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Crowdfunding

Crowdfunding

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Crowdfunding

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  1. Anne Strachan @crowdfunduk CrowdfundUK.org anne@crowdfunduk.org Crowdfunding

  2. What I will cover • Introduction to crowdfunding • the three models • the process • risks and safeguards • The crowd • What investors, lenders or donors are looking for • Case studies • Come to the workshop to find out more!

  3. Why crowdfunding

  4. Statistics Globally 2012 £1.8 billion 2013 Set for £3.5 billion Kickstarter £22 million pledged for UK projects in one year £17.1m for successful projects Crowdcube Over £13 million for 71 businesses since February 2011. Over 43,000 members Raised £1.5 million for its own growth 2013

  5. Crowdfunding models Equity = crowd-investing Works best for larger investment in the whole business model. Must be able to offer share capital (NB Community Shares) Loans/debt = crowd-lending Works best for business or enterprise that does not wish to give away equity – but can repay a loan, with interest. Social lending possible. Donations or rewards = crowd-funding Works best for a well connected enterprise/entrepreneur with a clearly defined product and deadline. All-or-nothing or all you raise you can keep

  6. How crowdfunding works

  7. What links …

  8. Why crowdfunding • It gives access to capital • But - its not just about the money • loyal customers (evangelists) • pre-sales • marketing and PR • different inputs and ideas • Incubation - proof of concept • can be easier than obtaining grants or loans • free – if it fails

  9. What Crowd-funding is not It’s not a funding stream “If you build it they will come …” It’s not easy – 40-50% success rate If you don’t ask, you don’t get Only those projects which actively fundraise succeed.

  10. 40-50% succeed The Pebble $10.26 million Ouya games console $8.9 million £40,000 Draw Like a Boss £51,833 Is Daddy Coming Back in a Minute £11,270

  11. Risks • 50-60% don’t reach their • target (£19% equity) • fraud • those that fail honestly … and safeguards • due diligence • legal structure of organisation • reputation, social capital and the crowd • no money changes hands – until success

  12. Questions so far?

  13. Why would you donate/invest your money? • You meet someone, or receive and email, asking you to invest (donations) in a new business • What would inspire you? • What will encourage you to donate? • What concerns would you have?

  14. Why do people donate? • Personal contact - family and friends, wider personal/organisationalnetworks (they like you or believe in what you are doing) • Closeness values, professional or geographical (what’s in it for them) • Support creators or causes (community of interest) • Seek rewards (they want the product) • Loans and equity – they want a return on investment

  15. Crowdfunding – equity Strength of the business case Tax relief Quality of the pitch Experience of the team CEO personal investment in the business

  16. Crowdfunding – loans • Ability to repay debt in medium term • Strength of the business • Director’s track record

  17. Crowdfunding – donations/rewards Strength of the idea Quality of the pitch Value of the rewards AND MOST IMPORTANT Wide engaged social networks

  18. Business - equity Near Desk The oyster card for desks: rent office space by the Hour at various locations around the UK £134,500 for 7.71% equity 139 investors – investments from £10-£51,000 25% of investors had invested in crowdfunding campaigns before EIS eligible

  19. Business - loans Pants to Poverty - Bonk of Pants Campaign on Buzzbnk £58,365 raised of £30k target Growing an ethical supply chain for fair traded underwear 104 backers Ethical market – crowd of existing customers 10.2% interest – 3% cash 7.2% in pants!

  20. Business - donations Bonnie Bling Campaign on Bloom VC £8,130 raised of £7,500 target Laser cutting machinery to keep production in Scotland 136 backers Niche market – crowd of existing customers Rewards were appealing Backing Scottish business

  21. Community Enterprise Home Baked Campaign on Kickstarter £18,725 raised of £13,000 target An oven for a cooperative bakery in Anfield 494 backers from all over the world Community support Effective social media campaign

  22. So what’s your business idea?

  23. What does a crowdfunding campaign need? A strong “crowdfundable” proposition that fits the model An engaging pitch Creative rewards The personal touch

  24. What does a crowdfunding campaigner need? • a team • a creative and innovative approach • meticulous planning • marketing and social media skills • time and energy • AND AGAIN - MOST IMPORTANT • wide engaged social networks

  25. Final thoughts or questions?