The multiple sides of

CROWDFUNDING

bernardo.balboni@deams.units.it

@bbalbon

The bright side

https://www.kickstarter.com/projects/olo3d

/olo-the-first-ever-smartphone-3d-

printer/description

The dark side

https://www.kickstarter.com/projects/olo3d

/olo-the-first-ever-smartphone-3d-

printer/description

What crowdfunding is

Crowdfunding is the practice of funding a

project or a venture by raising monetary

contributions from a large number of people,

typically via the internet in order to make the

project (or the venture) succeed

What crowdfunding

is not

• Philantropy 2.0

• A form of revenues

• The solution for the

«funding/equity gap»

• A selling tool

• A trend

is

• A fundraising tool

• A tool to fund a project’s

industrialization

• An option to fill the

«funding/equity gap»

• A market validation tool

• A increasing phenomenon

The pillars of crowdfunding

Peers/Community

Emotion

Trust

Money

... and Web

The aim of a crowdfunding

campaign is to generate a

particular type of reaction from

the target audience

Sto

len

fo

rm ©

Dan

iele

Ferr

ari

Backers invest in equity

shares of innovative start-up.

Backers fund the projects and

receive rewards

Backers donate some money

for the NGO’s activities

Backers borrow an amount of

money and receive some

interests

Crowdfunding Platform

Campaigns focused on

start-up growth potential

Campaigns focused on

the project outcomes

Campaigns focused on

NGO’s activities and

mission

Campaigns focused on

the request for a loan

Demand EQUITY

REWARD

DONATION

LANDING

Offer

Crowdfunding Models

Equity vs. Reward Funding the equity gap of an innovative start-up (high risk)

Funding the organic growth of the start-up (market growth, product portfolio , diversification strategy) Complex financial tool (could include also preferred shares)

Enterprise value estimation is needed (it requires the involvement of lawyers and financial experts)

Corporate governance and accountability become more difficult with an increasing the number of shareholders

Funding a project promoted by firms,

entrepreneurs, teams, individuals

Funding the market validation of a

prototype (idea, event, service, product)

Rewards (products/services) has to be

industrialized and delivered

Communications investment (video,

mailing, external agencies, etc.) is

needed

Legitimation of the campaign, and its

promoter, is based on the ability to

effectively deliver the reward on time

The world of crowdfunding

The scope of crowdfunding

Source: Analisi delle piattaforme di crowdfunding italiane”

December 2015 69 established platforms 12 platform in the launching phase

What about Italy?

2005 2010 2011 2012 2013 2014 2015 2008

Produzioni

dal basso Smartika

BuonaCausa

Iodono

Prestiamoci Rete del

Dono

Cineama

Com-Unity

Letsdonation

Musicraiser

Smartika

Starteed

Eppela

Commoon

DeRev

Fidalo

Ginger

Micro Crédit

Artistique

Proposizione

Terzo Valore

Werealize

Assiteca Crowd

BeCrowdy

Bookabook

Funditaly

Innamorati della cultura

Progetto Civibanca 2.0

School Raising

StarsUp

Universitiamo

Upspringer

Vizibol

WithYouWeDo

Crowdfundme

Cubevent

Giffoni Innovation Hub

Mecenup

Next Equity

SportSupporter

Tip Ventures

Triboom

WOOP food

Source: Analisi delle piattaforme di crowdfunding italiane”

Italian Crowdfunding System 31

13 13

3 8

1 05

101520253035

Model

N. of

projects

received

N. of

projects

published

Successful

projects

(>100%)

Funded

projects

(<100%)

Unsuccess

ful projects

Successful

rate Total value

Reward 23.314 2.327 1.151 575 704 49% 7.104.340

Donation 2.650 2.090 240 1.047 615 12% 1.356.410

Equity 360 21 7 2 9 33% 1.637.631

Lending 67.400 10.100 4.325 0 0 43% 22.824.000

Reward+Donation 7.200 6.843 659 1.097 5.687 10% 3.630.034

Donation+Lending --- --- --- --- --- -- 20.230.324

Total 100.924 21.381 6.382 2.721 7.015 30% 56.782.740

The Equity Crowdfunding Italian System

Consob has approved 19

equity-based platforms:

• 18 (ordinary)

• 1 (special)

12 platforms are effectively working

Unicaseed Starsup

AssitecaCrowd NextEquity

CrowFundMe Investi-re

Tip Ventures

The most famous ‘quasi-equity’ plaform is Siamosoci.com, that is a

sort of club for professional investors (not an equity platform)

Fragmented. Of course

Equity-Based campaigns Overall, 38 equity-based campaigns in Italy (during 28 months).

15 succesfully funded

www.osservatoriocrowdinvesting.it

N. of projects

Equity collected

Equity and Lending in UK

The UK Alternative Finance Industry Report 2014 - Nesta

The weak side of the

Italian context

• Digital Divide (technological and cultural)

• Limited knowledge of English language

• Relatively low use of online payment system

• Limited crowdfunding culture

• Scarce support from public and private (financial)

institutions

Some final remarks

• Crowdfunding is an excellent validation test for the

launching of new products and services

• Crowdfunding is not suitable for every kind of project

• Crowdfunding is not for free

• Crowdfunding campaign cannot be improvised. Money

doesn’t fall from the sky. Promotion and commitment are

essential

• Crowdfunding campaign is really useful for its comments

and feedback also when it doesn’t achieve the funding goal.

• And it’s possible to try again (and again, again, again,

again, again, again, again, …)

Tips for the campaign 1. Economic sustainability of the

overall project

2. Budget definition

3. Target analysis

4. Identification of your

stakeholders

5. Other funding sources

(essential to generate “trust”)

6. Team for the crowdfunding

campaign

7. Length (30-45-60-90 day) and

period of the campaign

8. Existing platform or DIY?

9. Rewards generation

10. Project description

11. Video

12.On-line and off-line promotion

13.Feedback/community

management

Go back home,

choose a crowdfunding platform,

explore the projects,

fund a project you like

or you find it worthy to be implemented

Homeworks

Contacts and more mail

bernardo.balboni@deams.units.it

twitter @bbalbon

Papers

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2430463 http://www.jbs.cam.ac.uk/fileadmin/user_upload/research/centres/al

ternative-finance/downloads/2015-uk-alternative-finance-benchmarking-report.pdf

https://www.nesta.org.uk/sites/default/files/understanding-alternative-finance-2014.pdf