Circumnavigating Traditional Finance CROWDFUNDING
Crowdfunding Presentation | Chris Fodor | Vienna | June 17, 2019 PART 1 Introduction What is crowdfunding?
A financing method whereby money-seekers can find funding from money-givers via an electronic platform (website).
Crowdfunding Presentation | Chris Fodor | Vienna | June 17, 2019 PART 1 Introduction Meet the project that raised +$250 million
Crowdfunding Presentation | Chris Fodor | Vienna | June 17, 2019 PART 1 Introduction Indeed gaming is a hot category for crowdfunding
Star Citizen video game Launched on Kickstarter in 2012. Over the years raised over $250 million.
Not bad, eh?
Crowdfunding Presentation | Chris Fodor | Vienna | June 17, 2019 PART 1 Introduction But you also get brilliant ideas such as this...
Hare-brained ideas? Do not reach their funding goals, or are suspended by the platform owners. Shown here: Paul, the sexiest smartphone charger on the planet… raised only $2,160 out of target $8,000.
Crowdfunding Presentation | Chris Fodor | Vienna | June 17, 2019 PART 1 Introduction Dulcis in fondo...
Crowdfunding Presentation | Chris Fodor | Vienna | June 17, 2019 PART 1 Introduction The platform links the seekers and the givers
Crowdfunding Presentation | Chris Fodor | Vienna | June 17, 2019 PART 1 Introduction In crowdfinance, two planets co-habit
▸ ▸ ▸ ▸ Donations: the majority of “raises”. No reimbursement required. Often in-kind gifts (called rewards). Examples: Indiegogo, KickStarter, etc.
▸ Loans: crowdlending; still the minority, but growing. Money-givers are reimbursed for their loans, sometimes even with interest. Examples: Conda, Kiva, etc.
Crowdfunding Presentation | Chris Fodor | Vienna | June 17, 2019 PART 1 Introduction An old concept, revived by the Internet
Pre-Internet: books via subscription plans; war bonds; Auguste Comte
Internet era 1997 - Music - Marillion tour - $60,000 1997 - Film - Mark Kines - $125,000 2002 - Software - Free Blender graphics - Euro 100,000
Companies launched: 2001 - ArtistShare; 2005 - Kiva; 2008 - IndieGoGo; 2009 - KickStarter; 2019 - GoFundMe, etc.
Crowdfunding Presentation | Chris Fodor | Vienna | June 17, 2019 PART 2 Operating Basics Part 2
Operating Basics
Crowdfunding Presentation | Chris Fodor | Vienna | June 17, 2019 PART 2 Operating Basics Kickstarter.com - one of the great success stories
Crowdfunding Presentation | Chris Fodor | Vienna | June 17, 2019 PART 2 Operating Basics Conda.at - the Austrian leader
Crowdfunding Presentation | Chris Fodor | Vienna | June 17, 2019 PART 2 Operating Basics Kiva.com - crowdlending for development
Crowdfunding Presentation | Chris Fodor | Vienna | June 17, 2019 PART 2 Operating Basics Kickstarter - seekers must be self-promoters
Crowdfunding Presentation | Chris Fodor | Vienna | June 17, 2019 PART 2 Operating Basics Kickstarter - good projects are well-groomed
Crowdfunding Presentation | Chris Fodor | Vienna | June 17, 2019 PART 2 Operating Basics Money-seekers: what are their responsibilities?
Overall: ▸ creating a convincing sales pitch on the platform (text, image, video) ▸ agree to the commission provisions of the platform ▸ agree to other legal provisions specified by the platform and possibility by the local regulatory framework Donations: ‣ no legal obligations except those listed in the project offering. ‣ often gifts in kind (T-shirt, CD, invitation to an event, etc.) Loans: ‣ much stricter constraints on loan reimbursement ‣ yet usually no collateral required, so ‘bankruptcy light’ ‣ legal environment changes by country
Crowdfunding Presentation | Chris Fodor | Vienna | June 17, 2019 PART 2 Operating Basics Platform: what are its responsibilities?
▸ create the platform and maintain it
▸ promote the platform so that it attracts the seekers and the givers
▸ pay itself somehow so as to cover costs (IT & staff & marketing)
▸ no risk if fund target not reached
Crowdfunding Presentation | Chris Fodor | Vienna | June 17, 2019 PART 2 Operating Basics Money lenders or donors: what are their responsibilities?
▸ provide cash, typically via online methods and immediately upon log in.
Crowdfunding Presentation | Chris Fodor | Vienna | June 17, 2019 PART 3 Perspective PART 3
Crowd finance in perspective
Crowdfunding Presentation | Chris Fodor | Vienna | June 17, 2019 PART 3 Perspective How does crowdfinance fit into the finance universe?
Crowdfunding Presentation | Chris Fodor | Vienna | June 17, 2019 PART 3 Perspective
Not one business model for all
Revenue streams for platforms: 1. commission (usually 5%) on funds raised 2. fund processing fee (3 to 5%) for credit card payments 3. donations to the platform (not its projects) 4. back-end merchandising
Key performance factors: 1. Low level of “junk ratio” (i.e. projects that raise zilch) 2. High level of successful projects
Crowdfunding Presentation | Chris Fodor | Vienna | June 17, 2019 PART 3 Perspective Crowd finance has become a big player
Crowdfunding Presentation | Chris Fodor | Vienna | June 17, 2019 PART 3 Perspective
Most campaigns are for business concepts (products, services)
Crowdfunding Presentation | Chris Fodor | Vienna | June 17, 2019 PART 3 Perspective
Business and social causes are almost 75% of “raises”
Crowdfunding Presentation | Chris Fodor | Vienna | June 17, 2019 PART 4 Conclusion Is crowdfunding just a temporary flash in the fintech pan?
Opportunities ‣ low barriers to entry ‣ specialization per sector (arts vs. tech vs. consumer goods, etc.)
Threats ‣ for platforms: reaching critical size; reaching the proper niche; minimizing junk projects; avoiding outright fraud.
Crowdfunding Presentation | Chris Fodor | Vienna | June 17, 2019 PART 4 Conclusion Thanks for your attention
Chris Fodor
Crowdfunding Presentation | Chris Fodor | Vienna | June 17, 2019