Crowdfunding for SME by FriendsClear EFMA Retail Credit Conference 20-21 june 2013 Amsterdam Complementarity or Competition with Banks

1. Crowdfunding for SME
EFMA Retail Credit Conference
20-21 june 2013
Nicolas Guillaume – Financial Breakthrough
nicolas.guillaume@finthru.com
Blog : http://nicolasguillaume.fr/
Twitter : http://twitter.com/NicolasMax
Mobile : +33 6 19 98 57 65
Financial Breakthrough
Blog : http://finthru.com/
Twitter : http://twitter.com/finthru
1
EFMA CONFERENCE – RETAIL CREDIT 20-21
June 2013 - Amsterdam

2. Agenda
• Key points
• Global Market
• SME Focus
• FriendsClear’s case
• Feedback
• Marketing
• Regulation
• US Crowdfunding Act
• Competition vs Complementarity
2
EFMA CONFERENCE – RETAIL CREDIT 20-21
June 2013 - Amsterdam

3. Key Points
• Free and extended access to projects to be
funded by investors (funders)
• Direct choice of funding by investors
• Full Transparency
3
EFMA CONFERENCE – RETAIL CREDIT 20-21
June 2013 - Amsterdam

4. Key Points (detailed)
• Free and extended access to projects to be funded by investors (funders)
– Projects individualy identified and described (information disclosure)
– Defined amount requested with predefined use of funds
– Projects reviewed by platforms
– Usually through Internet
• Direct choice of funding by investors
– Limited amount by investor
– Directly assigned to a project
– Assessment carried by each investor
– Large number of investors requiring a collective approval (collective intelligence)
• Full Transparency
– Amounts funded
– Amounts collected and fundings granted
– Returns
4
EFMA CONFERENCE – RETAIL CREDIT 20-21
June 2013 - Amsterdam

5. Key Points (continued)
• Each point very differenciating from traditional
finance product
• Social Media (info disclosure, virality, interactivity,
internet accessibility)
• Funding is not the point
– Multiple funding models : reward, no return
allocation, loan without interest, loan with interest,
equity, bond
– Third party (direct funding) or own account (mirroring
funding)
– Funding, Refunding, Additional funding
5
EFMA CONFERENCE – RETAIL CREDIT 20-21
June 2013 - Amsterdam

6. Global Market
Source : Massolution, May 2012
6
780 M$ loans originated
(2012)
EFMA CONFERENCE – RETAIL CREDIT 20-21
June 2013 - Amsterdam

7. SME Focus
7
Kickstarter Babyloan FriendsClear Funding
Circle
Crédit
Agricole
Smartangels
Funding Type Reward Loan without
interest
Loan with
interest
Loan with
interest
Loan with
interest
Equity
Project sample 3Doodler
3D Plastic
melted pencil
2,3M$ (30K$
requested)
Tilagavady &
Djeasridar
Indian
restaurant
5K€
Matériel
Forestier
Woodcutter
8K€
Score a Hole in
One
Events
Organization
50K£
Eolienne Loué
Windmill
1,2M€ (on a
total of 17M€)
Sentinelo
Mobile
application
500K€
Funders Nb 26.457 82 26 24 250 33
Av. funder
amount
88 $ 68 € 307 € 2.084 £ 4.800 € 15.000 €
Funder
counterpart
Delivery
Promise
Funding
Account
(mirroring)
Term Bank
Account (with
securities)
Loan part Term Bank
Account
(mirroring)
Ad hoc Offer
Equity
Risk Delivery
default
MicroFinance
Institute
Default
Loan default Loan default No risk •Operation
•Valorization
•LiquidityEFMA CONFERENCE – RETAIL CREDIT 20-21
June 2013 - Amsterdam

8. Kickstarter
8
88$ / funder
http://www.kickstarter.com/projects/1351910088/3doodler-the-worlds-first-3d-printing-pen
Reward
EFMA CONFERENCE – RETAIL CREDIT 20-21
June 2013 - Amsterdam

9. Babyloan
9
68€ / funder (82 funders)Loan without interest (cf Kiva)
Nicolas Guillaume – FriendsClear / FinthruEFMA CONFERENCE – RETAIL CREDIT 20-21
June 2013 - Amsterdam

10. FriendsClear
EFMA CONFERENCE – RETAIL CREDIT 20-21
June 2013 - Amsterdam 10
Requested : 8.000€
307€ / funder
(26 funders)
Loan with interest
Nicolas Guillaume – FriendsClear / Finthru

11. Funding Circle
11
2.083£ / funder (24 funders)Loan with interest
EFMA CONFERENCE – RETAIL CREDIT 20-21
June 2013 - Amsterdam

12. Smartangels
12
15.000 € / funder
33 funders
Equity
EFMA CONFERENCE – RETAIL CREDIT 20-21
June 2013 - Amsterdam

13. FriendsClear’s case
• Professional Projects funded by loan (3K€-25K€, 3
years, 8,5% fixed rate + 4% flat fees)
• Selected & funded by internauts through a
dedicated crowdfunding account with Term
Deposit (interest rate 4,5%) mirroring projects
(and guarantee)
• Money collecting, account management and loan
origination performed by a banking partner
Credit Agricole
• Projects reviewed (FriendsClear) and banking
controls (Credit Agricole)
13
EFMA CONFERENCE – RETAIL CREDIT 20-21
June 2013 - Amsterdam

14. FriendsClear Regulation frictions
• Regulator remarks (Quiet period)
– No discretionary refusal for loan
– Direct selection
– Risk fully supported by funders
• Modified model
– Discretionary refusal for loan
– « Projects Basket » : choice of a project into a « basket » of
projects
– Capital guarantee by Credit Agricole
• Risk on interest not capital (4,5% default rate OK)
• Double selection process not convergent (timing cycle, criterias,
segment addressed) => not scalable
14
EFMA CONFERENCE – RETAIL CREDIT 20-21
June 2013 - Amsterdam

15. FriendsClear Feedback
• Projects are the product
• Very attractive product (for funders, project owners,
media)
• 2 levels of client involvement
– (Non financial) « contribution » (vote, recommend, virality,
comment)
– Funding
• 2 models of virality
– Ad hoc communities (Social Media)
– Recurrent funding communities
• High impact of funding tools and regulation (client
communication, legal, risk management,…)
15
EFMA CONFERENCE – RETAIL CREDIT 20-21
June 2013 - Amsterdam

16. Clients profiles
16
FundersProject owners
• Emerging phase projects
• Non standard profiles (young, without
experience, professional change,…)
• Small size projects (commerce ambulant,
service à la personne, internet)
• Assessment problem projects (innovation,
unknown indutry)
• Scoring flag projects (excluded industries,
unfilled ratios)
• Risky projects (startup, retournement,...)
• No accounting or bank relationship history
• Equity « Funding gap » (100K€ to 2 M€)
• Bank reluctance
• Internet based quick and packaged (less
paper) process => not in FriendsClear’s
case
• Wide client profiles diversity
• Motivation
• Project support
• Active selection
• High yield
• Transparency / Traceability
• « Power users »
• Favored segment : experienced
executives or managers closed to
retirement
• Time
• Money
• Expertise
EFMA CONFERENCE – RETAIL CREDIT 20-21
June 2013 - Amsterdam

17. Crowdfunding Regulation
• Collecting money : eMoney, KYC, AML
• Client qualification & protection : MIFID /
PRIPS, Prospectus
• Middle-man : eMoney, Broker, ?
• Funding tools : Prospectus (equity), Loan,…
• Regulation is an issue but not a problem
(except if you are a bank)
17
EFMA CONFERENCE – RETAIL CREDIT 20-21
June 2013 - Amsterdam

18. US Crowdfunding Act
• Exemption 2000$/
year / funder
• Funding Portal
(Middleman)
18
Source : Forbes,
Sept 2012
EFMA CONFERENCE – RETAIL CREDIT 20-21
June 2013 - Amsterdam

19. Competition vs Complementarity
• High involvement product for special needs
and segments
• Small amount
• Can be « packaged » to be retailed by
traditional banks
• Much more complementarity than
competition
19
EFMA CONFERENCE – RETAIL CREDIT 20-21
June 2013 - Amsterdam

20. Thanks for your attention
20
EFMA CONFERENCE – RETAIL CREDIT 20-21
June 2013 - Amsterdam

21. Questions
21
EFMA CONFERENCE – RETAIL CREDIT 20-21
June 2013 - Amsterdam

22. Nicolas Guillaume
Financial Breakthrough
nicolas.guillaume@finthru.com
Blog : http://nicolasguillaume.fr/
Twitter : http://twitter.com/NicolasMax
Mobile : +33 6 19 98 57 65
Financial Breakthrough
Blog : http://finthru.com/
Twitter : http://twitter.com/finthru
Ressources :
Blog : http://nicolasguillaume.fr/
Twitter : http://twitter.com/NicolasMax
Cours Social banking & Fin Part : http://fr.slideshare.net/NicolasMax/2012-cours-social-banking-prt-
participatif
22
22
Paternité-Pas d'Utilisation
Commerciale-Pas de Modification
2.0 France
http://creativecommons.org/licenses/by-nc-nd/2.0/fr/
EFMA CONFERENCE – RETAIL CREDIT 20-21
June 2013 - Amsterdam