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
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
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
• 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 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
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?
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 [email protected]
+1 646 363 6664 (US) +44 7889 833 165 (UK)
Grow VC Group
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