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Final report of our crowdfunding project

Final report of the group work. Thanks to my teammates Nicolas Cambuzat, Indrit Demiraj and Arnaud Humbert.

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Final report of our crowdfunding project

  1. 1.   1   Group  8  :   Nicolas  Cambuzat   Kévin  Cecile   Indrit  Demiraj   Arnaud  Humbert                                                           ICN  Business  School   Year  2013/2014           Anglo-­‐Saxon  Project  Management   |  Final  proposal  |   HelpU$    
  2. 2.   2   Table  of  content   I/  Business  Objective  ..............................................................................  3       II/  Description  of  Activity  and  Service  ............................................  3       III/  Project  timing  .....................................................................................  4       IV/  Target  Country  &  Customers  .......................................................  5       V/  Strengths  and  weaknesses  of  the  market  ................................  7       VI/  Market  studies  /research  undertaken  ..................................  13       VII/  Marketing  strategy  ......................................................................  15       VIII/  Financial  plan  :  .............................................................................  16   IX/  Sources  :  ………………………………………………………………….21                              
  3. 3.   3   I/  Business  Objective   We want to build a new firm, located in the USA, with great ideas and innovatory aspirations. We want to create a circle with as many businesses as possible. These businesses will try to cooperate and why not help each other. In this way we will be able to help and give an opportunity to the firms and destroy old- fashioned barriers of making businesses. We expect to make profit within the first year but we can patient and wait enough time to get our profits because first we want to create this network which is our first objective. For a crowd funding website like, popularity is important because this is what will increase our number of companies and investors. Our objective is to have traffic of 5,000 visitors on our website per day. And in the long term we want to attract up to 200,000 visitors per day. We have decided to target this figure, after comparing to our competitors on crowd funding market. In terms of financial objectives within the first four years we see rational to put our yearly growth income at $300,000. We based our goal on how much money can be transferred on our website every month (with a 5% fee, if each month $500,000 is being transferred through our website $300.000 per year is an achievable goal). We also plan to make money using advertising on our website (with ad revenues of $15 for every 1,000 page views which would represent between $27,000 and $1,080,000 depending on traffic). II/  Description  of  Activity  and  Service   We are four young entrepreneurs trying to fulfill our American dream, but we still have a French background and we want to keep the risk to a minimum. This is the reason why we choose an LLC (Limited Liability Company) for our corporate structure. Which means the four of us will be considered as partners in the company and in case of debt or bankruptcy we won't be personally responsible and the potential lack of solvency shall only be limited to what we have put in the company (liquidity, software, patents, infrastructures, etc.) We have had the idea to elaborate a service based on crowd funding, addressed to companies which are asking for money and looking for investors. We will select the companies we work with very carefully, we have a bunch of criteria that the companies need to satisfy before entering our data base: they need to be active and profitable for over two years and they have to have very little debts (10% max of the past year revenue). Those criteria are very important for us, and the potential investors on our website, to minimize the risk of investing. We offer companies the possibility to fund a project for their business; it can either be a better marketing plan or a change of infrastructure that would help them reduce their production, manufacturing or distribution cost. We don’t want to find new ideas but we want to help companies that already have a stable business and help them grow through a solid long term plan. The companies will then evaluate how much money they need to fund their project in exchange for a percentage of equity stakes of the company. For example a CEO evaluates his company at $1,000,000 and he thinks that
  4. 4.   4   a $100,000 investment will help his company grow, he then comes on our website and ask for $100,000 in exchange of 10% equity stakes in his business. Our website provides potential investors to companies and potential companies to investors. We also provide companies with the expertise of our great partners: a world renowned communication agency Mindshare as well as a consulting agency, which will help the companies in their decision process. The two main points are the following: 1. This website is overall, an original system of investment. Instead of the traditional way of investing (bank loans or any kind other of investors like business angels), we had the idea to create a system of investment with people coming from different social background. Actually, the aim is to bring a lot of people who will buy coupons (in order to be a little bit more competitive we chose to fix the minimum coupon at the price of $20, which is a bit lower than our competitors in order to enlarge the capacity of investors) which will provide the funding of the company. Those coupons will, once the raising is completed, translate into shares in the company. 2. The second point to develop is partnerships. First with a Marketing/Communication agency (Mindshare, which is part of the WPP group). And secondly with a consulting agency. On the one hand, it will be profitable for us regarding our own communication. On another hand, the idea is to really differentiate our service against the potential competitors. We will pay a fix fee to those agencies for their services of $5,OOO per month. But we will negotiate an intermediate fee for every transaction if our companies end up doing further deals with our partners. III/  Project  timing   The development of our project is expected to take six months at a minimum. The timing is not related to financial delays. We need time to execute a marketing plan and ensure a necessary level of awareness of our company. ! ! Investors! Helpusgrow+ Companies!! X!amount! X!amount!from!investor! Profit! generated! 20% ! 80%!
  5. 5.   5   IV/  Target  Country  &  Customers   We plan to launch this service in the USA. We decided to locate our offices in Austin, TX because it is known as the 3rd best city to start a business in the United States. Although Austin is one of the most liberal cities in America, with one of the biggest universities in the country, it belongs to a Republican state and we will benefit from its low fiscal duties. Also the rent prices for office space will be much cheaper than in any other big cities on the East Coast. For example, a 800sqft office, which is in a very good location will cost us around $800/month. Considering the previously mentioned targeted customers, we hope to attract as many investors as possible and of course, companies. In order to do so, we will charge a very low rate over every transaction: 5%. As a consequence, by all this diversity we propose, companies must be interested in “”. Therefore, if companies are interested and there are a lot of demands, there will also be a lot of investors interested. More companies will get in touch with us, more investors will pay attention to this service. In concrete terms, the customers we are looking for are: 1. On the one hand, “wanna grow” companies with high potential. So, we will accept demand from small but big companies as well. We choose to focus our service on the companies being already developed, but which would like to increase their turnover and improve their performance by launching a communication plan. By integrating another branch to this service (a partnership with a famous advertising agency), we plan to attract companies which can not afford that kind of agency without crowd funding. 2. On the other hand, we need to attract a maximum of investors. As we said before, they must be attracted by the very low rate we will charge. The advantage is that we don’t have a lot of competitors. It is mainly banks and some websites like “GiveForward” which provides a service a bit similar to ours. Also, the only question is: will the investors choose Banks or “HelpUsGrow” to invest their money? By describing all these advantages we have over our competitors, it seems that our service should be more interesting for both parties. With a good communication plan showing our assets (proximity, low rate, security and diversity), we should be able to bring a lot of customers to make it work. To conclude, let’s have a quick look concerning the Hofstede center which mainly based our motivation on targeting the USA to develop and implement our service. Indeed, it is important to evaluate the cultural and civilization context in order to create a service which respects the way of living of its customers. As a consequence, it turned out that the USA came as the ideal country to implement HelpUsGrow: First, one of the most important criteria for this kind of service is definitely the “uncertainty avoidance” which revolves around a society which deals with the fact that the future can never be known. In concrete term, are American people worried about the future or not? We can notice the score relatively low concerning America. This is a very good point since it means that American people are willing to discover new things and innovation is well perceived. But more importantly, American people are not afraid about future, as a consequence they are not afraid of investing and this is the
  6. 6.   6   key point on which our service is based on. The less people will be reluctant to the idea of investing, the more customers we will have. Eventually, the more investors we have, the more companies will be interested to come and see Helpusgrow in order to improve their potential. The very high individualism combined with the fairly low score of power distance result of the following characteristics: -Again we have a proof that American culture paves the way to investment because this shows that American people are focused on their own profits, they like challenges and are willing to take risk in order to generate money. -They are not afraid about external constraints they look after themselves only and do not rely on external factors so nothing will influence the investors to fund a project or not. -The main characteristic of being individualist can be translated as the fact of not being shy but rather open-minded. American people are curious and interested in everything. These criteria can be both applied for an organization which would like to go further by improving their communication plan or for investors to look for “good plan” and innovative creation leading to a safe investment. A fairly high masculinity (62) reveals the importance for people or organization to achieve their goal, looking for winning and facing challenges. This implies for all companies to act through a “best-in-the-field” spirit. As a result, all kind of companies even those with already a comfortable place yet are always seeking to be the number one and are not afraid to launch new products or new services in order to improve even more their competencies. Thus, it asks investments that Helpusgrow will be able to bring them and lead them to success.
  7. 7.   7   V/   Strengths   and   weaknesses   of   the   market     External  analysis   1) Market Analysis To our company the main market is crowfunding. Crowdfunding is a method to raise money using the Internet and serves as an alternative source of capital to support a wide range of ideas and ventures a) Size of the market • Crowdfunding websites helped companies and individuals worldwide raise $0.89 billion from members of the public in 2010. • In 2012 there were more than 1 million individual campaigns globally. • In 2013 the industry is projected to grow to $5.1 billion. (from which $1.6 billion was raised in North America. b) Structure of the market Crowdfunding is an open market that means there are few barriers to entry and we can enter easily. It is also a fragmented market that is to say that there is a lot of company in the market with small market share. c) Life Cycle We can say that crowndfunding market is in the growth phase, so the profit should increase.
  8. 8.   8   Macro-­‐environment  analysis:  PESTEL       Opportunity   Threat   Political   Crowdfunding Tax: And in the USA each State has its own Tax economic   Financial crisis-> banks are disclinided to loan money to small businesses Social-­‐cultural   People are use to pay on internet, and now through mobile device (smartphone, tablet) Conflict of generation: not all entreprenors won’t be inclined to use our websites because of the fact that their generation won’t trust our funding system. technology   The use of Internet, mobile technology, and social media is increasing. Security is a threat, no company is sheltered from hacking. Environmental   Legal   Rules on Crowdfunding for Security Offerings: The idea behind the crowdfunding security exemption in the JOBS Act is to allow private companies to raise relatively small amounts of capital from a large number of investors without having to register the securities issued with the SEC or under state blue sky laws. The proposal would let businesses use the Internet, mobile technology, and social media to raise up to $1 million a year from investors via crowdfunding. Under the JOBS Act, the SEC is required to adjust the $1 million dollar amount every five years to reflect changes in the Consumer Price Index. Under current U.S. federal law, the sale of securities to the public as an investment is regulated by the Securities and Exchange Commission (SEC), and it is illegal to receive a payback on an investment unless the company is approved by the SEC.          
  9. 9.   9   Microenvironment analysis: Porter  five  forces  analysis   a) Competitors Kickstarter Kickstarter is a website where creative projects raise donation- based funding. Kickstarter is one of the earlier platforms, and has experienced strong growth and many break-out large campaigns in the last few years. Indiegogo Indiegogo approves donation-based fundraising campaigns for most anything — music, hobbyists, personal finance needs, charities and whatever else you could think of (except investment). They have had international growth because of their flexibility, broad approach and their early start in the industry. Crowdfunder Crowdfunder is the crowdfunding platform for businesses, with a growing social network of investors, tech startups, small businesses, and social enterprises (financially sustainable/profitable businesses with social impact goals). Crowdfunder offers a blend of donation-based and investment crowdfunding from individuals and angel investors, and was a leading participant in the JOBS Act legislation. RocketHub Rockethub powers donation-based funding for a wide variety of creative projects. Crowdrise Crowdrise is a place for donation-based funding for Causes and Charity. They’ve attracted a community of do-gooders and and fund all kinds of inspiring causes and needs. Somolend Somolend is a site for lending for small businesses in the US, providing debt-based investment funding to qualified businesses with existing operations and revenue. Somolend has partnered with banks to provide loans appbackr Appbackr is a website that raise donation-based funding to build the next new mobile app AngelList AngelList is website that raise donation only given by accredited investors and institutions, business angel is a website that raise crowdfunding in order to create crowdfunding websites that raise money for for a specific group or niche in the market.
  10. 10.   10   Quirky Quirky is a place to collaborate and crowdfund for donation- based funding with a community of other like-minded folks. Their site digs deeper into helping the process of bringing an invention or product to life, allowing community participation in the process. Collaboration on the web is an area of exponential growth. It is attracting a lot of small companies. We can notice that in the crowdfunding there are 2 types of crowdfunding, • The first is what’s called donation-based funding. The birth of crowdfunding has come through this model, where funders donate via a collaborative goal based process in return for products, perks or rewards. • The second and more recent model is investment crowdfunding. In this model, individuals who fund become owners or shareholders and have a potential for financial return, unlike in the donation model. b) Threat of new entrants We can notice the threat of business angels who open crowdfunding websites, they are threatening because they are accredited investor, so they have credibility and if a promising project doesn’t raise enough money through crowdfunding they can complete to achieve the project, that’s reassuring for entreprenors and will attract clients. What’s more, we can see that a lot of start-ups are entering the crowdfunding market because of the money     C) Bargaining power of suppliers We don’t have suppliers, but a partnership with Mindshare, and according to size of their company, they have more power than us in negociation. But we have some power because we brought clients to them, and those clients can not afford to work with mindshare, and would have go see a Mindshare’s competitors.     D) Bargaining power of customers (buyers) Our clients have a strong power of negociation because they can easily choose to go on another crowndfunding website. Today with the easy acces to internet in the United Sates of America, most of the crowdfunding websites are accessible.     E) Threat of substitute products or services Our biggest threat is loan from banks because it is the main substitute service for funding. Funding service is a very old service, and banks are the main actors, so with our new kind of funding are not that well-known outside the youth generation who grew up with internet.
  11. 11.   11   Crowdfunding, is an innovative capital formation strategy and investment possibility, has both supporters and skeptics. In order to evaluate the new phenomenon of crowdfunding, a qualitative evaluation is invoked. SWOT analysis is a powerful qualitative research tool, which serves for gathering information and decision-making. SWOT analysis not only diagnoses past and present condition, but also gives us a vision about the future, ability to outline development perspectives. As crowdfunding is very new and rules regarding it are still being set, SWOT analysis can help to understand and position the method with regards to others and avoid mistakes. The application of this tool is based on distinguishing the strengths and weaknesses of crowdfunding and, respectively, the opportunities and threats. Strengths Weaknesses Accessibility of capital Only internet based , lack of advise Benefits for communication through both local and global means Ideas and business models presented can easily be stolen Ability to test a market – we can measure the potential for a successfully start up based on public response Weaker investor protection and potential for fraud Gives more control to entrepreneurs We should consider the administrative and accounting challenges .This challenges include a precise bookkeeping of all investments and shares Getting people emotionally in what we do Opportunities Threats Social network for promoting, and possibility to couple with crowdsourcing The risky nature of small business A niche investment opportunity / way to rise a capital Current legal restrictions are suitable for equity crowdfounding Low barrier of entry Current legal restrictions are suitable for equity crowdfounding The Possibility to create a new service and the license that would go with it, that secure our business for a certain period of time Bank competitors
  12. 12.   12   SWOT analysis, notions to be explained: Strengths are distinctive features of crowdfunding and advantages of using it in comparison with other means to raise capital or invest. Weaknesses are negative features and the features the method is lacking in comparison to other ways to raise capital or invest. Weaknesses are also of internal origin. Opportunities represent the attributes of the environment that can be exploited in order to improve the method or increase the use of the method. Threats are exposures to negative elements of external origin harmful to the method and decreasing its performance.
  13. 13.   13   VI/  Market  studies  /research  undertaken   Market search for crowd funding: • History: An early form of the crowdfunding business model was Praenumeration, a Subscription business model, which was used in the 17th century to finance book prints. Similar to crowdfunding an additional benefit to donors was offered. The United States based company ArtistShare referred to as "a pioneering crowd- financing platform" was started in 2001, followed later by sites such as EquityNet (2005), Pledgie (2006), Sellaband (2006), IndieGoGo (2008), GiveForward (2008), Kickstarter (2009), RocketHub (2009), Fundly (2009), GoFundMe (2010), Appsplit (2010), Microventures (2010), and Fundageek (2011). In the film industry, independent writer/director Mark Tapio Kines designed a website for his then-unfinished first feature Foreign Correspondents in 1997. By early 1999, he had raised more than $125,000 over the Internet from at least 25 fans, providing him with the funds to complete his film. Franny Armstrong later created a donation system for her feature film The Age of Stupid. Over five years from June 2004 to June 2009 (release date) she raised £1,500,000. In December 2004, French entrepreneurs and producers Benjamin Pommeraud and Guillaume Colboc launched a public Internet donation campaign to fund their short science fiction film, Demain la Veille (Waiting for Yesterday). Within 3 weeks, they managed to raise $50,000, allowing them to shoot their film. Adopt-A-Classroom, founded in 1998, is documented as the first crowdfunding website for education. According to Wordspy, the earliest use of the word "crowdfunding" was by Michael Sullivan in fundavlog in August 2006. The most successful crowd funded project to date is Star Citizen, an online space trading and combat video game being developed by Chris Roberts and Cloud Imperium Games, which as of 23 November 2013—claimed to have raised US$30,044,586, beating the previous record of US$10,266,844 set by Pebble Watch. On March 7, 2013, the crowdfunding site was shut down by InMobi. Crowdfunding websites helped companies and individuals worldwide raise $0.89 billion from members of the public in 2010, $1.47 billion in 2011 and $2.66 billion in 2012. In 2013 the industry is projected to grow to $5.1 billion. (from which $1.6 billion was raised in North America). In 2012 there were more than 1 million individual campaigns globally.[29] In 2013 the industry is projected to grow to $5.1 billion.
  14. 14.   14   • Competitors: 1. USA: The first portal operating in the U.S. and geared towards small businesses was founded in 2010 by Alejandro Cremades and Tanya Prive and is operating under the name of Rock The Post. Other companies that offer crowdfunding services in the U.S. are The Soho Loft and Wefunder. 2. UK: Abundance Generation was the first regulated crowdfunding platform in the United Kingdom (UK) to be regulated by the Financial Services Authority (now the Financial Conduct Authority). It was approved in July 2011 and was launched to the public in 2012. Abundance Generation provides debt finance to UK-based renewable energy developers. On 6 July 2012, Seedrs Limited was launched as the first equity crowdfunding platform to have received regulatory approval in the UK from the Financial Services Authority (FSA). In August 2012, Richard Branson announced his support for crowdfunding, crowdinvesting and crowdlending platform in the Telegraph newspaper. In February 2013, the CrowdCube crowdfunding platform, which was launched in 2011, was authorised by the FSA. 3. Canada: Although Canada has its own crowdfunding portals, none of these currently allow equity crowdfunding. In June 2013, the Ontario Securities Commission announced that it was allowing an Ontario-only portal for accredited investors.
  15. 15.   15   VII/  Marketing  strategy   The main objective of our marketing strategy is to reach potential investors, because we feel that the companies we want to promote on our website will be much easier to attract. For the companies there is no risk involved so we want to focus our limited marketing budget towards educating potential investors on the long term benefits. We will define our marketing success through our KPI (Key Performance Indicator), which will be increase in traffic to the website. Our target audience would be divided in two: 1. Low level investors, most likely students, young adults and middle class people who are looking for a new and safe opportunity to invest their money with a higher reward than the traditional ways offered by banks like low interest reward saving accounts. 2. High level investors, high class people looking to invest a lot with a minimum risk and a high reward. Even though our website will be reaching locally based investors interested in helping close by companies, we need our marketing plan to be seen nationwide. We need as much exposure as possible in order to reach our numbers. We plan to be very active on several media; we want to adjust our marketing plan to the US market. The most accurate plan would be to divide our budget with the different media: 50% on digital ads, 20% on TV spots, 20% on magazines and 10% on radio and billboards. We plan to invest around $50, 000 per trimester on all our media coverage. By using a crowd communication we will attract a bigger audience. The success matrix of our marketing plan would be based on the traffic on the website, within six months we would like to have a minimum of 5,000 visitors on our website per day. To  summarize  a  good  marketing  strategy  for  our  crowd  funding  website  we  need   the  famous  four  P’s  of  marketing  mix,  four  P’s  know  as  Product,  Price,  Promotion   and  Place.     i. Product:   we   offer   a   service   that   will   help   companies   fund   their   project   and  we  offer  project  investable  in  for  potential  investors.   ii. Price:   our   service   will   not   have   a   fixed   price   but   will   depend   on   the   different   transactions   made   on   the   platform   and   we   will   get   a   low   percentage  of  those  transactions.   iii. Promotion:   we   plan   to   divide   our   marketing   budget   on   different   media   channel:50% on digital ads, 20% on TV spots, 20% on magazines and 10% on radio and billboards.   iv. Place: we want to reach as many customers as possible all over the United States but our main targeted place will be the web.    
  16. 16.   16   Due  to  the  specialiazed  market  we  are  jumping  in  the  original  four  P’s  will  not  be   as  relevant  as  we  would  hope.  That  is  the  reason  why  the  Crowdfunding  world   has  its  own  four  P’s:   • Passion (Excitement): We want our investors to feel personally part of the projects they invest in. The passion is indeed needed. • Perks (“Thanks”): Perks are often very individual and depend heavily on the subsequent product or service. • Participation : It is important that the investors are actively involved in the project, and it’s crucial that you make it clear that success can be achieved only through them. • Pride (pride) : In a sense, you give people the chance to participate and create something through you and your project.                          
  17. 17.   17   VIII/  Financial  plan  :   In this section we will first list the different costs that we anticipate for our project. Second, we will explain the ways in which we think we will finance our project initially and finally we will explain the profits schedule we have decided. 1. Costs: • Human Resources We need to have the right human resources when creating a project for a company. The people are the main factors in these cases. In our company we will be four people. One of us will be the Director or General Manager of the company. One will be the Finance Manager, one the IT Manager and one the Marketing Manager. We will not need money to pay ourselves initially because we are the people undertaking this initiative. So there are no salary expenses. • Office We will need an office where we will work together and we will have meetings and other common office activities. As we previously mentioned, a suitable office for us in Austin, TX will cost about 800$/month rent. • Marketing It is true that we will have a Marketing Manager that will be one of us and he does not need any salary. But, we need money to finance our advertising campaign with all the kind of advertising instruments that may be possible. These may be Online Advertising, Cell Phone and Mobile Advertising, Outdoor Advertising, Print Advertising and a lot of other forms. All these need a certain and considerable amount of money. • Website and Software The main part of our project is the virtual place, which will be our website. The website will be created by the IT Manager who will be one of us. In this way we will not have any costs of monetary nature. On the other hand, there may be need of certain complicated software packages to build our website and to run our business. These software packages may be necessary to be bought. So we may have some costs in this field. • Legal Since we will create a company, we will need to register it in USA and make it legal. For these purpose we have to pay the according fees and tax duties, Also we need to take the right business operating license according the USA law. For all these previously mentioned issues we need some money.
  18. 18.   18   2. Financing: After considering all the sources of costs and explaining them related to our project, we need to make a plan about how will we finance this project and the previously mentioned costs. We have considered the internal and also the external financing for our purpose. • Internal Financing We will invest our own capital in this company. We will invest first our knowledge, our time and our competencies. Second we will invest all our electronic devices like computers etc. Finally we will invest a small monetary amount from our own savings and from the help of our parents or friends who believe in us and want to encourage us. Of course, this will be a modest monetary amount. • External Financing It is very difficult to find external sources of financing. Especially in our case because we are students and we do not have anything to use as collateral. But, there are some alternatives that are worth considering and fighting for. We can get in contact with a bank and ask them for a loan. Our project is really good and we believe in it so we will make them to believe too in our project and help us. The United States has a financial market where are operating a lot of foreign and local banks and other financial institutions of different forms so there are a lot of financing opportunities available. 3. Profits: We explained the costs and the sources of financing that we need in the initial steps of our project. But during the operation of our company we will need some profit to be able to pay our maintenance costs, our Advertising contractors and also to pay our debt interests or to pay the share of the venture capitalists that helped us. In addition, we also need to have a profit for ourselves that we may decide to reinvest it or to retain it. At the end, the purpose of every project is to get some profit back. We expect to get back a profit of 5% initially in the first year of our project.
  19. 19.   19   Expenditure: Human Resources $0. We will be the only staff members. We don’t need anybody else at the beginning. Office $800/month. Rent. Marketing $50,000 per trimester Website and Software $5,000 for the infrastructure website by choosing the software “Crowdvalley”. Legal A $20 reporting fee and a statement of information are required 90 days after formation and then every two years. An annual $800 LLC tax is due 75 days after formation and every year thereafter. There is a minimum annual fee of $865 if the LLC's net income exceeds $250,000. External financing $70,000 with 3.3% interest rates for 10 years (bank loan) 4. Cash flows Model:   This  is  a  simple  model  created  by  us  that  tries  to  predict  the  cash  inflows  and   outflows  of  our  business  and  predict  a  rate  of  return  for  it.  The  model  is  a  ten   years   model.   The   amounts   of   money   are   in   thousands.   We   do   not   take   into   account   the   tax   on   profit   or   income.   We   calculate   only   until   pre-­‐tax   but   we   include   some   legal   spending   that   we   will   have   as   a   LLC   company.   The   idea   behind  the  model  is  based  on  similar  models  from  similar  online  crowd  funding   platforms.   The   model   is   a   linear   model   and   does   not   take   into   account   any   extreme  scenarios.     So,  first  we  create  a  system  to  find  the  amount  of  financing  that  we  will  need  and   have  every  year.  For  this  I  have  used  this  kind  of  logic:    We  expect  to  have  600   requested   deals   in   the   first   year   from   600   companies   and   this   number   will   increase  by  10%  from  year  to  year.    We  will  accept  only  5%  of  the  requests  for   help   from   different   companies.   This   is   because   we   will   need   to   select   the   companies   very   carefully   since   we   should   offer   to   the   investors   secure   and   serious  investments.  The  percentage  of  the  received  deals  that  we  will  approve  is   called  the  curation  rate  and  in  our  case  is  5%  because  that  is  the  average  in  these   kinds  of  platforms.  But,  there  is  no  guarantee  that  all  of  the  deals  that  we  chose   will   be   funded.   On   average   80%   of   the   listed   deals   is   funded   and   the   average   transaction   size   for   each   deal   is   $200,000.   We   expect   the   transaction   size   to   increase   by   5%   from   year   to   year.   By   multiplying   the   funded   deals   with   the   average  transaction  size  for  each  year,  we  find  the  total  funding  for  each  year   which   will   come   from   our   online   investors.   We   will   start   with   a   funding   of   $4,800,000  to  $17,670.000  after  ten  years.    
  20. 20.   20     After that we will calculate the total cash inflows for us. The first year will be a holding period which means that we will not take any cash from the funds we have collected from the investors. One year after we expect the total cash return to be 3 times the funding of the previous year ($14400=$4800*3). This is an average coefficient of return for crowd funding online platforms. So the total capital gains will be $14400-4800=$9600. The amount of cash that we will carry for us is 20% of the capital gains $9600*20%=$1920. The other 80% of the capital gains will go back to the investors and for new funding.     Now we add to the total cash in of every year the income from the advertising. We believe that we will have 500 visitors per day in our platform which means 180,000 visitors per year. We receive $15 for 1000 visitors so it means we will approximately have $2,700 every year from advertising.   Visitors/day   500   Visitors/year   180000   Advertising  revenues   2.7    
  21. 21.   21   We calculated the total cash inflows and now we need to calculate the total cash outflows. We will have $800 expenses every month for the rent which means we will have $9,600 every year rent to pay. In the first year we will need to buy the software which costs $5,000. We will have to pay $5,000 per month form Marketing, Communication and Consulting Agencies. Legal expenses include the tax fee and the registration fee for LLC companies. Interest and capital payments are for the $70,000 loan that we will take with an interest rate of 3,3% for 10 years. I have assumed a linear amortization of the loan for simplicity. The sum of all these expenses gives us the total cash outflows for each year.   The only thing that we need to do now is to find the net cash flows for each year. We see that we have a negative flow of $79,951 in the first year and we get a positive cashflow of $5,942,184 in year ten. Which gives us a return on investment about approximately 71% =($5,942,184- $82,651)/$82,651.This return is without taxes. As you can see there are no negative net cashflows during this ten years period after year 1.        
  22. 22.   22   Sources: 2013/ crowdfunding vmr9geskvkyIFYsL idea/ Small-Businesses.htm

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  • kamleshgulabchandani

    Jan. 16, 2019
  • Haitammarwane

    Mar. 7, 2020
  • hashimraja

    Jul. 24, 2020

Final report of the group work. Thanks to my teammates Nicolas Cambuzat, Indrit Demiraj and Arnaud Humbert.


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