2. AGENDA OF TODAY
• Introduction
• Presentation of Crowdfunding platforms:
My Micro Invest Guillaume Desclée
Look & Fin Frédéric Levy Morelle
• Testimony of companies:
2Houses Gill Ruidant
Saint-Aulaye Jean-Louis Barré
• Discussion
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3. INTRODUCTION
• Definition
• Market composition
• Role regarding traditional financing solutions
• Important aspects from different perspectives:
the entrepreneur
the backers
the platform
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4. CROWDFUNDING
• Definition
• Market composition
• Role regarding traditional financing solutions
• Important aspects from different perspectives:
the entrepreneur
the backers
the platform
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6. …TOWARDS A DEFINITION OF CROWDFUNDING…
“…describes the collective effort of individuals who
network and pool their money, usually via the Internet,
to support efforts initiated by other people or
organizations.”
For entrepreneurs:
Crowdfunding = new financing source
Source: Ordanini et al. (2011), Prive (2012)
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7. THERE EXIST DIFFERENT CROWDFUNDING MODELS:
Non-financial return for funders Financial return for funders
Donation-based Reward-based Equity-based Lending-based
Philanthropy or Non-monetary Dividend / Fixed periodic
sponsorship rewards Capital gain income
New financing sources for
Source: adapted from Massolution (2012) companies!
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9. CROWDFUNDING
• Definition
• Market composition
• Role regarding traditional financing solutions
• Important aspects from different perspectives:
the entrepreneur
the backers
the platform
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10. HOW LARGE IS THE CROWDFUNDING “SECTOR”?
Worldwide:
- In 2011: CFPs: $1,5 B - US Business Angels: ~$22,5 B
- In April 2012: 452 active crowdfunding platforms
EU (2011):
• CAGR raised
funds: 40%
• CAGR number
US (2011): of CF firms:
• CAGR raised 60%
funds: 90%
• CAGR number of
CF firms: 30%
Source: Massolution (2012), Brown (2012)
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11. EU COMPARED TO US
A higher CAGR in terms of CFPs (60% >< 30%)…
Good indicator given that…
new entrants CFPs generates 25% of overall fund
raising
A higher share of equity- and lending-based CFPs
(31% >< 18%)
Source: Massolution (2012)
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12. EQUITY- AND LENDING-BASED CF
Millions of $
Around half the overall raised
funds
Equity-based:
• Not the largest overall source
of funds…
• But largest raised amount of
funds/campaign ($85k><$5k
or less for other)
• …and growing… primarily in
EU
Source: Massolution (2012)
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13. CROWDFUNDING
• Definition
• Market composition
• Role regarding traditional financing solutions
• Important aspects from different perspectives:
the entrepreneur
the backers
the platform
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14. CF: FINANCING « TOOLS » FILLING SOME GAPS…
Risk level and
expected return
Debts (i.e. from banks) Stock
15% markets
Trade
Sale
25% Equity
VC
Grants Private
Specific
35% funds
Bussiness
Angels
Public
50% University funds
investment
funds Lending-based CF
FFF
Equity-based CF
Seed Start-up Development Growth Consolidation
Company maturity
Source: adapted from Olivier Witmeur MBA BP 2012 & Women Business Angels Club
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15. COMPLEMENTARY ROLES TO TRADITIONAL FINANCING
SOURCES
• Equity-based CF:
To consolidate equity and leverage access to other
financing sources such as bank loans
• Lending-based CF:
For entrepreneurs who want to avoid dilution but
project is (still) too risky for a traditional bank loan
Or entrepreneurs who lack guarantee to back loans
To complete a bank loan, ↓ the overall risk, ↑
probability of getting the funds
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16. CROWDFUNDING
• Definition
• Market composition
• Role regarding traditional financing solutions
• Important aspects from different perspectives:
the entrepreneur
the backers
the platform
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17. Important aspects
from different perspectives
• Three main players with their own perspectives:
the entrepreneur (project)
the backers (crowd)
the platform
• Additionnal players potentially involved in the process :
Law firm(s) & Bank
Professional investors
The regulatory authority (= FSMA in Belgium), etc
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19. Important aspects:
(1) Legal framework for the platform
Belgian regulation
Public investment offering
>= or < 100.000 €
(un)public information … and FSMA tends to
to (un)limited nbr of avoid / postpone the
people design of a clear and
proper framework for
crowdfunding activities
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20. Important aspects:
(2) Main contractual / legal connections
Connections
not always
present and
other ones
may apply !
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21. Important aspects:
(3) Cash flows, costs and revenues
Potential recurrent revenue / cost
Funds invested
success by the crowd
failure
Potential Success fee
other costs
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22. Important aspects:
(4) What the platform provides
• Upfront management of projects:
Collection, screening, selection
Advice on valuation (optional)
Services related to communication (optional)
• Visibility for the projects to be funded
• Closing management of projects:
Supervision of the fund clearing with the bank
Supervision of the legal clearing between the funded
company and the funding individuals (crowd)
• Point of attention: platform’s responsibility
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23. Important aspects:
(5) Selection’s criteria of platforms
• Selection’s criteria of platforms (following their positioning)
Degree of professionalism, maturity and credibility of
the project and the information material provided
Return on Investment to be expected
Innovative character (not meaning technological)
Sector
“Sexiness” of the presentation to the crowd
Chance of success of the fund raising (thus not only
based on pure classic criteria as for professional
investors)
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24. Important aspects:
(6) Requirements for a good projects
• Provide to the platform management different types of
information on the project: the project itself, the value
proposition, the differentiation, the team, the business
model, the financial forecast, etc
• As usual credibility (of the project and the team) is key
• But in the case of crowdfunding, presentation is paramount
and a “sexy” video presentation is often a must
• There should be “something” that speaks to the collective
or individual mind, imagination or dreams of the crowd
• Finally, all platforms have specific characteristics of their
own, as do their respective crowds, which the
entrepreneurs should also consider in the equation
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25. Important aspects:
(7) What the crowd expects and provides
• What the crowd expects :
The project to be clearly presented
To be (quickly) convinced
To be seduced with a project that speaks to its mind
To get a specific level of ROI (return of investment)
• What the crowd provides :
A proof of concept of the project
A first base of clients
Funding
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26. Last important aspects:
• Technical characteristics of the transaction : crowd model
(4), amount, tenor, costs-revenue-reward structure, etc
• The fund raising usually follows an ”all or nothing logic” : be
strategic
• Valuation of the company: maximisation vs fair level
• Dilution: % of shareholder equity to match the raised fund
• Management of relation with investors after the
transaction
NB: All those “parameters” and aspects (and other ones)
should be considered while discovering the value proposition
of each individual platform
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28. REFERENCES
• Brown, T.K. (2012). 2011 Angel Market Trends. Podium Ventures.
• Farrell, J. (2012). The JOBS Act: what startups and small businesses need to
know. Forbes.
• Massolution - Crowdsourcing.org (2012). Crowdfunding industry report -
Market Trends, Composition and Crowdfunding Platforms.
• Ordanini, A., Miceli, L., Pizzetti, M. and A. Parasuraman (2011). Crowd-
funding: Transforming customers into investors through innovative service
platforms. Journal of Service Management 22 (4): 443.
• Prive, T. (2012). What is Crowdfunding and how does it benefit the
economy. Forbes.
• Steinberg, S. and R. DeMaria (2012). The Crowdfunding Bible: How to raise
money for any startup, video game, or project. Read.me.
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29. Thank you for your attention !
Brussels Enterprise Agency
E-mail: business@abe.irisnet.be
Web : www.abe.irisnet.be
www.1819.be
www.monstarterkit.be
www.ecosubsibru.be
Tel 1819
info@1819.be
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