Introduction to crowdfunding: models, ecosystem, examples Jouko Ahvenainen Creative Content Production Conference – June 4, 2015, Singapore Presentation available on http://www.slideshare.net/growvc

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Crowdfunding models

1.  Dona'on  and  reward  models  •  People  donate  money,  and  some'mes  they  can  get  a  reward  later  for  the  

dona'on  (it  can  be  e.g.  a  product  for  which  development  the  money  is  used)  •  Many  purposes:  develop  gadgets,  personal  dreams,  crea've  projects,    cause  •  Services:  Kickstarter,  Indiegogo  and  Kapipal  

2.  Equity  crowdfunding  or  crowd  inves'ng  •  Real  equity  investment  in  a  company  or  project  with  return  on  investment  •  Many  asset  classes:  startups,  SME’s,  real  estate,  movies,  energy  resources  •  Services:  Seedrs,  Angel  List,  Crowdcitee  

3.  P2P  lending  •  Peer-­‐to-­‐peer  loans  for  individuals  or  businesses  with  an  interest  rate  •  Many  purposes:  personal  loans,  mortgage,  business  investments  •  Services:  Lending  Club,  Zopa,  Prosper  

4.  Hybrid  models  •  Typically  a  combina'on  of  equity  and  lending,  e.g.  conver'ble  notes  

Finance regulation

•  Lending  and  equity  models  are  typically  regulated  by  the  local  finance  regulators  •  PlaUorms  typically  need  a  license  that  can  similar  as  broker  dealer  

license  or  a  specific  lending  or  crowdfunding  license  •  Regula'on  might  rule,  how  much  money  can  be  raised,  what  kind  of  

informa'on  is  needed  (e.g.  accounts),  who  can  invest  and  how  much  

•  Regula'on  has  had  a  lot  of  impact  on  crowdfunding  •  UK’s  FCA  has  been  ac've  and  fast  open  opportuni'es  for  crowdfunding  

and  in  the  UK  crowdfunding  has  become  a  significant  funding  source  (in  2014  over  $2B  alterna've  finance  investments)  

•  JOBS  Act  in  the  US  •  New  regula'on  is  now  coming  to  Asia,  e.g.  Malaysia  and  Taiwan  apply  

new  rules  for  it,  and  Singapore  and  Hong  Kong  are  working  with  that  

•  Dona'on  /  rewards  models  are  not  typically  regulated,  but  in  some  countries  they  might  require  a  license  to  ‘collect  money’  

How is the landscape?

•  Some  opinions  have  been  that  there  will  be  one  global  plaUorm  to  dominate  the  market,  like  Facebook,  or  at  least  like  eBay  

•  The  reality:  •  There  is  and  will  be  strong  finance  (local  and  global)  regula'on  to  this  

market,  star'ng  from  KYC/AML  (Know  Your  Customer,  An'-­‐Money  Laundering)  to  required  informa'on  and  traceable  transac'ons  

•  There  are  different  kinds  of  investors  from  supporters  with  $100  to  ins'tu'onal  investors  with  $100M  

•  There  are  many  types  of  securi'es  and  asset  classes  and  investment  vehicles  and  models  

•  It  is  not  only  the  regula'on,  but  also  investment  policies,  due  diligence  requirements  and  legal  responsibili'es  

•  More  and  more  exis'ng  finance  ins'tu'ons  want  to  use  online  models  and  processes  

•  It  is  fundamental  to  think  and  build  the  ecosystem,  not  only  try  to  make  one  funding  app  

Platforms for many assets and investment models

Source: Crowd Valley, Inc., crowdvalley.com

And build a real digital investing and lending ecosystem

Issuers   Investors  

Investor  Side  PlaUorms  or  Dashboards  

Digital  Market  Places  

Issuer  Side  PlaUorms  or  Dashboards  

Data,  Research  &  Services  

Back  Office  Services  

P2P  lending  

Business  loans  

SME  funding  

Real  Estate  

Crowd  plaUorms  

Family  offices  

Ins'tu'onal  Investors  

Automated  Funds  

Equity  offer  

Borrow  request  

Investment  vehicles  

Directory  services  

Source: Grow Advisors market analysis, growadvisors.com

•  No  one  can  build  this  ecosystem  alone  and  have  credibility  to  play  all  roles  

•  Extremely  important  to  get  new  digital  plaUorms  to  work  with  exis'ng  investors,  financial  ins'tu'ons  and  professional  services  (e.g.  research,  analysts  and  underwri'ng)  

•  Digital  services  can  cut  out  unnecessary  middle-­‐men  (e.g.  those  whose  posi'on  has  been  to  be  a  gatekeeper  to  informa'on,  deals  and  investors),  but  it  s'll  requires  top  level  value  added  services  to  help  all  par'es  and  bring  credibility  to  the  market  

•  The  winners  in  this  market  focus  to  do  their  own  part  very  well  according  to  laws  and  regula'on  and  partner  with  other  similar  actors  

Important to have ecosystem

Current Digital Investment Ecosystem Actors

Grow VC Group builds ecosystem components

Issuers   Investors  

Investor  Side  PlaUorms  or  Services  

Digital  Market  Places  

Issuer  Side  PlaUorms  or  Services  

Data,  Research  &  Services  

Back  Office  Services  

Source: Grow Advisors market analysis, growadvisors.com

Case  1:  Kapipal  Raise  money  for  your  dreams  

Raise money for your dreams

Kapipal.com

Kapipal.com

Creative projects

Kapipal.com

Kapipal.com

•  Dona'on  or  rewards  campaigns  •  Success  factors:  

•  People  have  emo'onal  and  ra'onal  reasons  to  support  you,  for  example,  they  feel  you  do  something  good,  they  want  to  see  your  project’s  outcome,  or  your  project  is  something  that  have  impact  on  their  life  

•  You  have  good  material  and  you  make  ac've  marke'ng  •  Oeen  you  need  support  from  your  exis'ng  network  to  get  viral  effect  

started  à  people  like  to  follow  other  people  (e.g.  with  Kapipal  you  market  your  campaign  in  social  media  and  collect  money  in  your  own  web  site)  

•  Global  campaigns  but  it  is  important  to  know  your  own  target  audience  who  are  really  targeted  to  donate  money  

Kapipal campaigns

Case  2:  Deal  Index  One  Place  Globally  to  See  Data    From  Crowdfunding  PlaUorms  

One place to look at the market globally

Source: Deal Index Ltd., dealindex.co

Source: Deal Index Ltd., dealindex.co

Source: Deal Index Ltd., dealindex.co

Source: Deal Index Ltd., dealindex.co

Case  3:  Crowd  Valley  Full  service  plaUorm  and  backoffice  to  start  a  digital  inves'ng  or  lending  service  

The  Full  Crowd  Valley  Offering  

2nd  genera'on  plaUorm  with  configurable,  integrated  services  for  domes'c  and  global  transac'ons:  

•  Transac'on  documenta'on    •  Investor  educa'on    •  Investor  verifica'on  and  accredita'on    •  AML  and  OFAC  checks    •  Credit  and  background  checks    •  Global  payment  services    •  Custodian  and  escrow  services    •  Private  company  research  services    •  Broker  dealer  services  

 Crowd  Valley  enables  any  finance  company  to  start  a  digital  inves'ng  or  lending  service  easily  and  quickly  

crowdvalley.com  

•  Mul7ple  payment  services  providers •  “Know  your  customer”  services •  Due  diligence  and  data  room  services •  Cap  Table/Share  registry  management

Crowd  Valley  API:  A  Simple  Solu7on  to  Complex  Transac7ons

•  Ongoing  company/shareholder  communica7on

•  Private  company  research •  Transfer  documents  and  e-­‐sign

Deal management with automated backend closing processes

Flexible front-end solutions for customer acquisition

Simple investor and company areas to maximize engagement and encourage investment

Automate  the  lifecycle  of  a  deal:

25 crowdvalley.com  

•  Fully  compa7ble  with  the  API •  Modern  and  intui7ve  features

Sleek  Template  or  Custom  Front-­‐Ends

•  Suitable  for  all  segments:  private  securi7es  marketplaces,  VC,  angels,  brokers,  peer  to  peer,  crowdfunding 26

crowdvalley.com  

Case 4: Grow Advisors Expert to help and build digital startup and finance ecosystems

growadvisors.com  

Key resources: 1.  Digital finance and startup ecosystem competence globally 2.  Real experience to build new global services from scratch 3.  Pioneers of new online funding and lending models 4.  Experience to work with regulators, decision makers and

legal experts 5.  Competence from technology to regulation and business

growadvisors.com  

How to start? If you want to use crowdfunding for your company or project, what to do

How to start?

1.  Select a model: do you look for, i.e. donations, a loan or equity investment •  If it a loan or investment, investors want to get return on investment •  If it is a donation, you must give a good reason, why people do it (as well emotional

as rational) •  Check the regulation •  With equity and loan you must make your math and understand terms and

conditions

2.  Select a platform •  Crowdfunding model, geographical coverage, focus (e.g. personal dreams, startup,

gadget, movie, music, etc), terms and conditions

3.  Make your campaign material and plan •  Remember there are thousands of other project that try to get money, so you must

get attention, be relevant for donators/investors, and if it is a loan or equity, your case must be convincing

4.  You must make it happen!!! •  Don’t expect that people just find your campaign and want to give money or the

platform makes all work, you must sell your case to people, you must active, and it is up to you

•  Use professional help (e.g. Grow Advisors), if you cannot handle it alone ß you look for other people money, you must know what you do

Jouko Ahvenainen jouko@growvc.com

+1 646 363 6664 (US) +44 7889 833 165 (UK)

Grow VC Group

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