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Crowd funding 21 march 2013
Crowdfunding is an approach to raising capital for new projects or businesses by appealing to large numbers of ordinary people for small investments. In the UK, crowdfunding is growing rapidly as a way to fund entrepreneurial ideas that may struggle to access traditional sources of funding such as grants, loans, or venture capital. There are different types of crowdfunding including donation, reward, loan, and equity crowdfunding. Platforms such as Kickstarter, Funding Circle, and Crowdcube are examples of operating crowdfunding models in the UK and have successfully funded thousands of projects and businesses by connecting them to individual investors. However, there are also ongoing challenges to address regarding crowdfunding
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Crowd funding 21 march 2013
- 1. Why not jointhe crowd and discover the new way to fund your growth? An overview of UK Crowdfunding Alan Scrase 21st March 2013 1
- 2. Context • SETsquared Partnership- the Enterprise collaboration of the Universities of Bath, Bristol, Exeter, Southampton and Surrey • Approximately 7,400 academics working at these universities are responsible for ten per cent of the UK's Higher Education research budget • Partnership formed in 2002 led by Southampton with Bath, Bristol and Surrey (Exeter joined in 2011) • Funded under Higher Education Innovation Funding until 2015 • Collectively supports the growth and success of new business opportunities through spin-outs (20%), spin-ins (80%), licensing, acceleration and incubation
- 3. The SETsquared approach • SETsquared approach – Review and apply to enter – If accepted then • Work with Centre staff • Appoint mentor • Regular Business Review panels • Aim to assist high-growth and innovative companies with – business planning – management team development – Securing funding • Grants • Banks • Investment including crowdfunding
- 4. UK has awealth of entrepreneurial talent • UK has lots of great ideas • Need to cultivate ideas into the next Google/Twitter/GroupOn • Often stifled by access to Money Google says searches for "business plan UK" have increased by 60% over the past year and searches for "small business loan" are up by 34%
- 5. The way itis… • Grants complicated and time consuming • Debt finance hard to come by • Venture capital difficult to find for smaller requirements • Business angels – limited investments • Typically a syndicate each investing £10k - £100k • Is there a way to have 5000 angels each investing £10? • What if anyone could become a business angel?
- 6. Crowdfunding • Crowdfunding is an approach to raising the capital required for a new project or enterprise by appealing to large numbers of ordinary people for small amounts • Social Media • Crowdfunding examples • Kiva.org - $325m funding raised, >777,000 lenders, ~800,000 entrepreneurs • Kickstarter.com – >24,000 projects funded, > $250m pledged to-date, 2m people have pledged
- 7. Equity Funding Gaps £100k £1m £2m • Most fundraising to date in lower gap but rapidly growing • Model has shown potential to raise larger amounts • Participation of larger investors
- 8. Annual growth inthe number of crowdfunding platforms worldwide In 2011 453 platforms raised $1.5 billion in project and business financing Source: Crowdsourcing.org
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- 10. Risk-Reward profile where crowdfundingmay fit • Mix of motivations for investing • Financial and non-financial returns • Model’s suitability for social ventures
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- 16. FundingCircle Loan Crowdfunding http://www.crowdcube.com/pg/how-it-works-4
- 17. The stages ofequity crowdfunding
- 18. Crowdcube Equity Crowdfunding • Crowdcube provides a FSA approved web-based central hub for entrepreneurs to meet micro-investors. It uses the power of Crowdfunding to provide a unique service to two types of people: • for entrepreneurs to source equity funding more accessibly than conventional routes • for smaller investors to have the opportunity to invest in exciting high-potential businesses “$100 invested in Microsoft at their IPO would now be worth approximately $35k.”
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- 21. Crowdcube Equity Crowdfunding https://www.fundingcircle.com/how-it-works#how-it-works-video
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- 23. Crowdcube to date Successso far… Deals successfully funded £5.1 million 35 funded so far… £100,000 >30,000 largest single investment members £2,547 £1 million av. investment FSA Authorised biggest deal
- 24. Some challenges • Regulation •Process challenges • Post-investment • Getting the best participants • Potential returns
- 25. Regulation • Important toensure investors are protected • JOBs Act is one option but not necessarily the best one • EU looking at options • UK FSA have started approving already • Need for more transparency and consistency across Europe
- 26. Process challenges • Flexibilityaround valuations • Collaboration between investors • Investor transparency and signals • Using online tools to aid in fraud detection and business evaluation
- 27. Post-Investment • Managing inputfrom many investors • Incentivising investors with small stakes • Protecting investors post-investment • Voting rights • Exploring liquidity for investors • Ensuring businesses remain attractive to follow-on funders
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- 29. Alan Scrase SETsquared atthe University of Southampton Incubation Centre Manager [email protected] 07825 761 652
Editor's Notes
- #2 Welcome My name is and I am…
- #3 Just to set it in context
- #4 Our approach ..
- #5 The UK but….
- #6 Where we are..
- #7 Kiva - Despite being only 39 months old it has raised over $87m, funding over 213,000 entrepreneurs. They have over 500,000 lenders worldwide. Ebbsfleet United Football Club was bought by approximately 26,000 people each paying £35 - £910,000 Zopa - have over 300,000 members and total disbursals have reached £50m.
- #8 Ignoring bank borrowing for now
- #12 Introduction pages with video
- #13 Chance to contribute small amounts for set package
- #14 And for larger amounts. Possible to become dealers or agents
- #15 Way to introduce small amount lenders to viable propositions
- #16 Lender controls who and how much and the rate
- #17 Business gets funding at a the best rate from the offers received
- #18 Process
- #20 Have to take a questionnaire as potential investor to prove you are en “educated investor”
- #21 Detailed “online prospectus”
- #22 Use video to promote and therefore “meet” the team