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 [email protected] Crowdfunding Presentation | Chris Fodor | Vienna | June 17, 2019.