A brief introduction to CrowdfundingThis webinar will give a brief history of this new internet phenomenon and its place in the funding of new ideas and companies. Equity crowdfunding, in particular, will be discussed and illustrated with a particular (successful) example

1. A brief introduction to Crowdfunding
This webinar will give a brief history of this new
internet phenomenon and its place in the funding
of new ideas and companies. Equity
crowdfunding, in particular, will be discussed and
illustrated with a particular (successful) example.
There is a link at the end of this deck to the
associated blog and webinar recording.

2. Biz Smart Webinar :
A Brief Introduction
to Crowdfunding

3. A Brief Introduction to Crowdfunding
• 1. What is Crowdfunding ?

4. A Brief Introduction to Crowdfunding
• 1. What is Crowdfunding ?
• 2. Will it be right for me?

5. A Brief Introduction to Crowdfunding
• 1. What is Crowdfunding ?
• 2. Will it be right for me?
• 3. Where can I get it ?

6. A Brief Introduction to Crowdfunding
• 1. What is Crowdfunding ?
• 2. Will it be right for me?
• 3. Where can I get it ?
• 4. How much will it cost ?

7. A Brief Introduction to Crowdfunding
• What is Crowdfunding ?

8. A Brief Introduction to Crowdfunding
• What is Crowdfunding ?
• It is getting a large number of individuals
to provide you with small amounts of
money for your business rather than
asking a single entity or a few people to
provide large amounts.

9. A Brief Introduction to Crowdfunding
• What is Crowdfunding ?
• It is getting a large number of individuals
to provide you with small amounts of
money for your business rather than
asking a single entity or a few people to
provide large amounts.
• This can be in the form of a loan or equity
or even by a “reward scheme”.

10. A Brief Introduction to Crowdfunding
• What is Crowdfunding ?
• It is getting a large number of individuals
to provide you with small amounts of
money for your business rather than
asking a single entity or a few people to
provide large amounts.
• This can be in the form of a loan or equity
or even by a “reward scheme”.
• All done online

11. Sources of Finance
• DEBT

12. Sources of Finance
• DEBT
• EQUITY

13. Sources of Finance
• DEBT
• Family and Friends

14. Sources of Finance
• DEBT
• Family and Friends
• Banks

15. Sources of Finance
• DEBT
• Family and Friends
• Banks
• Peer to Peer Lending (P2P)

16. Sources of Finance
• DEBT
• Family and Friends
• Banks
• Peer to Peer Lending (P2P)
• EQUITY

17. Sources of Finance
• DEBT
• Family and Friends
• Banks
• Peer to Peer Lending (P2P)
• EQUITY
• Potential Partner or Business Angels

18. Sources of Finance
• DEBT
• Family and Friends
• Banks
• Peer to Peer Lending (P2P)
• EQUITY
• Potential Partner or Business Angels
• Venture Capital

19. Sources of Finance
• DEBT
• Family and Friends
• Banks
• Peer to Peer Lending (P2P)
• EQUITY
• Potential Partner or Business Angels
• Venture Capital
• Equity Crowdfunding

20. History of Crowdfunding
• Started as a method of collecting many
small contributions by means of an online
platform, typically in return for a “reward”

21. History of Crowdfunding
• Started as a method of collecting many
small contributions by means of an online
platform, typically in return for a “reward”
• First people to do it were a UK Rock Band
called Marillion to finance their reunion
tour of the USA in 1997.

22. History of Crowdfunding
• Started as a method of collecting many
small contributions by means of an online
platform, typically in return for a “reward”
• First people to do it were a UK Rock Band
called Marillion to finance their reunion
tour of the USA in 1997.
• According to the US, it started in 2003
with a jazz album through a platform
called Artistshare in New York.

23. History of Crowdfunding
• In return for a contribution to the
Marillion tour fund, fans were essentially
guaranteed a ticket - probably for the best
seats in the house - to see their heroes.
• The band had the reassurance that they
could afford to tour the USA, with all the
attendant costs, before leaving these
shores.

24. History of Crowdfunding
• With the jazz album, rewards varied.
• $10 got you the right to download the
album first
• $250 got you a listing on the album credits
• $10,000 made you an executive producer
• The $130,000 raised was used to rent the
recording studio, pay the musicians and
produce and market the album which won
a Grammy in 2005

25. History of Crowdfunding
• Artistshare (2003)

26. History of Crowdfunding
• Artistshare (2003)
• Indiegogo (2008)

27. History of Crowdfunding
• Artistshare (2003)
• Indiegogo (2008)
• Kickstarter (2009)

28. History of Crowdfunding
• Artistshare (2003)
• Indiegogo (2008)
• Kickstarter (2009)
• Expanded into other areas of the arts

29. History of Crowdfunding
• Artistshare (2003)
• Indiegogo (2008)
• Kickstarter (2009)
• Expanded into other areas of the arts
• Theatre, Dance, Fashion, Video, Film

30. History of Crowdfunding
• Artistshare (2003)
• Indiegogo (2008)
• Kickstarter (2009)
• Expanded into other areas of the arts
• Theatre, Dance, Fashion, Video, Film
• Social Causes, Animals, Health, Charity

31. History of Crowdfunding
• Artistshare (2003)
• Indiegogo (2008)
• Kickstarter (2009)
• Expanded into other areas of the arts
• Theatre, Dance, Fashion, Video, Film
• Social Causes, Animals, Health, Charity
• Moved into the Business Sector in 2012

32. History of Crowdfunding
• KICKSTARTER
• Hosted over 250,000 campaigns
• Success rate of 40%
• These 100,000 have raised appr. $2 billion
• Music and Film/Video still largest sectors
• Moved into the Business Sector in 2012
• Restricted by US Law in what they could
do in the Business Sector. JOBS Act 2012

33. History of Crowdfunding
• KICKSTARTER
• In 2012 a campaign aimed to raise
$100,000 for a Pebblesmart watch.

34. History of Crowdfunding
• KICKSTARTER
• In 2012 a campaign aimed to raise
$100,000 for a Pebblesmart watch (Put in
$100 and get one worth $150 RRP)

35. History of Crowdfunding
• KICKSTARTER
• In 2012 a campaign aimed to raise
$100,000 for a Pebblesmart watch (Put in
$100 and get one worth $150 RRP).
• Money to be used for development,
tooling, production, marketing.

36. History of Crowdfunding
• KICKSTARTER
• In 2012 a campaign aimed to raise
$100,000 for a Pebblesmart watch (Put in
$100 and get one worth $150 RRP).
• Money to be used for development,
tooling, production, marketing.
• Raised over $10 MILLION

37. History of Crowdfunding
• KICKSTARTER
• In 2014 the CoolestCooler Coolbox asked
for $50,000 for tooling,production and
marketing and got………………..

38. History of Crowdfunding
• KICKSTARTER
• In 2014 the CoolestCooler Coolbox asked
for $50,000 for tooling,production and
marketing and got
•$13,000,000

39. Is Crowdfunding the right thing for me ?
• .

40. Is Crowdfunding the right thing for me ?
• Depends on what you want the Finance
for and your view of traditional routes.

41. Is Crowdfunding the right thing for me ?
• Depends on what you want the Finance
for and your view of traditional routes.
• Capital Equipment or Premises -
• Likely to be a Loan : Bank or P2P

42. Is Crowdfunding the right thing for me ?
• Depends on what you want the Finance
for and your view of traditional routes.
• Capital Equipment or Premises -
• Likely to be a Loan : Bank or P2P
• New product with a large upfront cost -
• Loan or a Kickstarter approach

43. Is Crowdfunding the right thing for me ?
• Depends on what you want the Finance
for and your view of traditional routes.
• Capital Equipment or Premises -
• Likely to be a Loan : Bank or P2P
• New product with a large upfront cost -
• Loan or a Kickstarter approach
• A New Stand Alone business -
• Equity : Partner, Angel, VC, Crowdfunding

44. Where can I get Crowdfunding ?
• Loan : Peer to Peer lender
• Reward : Kickstarter type platform
• Equity : Equity Crowdfunding platform

45. Peer to Peer Lenders P2P
• Zopa (2005), Ratesetter (2010), Funding
Circle (2010) all lent over £1 billion
• Members of the Trade Association
• Peer to Peer Finance Association
• along with Thin Cats, MarketInvoice,
LendInvest, Lendingworks, Landbay and
Madiston

46. Peer to Peer Lenders Who Borrows ?
Zopa : New Car, Home Improvements, Debt
Consolidation.
Ratesetter : Individuals, Small Businesses,
Property Developers.
Funding Circle : Business loans between
£5,000 and £1million for 6 months - 5 years.
LendInvest and Landbay : Professional
Landlords and Developers.

47. Peer to Peer Lenders What is the cost ?
Ratesetter : Fees are risk weighted. They
cover arrangement and management of the
loan and a contribution to the bad debt
provision fund.
Funding Circle : Fee to FC of between 2%
and 5% depending on length of loan and
credit risk assessment.
Interest rates ? % Depends on amount,
security etc.

48. Peer to Peer Lenders What is the risk ?
In 2015, Trustbuddy – aptly named – filed
for bancruptcy shortly after its UK opening.
In 2016, Funding Knight ran out of cash.
Even Funding Circle (n.b. lends £1.5 billion)
and is the third biggest lender to UK SMEs
after RBS and Lloyds.
Had losses last year of £40million on
turnover of just £32million. Secured
£120million investment for themselves in
2015.

49. Reward Based Crowdfunding Platforms
• Kickstarter UK
• Indiegogo
• Crowdfunder.co.uk
• Sponsume.
• Fees around 5% PLUS 3 – 5% for
processing !

50. Equity Based Crowdfunding Platforms
• Crowdcube
• Seedrs
• Syndicate Room

51. Equity Based Crowdfunding Platforms
• Syndicate Room
• Backed by Experienced Angel Investors
• Mainly for startups
• Fee 4% plus £1500 set up PLUS £1500 to
£3000 annually until the shares are sold.
• Both EIS and SEIS

52. Equity Based Crowdfunding Platforms
• Seedrs
• Mainly run by lawyers
• Fee 6% up to £150,000, 4% for £150 -500k
• 2% above £500k
• Plus £2000 completion
• Mainly EIS

53. Equity Based Crowdfunding Platforms
• Crowdcube
• Started Equity Crowdfunding in 2011
• Startups
• Moved into raising large loans as well.
• 300,000 Investors
Fees 7% plus completion fee of £1750
• Almost all SEIS or EIS

54. SEIS and EIS Schemes
• UK HMRC schemes for encouraging
investment in SMEs.
• Enterprise Investment Scheme for
companies which have not been trading
for longer than 7 years
• Seed Enterprise Investment Scheme for
companies which have not been trading
for longer than 2 years

55. SEIS and EIS Schemes
• Income Tax Relief
• Capital Gains Tax Relief
• Capital Gains Tax exemption
• Loss Relief against Income Tax

56. SEIS Scheme
• Income Tax Relief : 50%
• Maximum £100,000 Can carry back 1 year
• Capital Gains Tax Relief : Half Rate
• Capital Gains Tax exemption : FULL
• Loss Relief against Income Tax : Max Rate
• Company Maximum £150,000

57. EIS Scheme
• Income Tax Relief : 30%
• Maximum £1,000,000 Can carry back 1
year
• Capital Gains Tax exemption : FULL
• Loss Relief against Income Tax : Max Rate
• Company Maximum £5 million

58. Example : Crowdcube : FLOODKIT
• Amount Raised £135,000 SEIS (for 20%)
• Number of Investors 110
• Length of time 6 months
• Costs
• Crowdcube £8000.
• Lawyer (completion) £1750.
• Video for “pitch” £1500
• NEW Company

59. Can you now answer these questions ?
• 1.What is Crowdfunding ?
• 2. Will it be right for me?
• 3. Where can I get it ?
• 4. How much will it cost

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