Strategy
Product
A crowd with a vested interest is more than money Benefits of Crowdfunding
Funders bring relevant industry knowledge and experience to the table
They assist the entrepreneur in crafting winning strategies
They provide introductions to entrepreneurs that provide valuable market opportunities
They assist in refining a product offering so that it meets the demands of the market
They assist entrepreneurs in gauging demand for a product by attaching monetary bets on the company�s future And they provide the capital entrepreneurs need to execute on vision
What can industry participants expect? Averages Raise/Yield
Average Raise! Median!
All Types! $111,100! $46,850!
Equity Only! $178,790! $81,880!
Debt Only! $62,421! $15,341!
Rewards! $111,647! $25,800!
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Crowd capital employs the power of numbers to raise capital
$100,000 x 1 financier
BUSINESS FINANCIER CROWD
obligation
1. Zayd needs $100,000 for a start-‐up business !2. He completes a loan application or makes a
pitch to a professional investor !3. He raises $100,000 from a single financier
Scenario A: Traditional financing
1. Zayd needs $100,000 for a start-‐up business !2. He applies on an online crowd platform and
designs a social media campaign !3. He raises $100,000 from 25 friends, family
members and social media contacts
Scenario B: Crowd capital
BUSINESS
$4,000 x 25 financiers
obligation
An effective crowd capital strategy responds to four key needs
When you add those who received Angel/VC funding with those who are in talks it signals institutional interest
Crowdfund Investing Leads to Interest from Institutional Investors
=
28% within 3 months of CF close, completed Angel or VC follow on round
43% in discussions with institutional investors.
+
71% interest in institutional companies once crowdfunded!
Where will jobs be created? Impact on Jobs
Avg Employees pre-raise!
Median New Hires post-raise!
% of firms hiring!
Rewards! 1! 2! 28%!
Equity/Debt! 2.1! 2.2! 39%!