The Brussels Enterprise Agency hosted a practical seminar dedicated to the crowdfunding

1. INTRODUCTION
TO THE CROWDFUNDING EVENT
24/01/2013
Azèle Mathieu
Rodolphe d’Udekem d’Acoz
Advisors Business & Finance @ BEA
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2. AGENDA OF TODAY
• Introduction
• Presentation of Crowdfunding platforms:
 My Micro Invest Guillaume Desclée
 Look & Fin Frédéric Levy Morelle
• Testimony of companies:
 2Houses Gill Ruidant
 Saint-Aulaye Jean-Louis Barré
• Discussion
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3. INTRODUCTION
• Definition
• Market composition
• Role regarding traditional financing solutions
• Important aspects from different perspectives:
 the entrepreneur
 the backers
 the platform
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4. CROWDFUNDING
• Definition
• Market composition
• Role regarding traditional financing solutions
• Important aspects from different perspectives:
 the entrepreneur
 the backers
 the platform
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5. STARTING FROM A BASIC PRINCIPLE…
Source: wordpress.com
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6. …TOWARDS A DEFINITION OF CROWDFUNDING…
“…describes the collective effort of individuals who
network and pool their money, usually via the Internet,
to support efforts initiated by other people or
organizations.”
For entrepreneurs:
Crowdfunding = new financing source
Source: Ordanini et al. (2011), Prive (2012)
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7. THERE EXIST DIFFERENT CROWDFUNDING MODELS:
Non-financial return for funders Financial return for funders
Donation-based Reward-based Equity-based Lending-based
Philanthropy or Non-monetary Dividend / Fixed periodic
sponsorship rewards Capital gain income
New financing sources for
Source: adapted from Massolution (2012) companies!
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8. CROWDFUNDING: REALLY NEW?
Source: Farrell (2012) 8

9. CROWDFUNDING
• Definition
• Market composition
• Role regarding traditional financing solutions
• Important aspects from different perspectives:
 the entrepreneur
 the backers
 the platform
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10. HOW LARGE IS THE CROWDFUNDING “SECTOR”?
Worldwide:
- In 2011: CFPs: $1,5 B - US Business Angels: ~$22,5 B
- In April 2012: 452 active crowdfunding platforms
EU (2011):
• CAGR raised
funds: 40%
• CAGR number
US (2011): of CF firms:
• CAGR raised 60%
funds: 90%
• CAGR number of
CF firms: 30%
Source: Massolution (2012), Brown (2012)
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11. EU COMPARED TO US
 A higher CAGR in terms of CFPs (60% >< 30%)…
Good indicator given that…
 new entrants CFPs generates 25% of overall fund
raising
 A higher share of equity- and lending-based CFPs
(31% >< 18%)
Source: Massolution (2012)
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12. EQUITY- AND LENDING-BASED CF
Millions of $
 Around half the overall raised
funds
 Equity-based:
• Not the largest overall source
of funds…
• But largest raised amount of
funds/campaign ($85k><$5k
or less for other)
• …and growing… primarily in
EU
Source: Massolution (2012)
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13. CROWDFUNDING
• Definition
• Market composition
• Role regarding traditional financing solutions
• Important aspects from different perspectives:
 the entrepreneur
 the backers
 the platform
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14. CF: FINANCING « TOOLS » FILLING SOME GAPS…
Risk level and
expected return
Debts (i.e. from banks) Stock
15% markets
Trade
Sale
25% Equity
VC
Grants Private
Specific
35% funds
Bussiness
Angels
Public
50% University funds
investment
funds Lending-based CF
FFF
Equity-based CF
Seed Start-up Development Growth Consolidation
Company maturity
Source: adapted from Olivier Witmeur MBA BP 2012 & Women Business Angels Club
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15. COMPLEMENTARY ROLES TO TRADITIONAL FINANCING
SOURCES
• Equity-based CF:
 To consolidate equity and leverage access to other
financing sources such as bank loans
• Lending-based CF:
 For entrepreneurs who want to avoid dilution but
project is (still) too risky for a traditional bank loan
 Or entrepreneurs who lack guarantee to back loans
 To complete a bank loan, ↓ the overall risk, ↑
probability of getting the funds
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16. CROWDFUNDING
• Definition
• Market composition
• Role regarding traditional financing solutions
• Important aspects from different perspectives:
 the entrepreneur
 the backers
 the platform
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17. Important aspects
from different perspectives
• Three main players with their own perspectives:
 the entrepreneur (project)
 the backers (crowd)
 the platform
• Additionnal players potentially involved in the process :
 Law firm(s) & Bank
 Professional investors
 The regulatory authority (= FSMA in Belgium), etc
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18. Different players, Different perspectives
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19. Important aspects:
(1) Legal framework for the platform
Belgian regulation
Public investment offering
 >= or < 100.000 €
 (un)public information … and FSMA tends to
to (un)limited nbr of avoid / postpone the
people design of a clear and
proper framework for
crowdfunding activities
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20. Important aspects:
(2) Main contractual / legal connections
Connections
not always
present and
other ones
may apply !
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21. Important aspects:
(3) Cash flows, costs and revenues
Potential recurrent revenue / cost
Funds invested
success by the crowd
failure
Potential Success fee
other costs
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22. Important aspects:
(4) What the platform provides
• Upfront management of projects:
 Collection, screening, selection
 Advice on valuation (optional)
 Services related to communication (optional)
• Visibility for the projects to be funded
• Closing management of projects:
 Supervision of the fund clearing with the bank
 Supervision of the legal clearing between the funded
company and the funding individuals (crowd)
• Point of attention: platform’s responsibility
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23. Important aspects:
(5) Selection’s criteria of platforms
• Selection’s criteria of platforms (following their positioning)
 Degree of professionalism, maturity and credibility of
the project and the information material provided
 Return on Investment to be expected
 Innovative character (not meaning technological)
 Sector
 “Sexiness” of the presentation to the crowd
 Chance of success of the fund raising (thus not only
based on pure classic criteria as for professional
investors)
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24. Important aspects:
(6) Requirements for a good projects
• Provide to the platform management different types of
information on the project: the project itself, the value
proposition, the differentiation, the team, the business
model, the financial forecast, etc
• As usual credibility (of the project and the team) is key
• But in the case of crowdfunding, presentation is paramount
and a “sexy” video presentation is often a must
• There should be “something” that speaks to the collective
or individual mind, imagination or dreams of the crowd
• Finally, all platforms have specific characteristics of their
own, as do their respective crowds, which the
entrepreneurs should also consider in the equation
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25. Important aspects:
(7) What the crowd expects and provides
• What the crowd expects :
 The project to be clearly presented
 To be (quickly) convinced
 To be seduced with a project that speaks to its mind
 To get a specific level of ROI (return of investment)
• What the crowd provides :
 A proof of concept of the project
 A first base of clients
 Funding
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26. Last important aspects:
• Technical characteristics of the transaction : crowd model
(4), amount, tenor, costs-revenue-reward structure, etc
• The fund raising usually follows an ”all or nothing logic” : be
strategic
• Valuation of the company: maximisation vs fair level
• Dilution: % of shareholder equity to match the raised fund
• Management of relation with investors after the
transaction
NB: All those “parameters” and aspects (and other ones)
should be considered while discovering the value proposition
of each individual platform
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27. Source: Crowdfunding Educators
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28. REFERENCES
• Brown, T.K. (2012). 2011 Angel Market Trends. Podium Ventures.
• Farrell, J. (2012). The JOBS Act: what startups and small businesses need to
know. Forbes.
• Massolution - Crowdsourcing.org (2012). Crowdfunding industry report -
Market Trends, Composition and Crowdfunding Platforms.
• Ordanini, A., Miceli, L., Pizzetti, M. and A. Parasuraman (2011). Crowd-
funding: Transforming customers into investors through innovative service
platforms. Journal of Service Management 22 (4): 443.
• Prive, T. (2012). What is Crowdfunding and how does it benefit the
economy. Forbes.
• Steinberg, S. and R. DeMaria (2012). The Crowdfunding Bible: How to raise
money for any startup, video game, or project. Read.me.
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29. Thank you for your attention !
Brussels Enterprise Agency
E-mail: business@abe.irisnet.be
Web : www.abe.irisnet.be
www.1819.be
www.monstarterkit.be
www.ecosubsibru.be
Tel 1819
info@1819.be
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