Crowdfunding---

SSE Alumni Seminar

ROBIN TEIGLAND & CLAIRE INGRAM

STOCKHOLM SCHOOL OF ECONOMICS

DECEMBER 2013

ROBIN.TEIGLAND@HHS.SE

Crowdfunding in Sweden

Dr. Robin TeiglandAssociate Professor

Stockholm School of Economics robin.teigland@hhs.se

@robinteigland

Claire IngramPhD StudentStockholm School of Economicsclaire.ingram@hhs.se @Claire_EBI

Today’s presentation

What is crowdfunding?From crowdfunding to crowd equityWhy crowdfund?Trends in crowdfunding Q&A

What is Crowdfunding?

Accumulation of small investments in individual projects by large number of individuals (the

“crowd”) via or with help of Internet and social networks (De Buysere et al., 2012)

Picture: FundedByMe

Local Stockholm success story: Flippin’ Burgers

Money raised: SEK 36,502 / €4,000

Number of investors: 186

Date funded: September 2011

Sector: Food

Enabling local, small-scale solutions

Top 5 Best American Restaurants in Europe

http://travel.cnn.com/best-americana-restaurants-europe-023346

Crowdfunding 2012

Massolution 2013

Worldwide $2.7 bln

470k projects 800+ platforms

Est. 5.5 mln (Oct 2013)

Four forms of crowdfunding

Form of funding Benefits for funders

Donation-based Donation Intangible benefits.

Reward-based Donation or pre-purchase

Rewards in addition to intangible benefits.

Equity-based InvestmentReturn on investment if company

does well. Rewards sometimes also offered and intangible benefits

may motivate too.

Debt-based LoanRepayment of loan with interest. Alternatively intangible benefits if

loan given interest-free.

Ingram & Teigland 2013

Investment Role and Type Investment Value 2012

Angel Investors

Invest large amounts, make few investments, take equity share.

3.3-3.9 billion SEK p.a. (approximation based on 2008

data)

Soft LoansState loans at high interest rates

that can be written off if enterprise dissolution.

2.4 billion SEK p.a. (ALMI alone)

Venture Capitalists

Invest large amounts, make few investments, take equity share. 1.8 billion SEK p.a. (2010 data)

CrowdfundingDonation, pre-purchase/reward, or equity, depending on platform and

entrepreneur’s preferences.Estimated 37 million SEK p.a.

Ingram & Teigland 2013

Crowd equity raising its head…

• Politicians generally positive -> entrepreneurs + job creation

• But regulation is lagging in most countries

• US, Italy, Denmark changing regulations enabling equity

Massolution 2013

Millions of dollars

http://www.fundable.com/blog/crowdfunding-infographic---the-jobs-act-explained

Increasing focus on Crowd Equity in Sweden

UK 2010

To Sweden 2013

Equity only

Finland 2011

To Sweden 2013

Equity only

Sweden 2011

Equity: 27,8 mln SEK

Reward: 6,8 mln SEK

Why crowdfund?

Test the market/Proof of concept“Evangelists” / AmbassadorsMarketing & publicity (int’l platforms, mostly)Raise funds fasterFaster time to market Money

“It’s not just about the money.”

685 people talking about product on

social media

Australia’s “Major Disaster Department”World’s largest telecom

International expansion

Requirements to succeed?

What do you give in return (thank you, reward, pre-purchase, shares)?

Choose the right platform for youMake concept easily understoodEnsure initial critical massBring the crowd

And “The crowd needs fuel!”

I have a dream!

But there are potential downsides

Project(s) may not be understood by crowdNot significant amounts of money• More about publicity• But changing with crowd equity

Other skills/resources do not seem to be forthcoming

Trends in Crowdfunding

NicheCommunityHybrid platformsEnterprise sponsoredInternal corporate crowdfundingLIVE!Economic developmentCelebrities

Crowdfunding for research

Strategic partnership

+

Celebrities entering the scene

Executive Producer Robert RedfordNarrated by Jodie Foster

Donald Trump’s crowdfunding siteOpen to anyone

Internal corporate crowdfunding

iFundIT

More than 300 participantsEntry-level workers to VPs

Given $2,000 to invest over 8 week period Choose internal projects in which to invest

Enabling entrepreneurs anywhere

Ushahidi of Kenya

Kenya

“Made in Africa” 3D printer (Togo) through Ulele

Winner of International Space Apps Challenge

http://www.engineering.com/3DPrinting/3DPrintingArticles/ArticleID/5712/E-Waste-3D-Printer-to-Mars.aspx

But many unanswered questions

Cross border investments?Secondary markets for crowd equity shares?Taxation issues for investor and entrepreneur?Lack of support and strategic advice for both investors and entrepreneurs? How to better leverage “crowd” for resources?

Open source community of wide variety of individuals and organizations developing peer-to-peer digital currency

URL: http://bitcoin.org/en/Our research: http://papers.ssrn.com/sol3/papers.cfm?

abstract_id=2263707

Legitimate instrument

with >60,000 daily

transactions and

>USD 12 bln in circulation

in <5 years

Venture capitalists are the travel agents of yesterday – here today, gone tomorrow.

Venture capitalist in Silicon Valley –

June 2013

http://www.slideshare.net/eteigland/crowdfunding-in-sweden

Thank you!

Questions?

Image via NewYorker.com

Robin Teiglandrobin.teigland@hhs.se

www.knowledgenetworking.org

www.slideshare.net/eteigland

www.opencrowds.org RobinTeigland

Photo: Lindholm, Metro

Photo: Nordenskiöld

If you love knowledge, set it free…

För mer information:• Research article: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2263965• Industry report: http://blog.fundedbyme.com/robin-teigland/