Stephane Augustin

CROWDFUNDING PLATFORM ANALYSIS Date: February 2017 Presenter: Stephane AUGUSTIN Note: This material may be highly analytical  WHAT IS THIS THING CALLED CROWDFUNDING? Investopedia definition:  Crowdfunding is the use of small amounts of capital from a large number of individuals to finance a new business venture.  Crowdfunding makes use of the easy accessibility of vast networks of people through social media and crowdfunding websites to bring investors and entrepreneurs together.  For more information: http://www.investopedia.com/terms/c/crowdfunding.asp THE COLLABORATIVE ECONOMY IS REAL The concept is simple: “The collaborative economy enables people to efficiently get what they need from each other.” Regroup/partner and grow opportunities for each other => build communities. Crowdfunding emanates from this mindshift. KEY INSIGHTS ON CROWDFUNDING CAMPAIGNS Just How Serious is this Crowdfunding Business? It might seem like a strange idea to many people. However, crowdfunding is big and experts suggest that it will only get bigger from here. According to Fundable: - The average campaign for crowdfunding lasts for about 9 weeks - The average successful crowdfunding campaign is around $7,000 If a campaign can achieve 30 percent of its goal within the first week, then its chances of success are higher People earning over $100,000 annually are more likely to invest in startups through crowdfunding People of the ages of 24 – 35 years are more likely to participate in crowdfunding campaigns CROWDFUNDING MARKET GROWTH (2015) Note: Tremendous growth in 2016 and Expected to remain high in 2017. Need to look deeper for stats. Crowdfunding market high paced growth: 5 years ago => crowdfunding market => $880 million in 2010 2014=> $16 billion 2015=> $34 billion DEEPER ANALYSIS OF THE MARKET GROWTH (2015) Note: Asian Region with the highest annual growth rate (210%) http://crowdexpert.com/crowdfunding-industry-statistics/ CROWDFUNDING CATEGORIES Reward-Based Crowdfunding Peer-to-Peer Lending Donation-Based Crowdfunding Equity Crowdfunding People can pledge money to a new creative art project, a novel technology product in development, or a music artist producing a new album. P2P Lending enables borrowers to get access to funds outside of traditional banking channels. Small loans given to entrepreneurs to help fund things like short-term inventory. The smallest slice of the crowdfunding pie, equity crowdfunding also contains the most potential to change the way individuals invest their money. Equity crowdfunding enables real investments in private companies Top players in this category Top players in this category Top players in this category  Kickstarter  Lending Club  Kiva.org  Indiegogo  Prosper  GoFundMe PROS AND CONS OF EACH CROWDFUNDING CATEGORY Criteria Equity Crowdfunding Rewards based Crowdfuning Peer-to-Peer Lending Donation Based Pros Larger amounts of money “Cheap money” Better than banks (sometimes) Online way to give One customer/investor => easier investor relations More than money – a community Smart Money Pre-funding your next product Not viral Success can be your downfall – raising money is only the 1st part Selling off part of your company => expensive fundraising The pressure is on Increased transparency into your business Lot of work, potentially little payoff Cons More Debt For more detailed information: https://www.thebalance.com/what-type-of-crowdfunding-to-choose-for-business-985191 PROS AND CONS GLOBALLY Pros Cons Easy and cheap way to get funding Out of 100 projects, 1 or 2 projects get the funds Alternative to banks Low success ratio to scale up Create awareness on your product Going public with your idea => create copy cats and more competitors. Saves time and money (no need to seek out Self-investment vs getting funds from others a bunch of investors) => not the same hard work put in. Helps to organise your marketing strategy Does Not Work for Complex Projects Control on how to reward investors Might not fund large capital requirements Customer base development Often Follows an All-or-Nothing Approach Makes Your Project Inflexible => committed to investors. CRITERIA FOR SELECTING CROWDFUNDING SITE Funding Industries Process Fees & Receiving Funds •Many services have a specific focus for your crowdfunding campaigns. •The process to receive funds, as some services are all-or-nothing, meaning you have to raise 100% of your goal if you want to collect any money, •while others allow you to keep any funds you raise, though you may pay higher fees in those cases. •The industry standard is to charge a fee for providing the means of funding your campaign, which is typically around 5% of the money raised. •Some services focus on creative and artistic projects, some even more specifically music-related projects. •For all-or-nothing campaigns, you will not pay a fee if you do not receive your funding. STRATEGISING A CROWDFUNDING CAMPAIGN Set funding goals. Determine how much money you plan to raise with your fundraising campaign Devise a reward strategy. Giving the right reward and incentive. Post your campaign to the right crowdfunding platform. Get social. Communication. Visibility. Take in the money and get ready to deliver the rewards. INDIEGOGO https://www.indiegogo.com/ Criteria Information Collected Niche Media and art projects, technology, health, and even environment or religious pursuits. Well known for funding indie films. Funding model Fixed and flexible funding Repaying mode Assign and fulfill perks if your campaign is funded. Perks may include updates on your projects, first editions or originals of your work or clothes, and other merchandise. You can choose what perks to give at what donation price. The website provides suggestions on how to price and offer perks. Processing fee Indiegogo offers two different campaign options. With fixed funding, raising funds is all or nothing, so if you do not reach your goal, there are no fees or penalties. If you reach your goal, you pay a 4% funding fee. If you choose flexible funding, you can keep the amount you raise. However, if you do not reach your goal, the funding fee is 9%. If you continue raising funds and eventually reach your goal, Indiegogo refunds 5%, making the total fee only 4%. Payment processing and other third-party fees also apply. KICKSTARTER https://www.kickstarter.com/ Criteria Information Collected Niche For artists seeking funding for any creative project, Kickstarter is a solid choice. Funding model All or nothing. Project Kickstarter focuses on actual projects, so you must have a clear idea of what you want to create and be prepared to share and show off your results. Repaying mode Kickstarter offers a platform where you receive funding for your project and benefit from an enthusiastic community who wants to see your idea because a reality. Processing fee If you reach or exceed your goal, your contributors are charged and you'll receive your funds within a couple of weeks. Kickstarter charges a 5% funding fee. This crowdfunding site use Stripe to collect and process payments, which charges between 3% and 5% in payment-processing fees. THANK YOU  Let’s make this happen. Please leave a feedback. Will help me to improve. Going forward, planning to analyse: Venture Capitalist firms Angel investors and Equity Crowdfunding Success stories of entrepreneurs having used VCs or Crowdfunding