Equity Crowdfunding Needs Educated Investors

Crowdfunding is hopelessly dependent on traditional funding sectors to educate a new generation of investors and fully develop the industry.

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The alternative funding industry values its’ own innovative and somewhat ‘rebellious’ character – two characteristics the traditional financial industry isn’t well known for. On top of that, “the wisdom of the crowd” is going to guide crowdfunding towards full development. I wonder what “wisdom” is referred to, as most crowd-investors are not at all educated enough to estimate company success rates.

Larger investors, with whom I’ve spoken a lot as a campaign manager for Symbid, often consider crowdfunding a drop in an ocean, or simply “fun”.  And large investors are right in saying so. According to The Economist, after 2008 USD 2.2 trillion less has been lent then in the previous years. While the traditional industry is capable of experiencing such enormous losses, the alternative sector still has to develop the size, which should have accumulated around USD 5 billion in 2013. 

The lack of recognition of crowdfunding as a serious industry often tempts the crowdfunding industry to emphasize their assets as “real” industry, featuring bold headlines proving crowdfunding matters and basking in the glory of growth percentages like 81%. Though it might be true that the traditional industry is not featuring, banks, VC’s, investment clubs, Angels and Angel Networks and online investment platforms have a lot more experience of funding trajectories, knowledge about specific industries, risk calculation, the meaning of (startup) KPI’s in company development and startup survival rates(which are pretty low, only 50% is still existing after year 5).

This is knowledge the crowdfunding industry desperately needs if it want to develop into the grown up industry it claims to be. So what can we learn from these financial giants and how can we create a hybrid funding process where both investors and entrepreneurs gain maximum benefits?

The crowd is not accredited for a reason

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Though accreditation of investors is admittedly holding back the (U.S.) equity-industry, making accreditation of investors a frustration for many, there’s a reason this legislation exists: to protect investors. Though money limits are no way to ensure the investor has enough knowledge, some form of protection is needed. Society was outraged when we found out what ‘banks had done to us’, by selling us flawed financial products without properly informing their customers. The crowdfunding industry is doing exactly the same thing.

The industry hasn’t fully developed yet and we’re not sure about the exact rules of the playing field, yet we ask investors for money without giving them the proper education to make informed decisions. Investors trust that their money is well spent via crowdfundingplatforms. The attitude of some platforms stating they are in no way responsible for failed campaigns is at least partially untrue and most certainly an easy way to let down end endanger investors. Platforms and crowdfunding experts have the obligation to educate new crowd-investors about the risk they’re taking.

Crowd-investors cannot perform due-diligence

Even if crowd-investors want to double check their investment, this is often hard. Most investors understand their money is put into a high risk- high return project, they don’t know what makes a company flawed and when they do, they don’t have the tools to do so. Where VC’s have financial officers that can do a check, or are generally well informed about success rates in a certain industry, crowdfunders generally don’t have this information or a decent financial background. They have to make a decision based on a digital business plan, a pitch video and some financial projections that could be true, or not.

They don’t have a financial background

Discounted Cash Flow Valuation Firm ValueBefore you drive a car, you have a decent intake process which leads to you understanding what all the buttons you press actually do. You gain insight in traffic behaviour and learn to read the signs. Likewise, VC’s, banks and Angels make sure they understand business finance before they invest money. They understand not only the differences between debt and equity, several liability, securities etcetera, but also how internal financial developments influence the success rates of companies in different life cycle stages. Not something most crowd-investors are fluent in.

Crowd-investors have wrong expectations 

They expect money fast. Investing is not like lending money, the payback takes somewhere between 3 to 7 years at least. Instead of a quick win, portfolio management requires patience and resisting the urge to dive in deep when mass hysterics spread (“I want to sell my shares nów”). Speaking of portfolio management and spreading risks: most crowd-investors only invest in one or two propositions without giving prior thought how to make the most profit on the money they have available.

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A good exit is hard

Currently investors are locked into their investment most of the time. This doesn’t have to be bad as an investor will have to wait for his exit quite some years anyway. However, when the time is there, it’s hard to sell the shares in equity-funded companies unless there is one large investor taking over all the shares at once. The other problem about exits is that most crowd-investors haven’t even thought about that. In the years working for Symbid, I’ve only seen this question a few times, which is a really serious issue because it indicates investors don’t know how to make money on their shares, how a good exit is defined and when they indeed should sell their shares to optimize their benefit.

There’s no industry knowledge 

Generally crowd-investors have industry knowledge about the industries they’ve worked in themselves but it’s reasonable to expect investors not to stick to only those industries. In addition, even when they do, they usually have no idea about starting a business in that industry. Most of the crowd-investors are employed and don’t usually industry performance KPI’s (how many members within what period of time, etc.) at hand. Of course the business plan should rule out the most important questions, but investors have to assume that data is correct or depend on knowledgeable investors to share their questions with entrepreneurs and other investors.

Crowdfunders invest in products, not in teams

As Rags Srinisavan from Iterative Path has correctly pointed out, VC’s don’t invest in products but in teams. And though “the team” might produce a great pitch video, there is hardly ever a face-to-face meeting unless the investments are substantial. This can be often successfully devised via pitch events and the like, but most of the crowdfunders invest in a pitch based on the pitch presented, the ROI and whether or not they judge the product or industry to be interesting to them. However, no matter well the business plan has been developed or how stringently the financial test, if the founders end up fighting or the team breaks down, all the plans are worthless.

So what do we need from traditional funders? 

In one word: guidance. Crowdfunders have the right to make well informed investments. There will always be a difference between the ways traditional and alternative funders decide to invest: it’s what makes the two funding strategies inherently different.

AngelGuidance from Angels, Angel Networks, banks, VC’s and other consists of sharing knowledge, for example, explaining the reasons why they did or did not invest in specific companies. Or better, make an investment in a crowdfunding proposition and share what they liked about it and what not, and what chances of success they think the startup has.

Another way traditional funders can help crowd-investors is by performing a (first) due diligence. Though a VC might not want to take it all out for a proposition he won’t invest in anyway, a handout in terms of focus points that investors should try to aim at is very achievable. Asking a traditional funder to give a pitch a “Go/ No Go” and publishing it (“This startup received a “Go” from our VC/ Angel team”), is a sign for crowd-investors a professional with the same interests as they have, increasing the investors’ security and the chances of success for the entrepreneurs.

More options are an educative forum or program for crowd-investors and professional investors, to professionally track crowdfunding developments (e.g. how many crowdfunded companies still exist after x years?, is the crowdfunded money used to its intended goal?, etc.), creating affiliate programs between crowdfundingplatforms and traditional institutes (like crowdfunding as a first phase towards debt funding via the bank) and integrating the overall crowdfunding industry as part of a hybrid funding trajectory.

This article is not at all meant to describe crowdfunding investors as a bunch of uneducated people who should keep their hands off crowdfunding and investing. On the contrary; it’s a great development that people now have the freedom on how to invest their money. But alternative funding experts should definitely work towards a more professionalised, better informed and safer version of the current crowdfunding landscape if we want to create sustainable value creation for our companies, investors and our economies. The best way of doing that is looking at sectors who’ve already built up an immense industry: the traditional funding industry.

This article was previously published on CrowdfundInsider

Convertible Loans as a Band-Aid Solution to the Valuation Problem in Equity Crowdfunding

What’s happening: the industry wants equity

It’s ironic that crowdfunding makes it possible to set up companies that otherwise never would’ve come into existence, only to ruin them later by postponing the valuation issues that any start up will have to solve sooner or later. Might the positive start of crowdfunding come to a halt due to unsavoury developments, convertible Crowd Fans Audience Trafficloans specifically, within the equity-crowdfunding branch?

The good news first: crowdfunding continues to grow, especially equity crowdfunding is catching up. From the beginning of this year, equity crowdfunding has seen a delayed but sharp increase compared to the other forms of crowdfunding (donations, rewards, loans). A development that is projected to continue along with the funding volumes in this niche. The fact that (somewhat) complicated capital forms are being adopted means that entrepreneurs and investors are ‘reading up’ and that the industry is maturing. Reason for some platforms take their chances and claim they’re offering equity crowdfunding: without solving the valuation issue.

The sweet and sour of equity crowdfunding

During the last decades, Europe has been heavily hooked on bank loans much like the U.S. was in the ‘80’s. Since the financial downturn (and now its projected upturn) entrepreneurs have had to develop some creative financial income streams, one of them being crowdfunding.

Equity vs DebtEquity crowdfunding is a specific type of income generation that a lot of people have never learnt to control or deal with sufficiently. They’re simply not educated in this field, which explains why peer-to-peer lending has seen a major increase in the beginning of the crowdfunding era whereas equity has been a slow starter: people don’t understand so people don’t use it.

Now that equity is increasingly being adopted by investors and entrepreneurs, more platforms are eager to claim that they offer equity-crowdfunding. But the problem they run into is valuation. It’s hard to valuate a company that (often) hardly exists. And in contrary to traditional entrepreneur- investor settings, there is no discussion on how much a company is worth because.

The crowd often receives a certain valuation as a ‘take-it-or-leave-it’-offer, and investing means you agree with the valuation. Some platforms like CrowdCube offer the opportunity to ask for a “Alternative Offer” but 99% of the equity platforms isn’t that well developed. On top of that, even when the crowd does discuss a company’s worth, they often lack the knowledge to create a factual, calculated value.

So what do platforms like ReturnOnChange, Fundable, Seedrs or the Dutch platform Wekomenerwel (“We’ll-get-there”) do: they offer convertible debt as a way to delay the valuation issue.

Why are convertible loans bad for the crowdfunding industry?

Mark Suster, a two-times entrepreneur turned VC, has written extensively about the pros and cons of convertible debt in the traditional setting (not crowdfunding), explaining the difficulties in this form of equity instrument.

For those not informed, a convertible loan is a loan you get from a (potentially) future investor with oftentimes a very low interest rate, because the creditor belies that at a later stage he’ll be able to acquire part of the company for a relatively low price.

What’s so great about convertible loans?

If you don’t know exactly how equity investing works or what it might mean for your company (which unfortunately is the case more than we’d all like to admit) let alone cracking your head over a reasonable valuation, convertible loans sound pretty good. It’s a loan against fairly low interest rates. And when the creditor in a later stage becomes shareholder, he often doesn’t own voting rights.

The only catch: you don’t know what price you’re selling your company for, you’ll decide that later. I understand that in specific cases a convertible debt seems a good decision to make, especially for start-ups who often can’t (or don’t want to) spend a lot of time and money on the legal requirements of setting up the entry of a (direct) investor in the company (which is an invalid point in equity crowdfunding if you have the right legal structure). But in comparison you’d never agree to buy a car, put down a certain amount of money on forehand and find out later that you should’ve paid much less considering the milage. You’d run the risk of a scam.

Within the crowdfunding industry the tendency has arisen to do exactly that: expose your company to bad deal. The risks include not being able to pay back the loan or develop crucial parts of your company because you have a loan, unreasonable and/or unnecessary dilution and even losing control of the company. And all because we don’t want bust our balls over a valuation.Discounted Cash Flow Valuation Firm Value

Valuation is unfamiliar, complicated and expensive and it belongs in the financial department according to many starting entrepreneurs, not in the product/marketing department of which most start-ups are made up of. That still doesn’t mean taking up a loan now and hoping for the best (which is what convertible loans often seem to come down to), is how we should develop equity-crowdfunding. Convertible loans in the crowdfunding area are used as an excuse to delay the valuation problem: not to solve it.

The answer to the valuation problem? Do a valuation.

Which is very strange, considering a solution is already at hand. There are several alternatives at hand besides going to your accountant.

One example is EquityNet’s Calculator, extensively described in this article, which aims to create a quick scan valuation allowing the entrepreneur to have valuation within a few minutes straight into your e-mail inbox.

Stack of Coins MoneyAnother example that was started as a side project by SmartAsset, is Startup Economics. Though the tool is great for getting insight in the relation between raised funding amounts and share prices, for starting entrepreneurs it might be a little too much too soon, asking questions “the maximum pre-money valuation at which the notes may convert into equity”. It’s great to ‘play’ around with the figures and see the immediate feedback so that you can quickly get a grip on what is what in terms of numbers.

Another option is Equidam which has developed an entire company around online valuation. You won’t be done in two minutes, but based on a combination of your quantitative and qualitative input and five valuation methods; you’ll receive a 20-page report (paid) or the first free pages including your valuation for free.

These might not be the only solutions, but for now, they’re the best online start-up valuation methods I’ve seen. It offers an objective basis for supporting you valuation and for a lot of entrepreneurs (if the data is realistic) it’s a wake-up call as well as a good bottom-line for the valuation discussion. The DCF with DG, DF with multiples, Scorecard Method, Checklist Method and the VC method are all included and the report covers 20 pages of data and explanation to back up the start-up’s value.

Like I’ve argued before, the crowdfunding field can learn a lot of things from the traditional capital markets, with convertible loans as a beautiful example. Crowdfunding platforms should take responsibility for the products they help to sell and actively work towards a qualitative solution for valuation instead of adopting a ‘head-in-the-sand’-attitude. Instead of polluting the feeble and merely developed crowdfunding market with exotic investment vehicles that often don’t work in a traditional setting either, let’s focus on creating a real solution: a decent valuation method for start-ups.

Editors Note:  Symbid holds a small equity position in Equidam

This article was previously published on CrowdfundInsider

Top 19 crowdfunding experts startups needs to know

Crowdfunding has grown to become a very large part of startups success plan. Many companies are launching their businesses on sites like Kickstarter, Indigogo as well as several other sites to give their business a social proof. I’ve organized a list of some of the top experts from around the world to help you get the best advice possible when it comes to crowdfunding. The following is our list of the top 19 crowdfunding experts we used inPowered for the data:

Samantha Hurst

Samantha Hurst is presently a staff writer with Crowdfund Insider. She works alongside crowdfunding experts and lawyers to get the most recent news on the latest campaigns, platforms, and press releases. In the past, she has worked in numerous industries which include social media, engineering, entertainment media, and event planning.

Michael Ibberson

Michael Ibberson is an expert writer from Toronto, Ontario, who specializes in press releases, blogs and newsletters. He contributes to Crowdfunding–education/strategy, campaign promotion, and campaign management.

Kamni Gupta

Kamni is a lover of knowledge, a strategist and a leader. She is a self-proclaimed start-up junkie, with more than six years of expertise working with various early phase start-ups, the latest being CrowdFoundme, CoFoundersLab, and TheM2Group.

Erin Hobey

Hobey writes and researches original copy which covers international and domestic crowdfunding campaigns, which include Atlas Wearables, AngelPad, BoatSetter, and Boatbound, just to name a few.

Robert Hoskins

Hoskins is a Fortune 500 Corporate communications leader who has been fortunate enough to appreciate a long corporate communications career which has involved planning marketing campaigns for known brands and firms, which include: American Airlines, Halliburton, Rockwell International, Bell Helicopter, Texas Instruments, MCI, Sprint, etc.

Catherine Clifford

In the ten years that she has been a journalist, she has worked with The New York Daily News, CNNMoney.com, CNN, and Entrepreneur.com. She has intentionally driven her path in journalism toward the topics which excite her. Clifford’s latest work covers crowdfunding and social entrepreneurship and, according to her, has been the most rewarding of her career.

Aaron Djekic

CEO and founder of CrowdClan, Aaron Djekic, previously spent almost ten years helping startup businesses that needed capital to launch their companies. Djekic has designed the Beta version of CrowdClan, amongst the most successful and reputable crowdfunding resources out there today.

Bill Huston

According to statistics, 60 percent of crowdfunding campaigns never become completely funded. At My Crowd Rocks they think the reason is simple. Crowdfunding includes a compound term and if you do not build an excited and engaged crowd you won’t get the funding desired.

Darryl Burma

Burma is a crowdfunding industry thought leader and forward thinker. For the last couple of years he has been highly involved within the crowdfunding field and is the CEO and Co-founder at CrowdMapped.com, the globe’s first 411 search directory and global geo-location based crowdfunding company.

Fritz Parker

Parker researched, wrote, and managed blog content to spotlight the work of the crowdfunding industry and Launcht, which includes industry developments and trends.

Ludwine Dekker
Dekker is the senior contributor for CrowdfundInsider. Dekker has been coaching entrepreneurs and executing their fund raising for 3 years. As a digital marketing expert, Dekker specializes in entrepreneurship, fund-raising, and technology. As a Symbid campaign manager, Dekker strategically manages the entrepreneur’s requirements and campaigns, frequently writes for many platforms, organizes pitch events, as well as gives workshops

Paula Newton

Another crowdfunding expert. She writes comprehensive guides on how and what to do for every crowdfunding situation.

Kendall Almerico

Crowdfunding expert, attorney, as well as JOBS Act Expert named within January of 2014, by VentureBeat, as the seventeenth Most Influential Leader Within The Crowdfunding Industry.

Simon Dixon

Dixon is an active banking reformer as well as director of the United Kingdom Digital Currency Association and founding member of the United Kingdom CrowdFunding Assoc., who consistently speaks about the future of finance to financial institutions, investors, businesses, and governments.

Clyde Smith

Hypebot Sr. Contributor Clyde Smith blogs of music crowdfunding at Crowdfunding For Musicians.

Devin Thorpe

Thorpe’s books on crowdfunding and personal finance draw on his entrepreneurial finance expertise as a CFO, an investment banker, mortgage broker, and treasurer, assisting individuals utilize financial sources to do good.

Chance Barnett

Barnett is the CEO of crowdfunder.com. He democratizes early phase investment for entrepreneurs via the power of the JOBS Act and equity crowdfunding.

Vann Alexandra Daly

Vann Alexandra includes a creative services agency which gets projects financed via crowdfunding. In the last 2 years, the business has produced multiple crowdfunding campaigns-with a 100 percent success rate-and raised millions of dollars for customers who include Neil Young, critically acclaimed journalists, and Emmy and Oscar nominated filmmakers.

Carolyn M. Brown

Brown is Sr. Producer at Black Enterprise, and is responsible for the editorial direction of content about franchising, entrepreneurship, small business financing, and entertainment around multimedia platforms–live events, broadcast, digital and print.

(Originally published on Inc.com).

Harry Potter beaten by Augmented Reality? Dara Technologies lets imagination fly off the page!

Harry Potter can wrap up his bag of tricks because Dara Technologies presents: the Time Tub Twins! Flying bath tubs, scurrying dogs and of course a crazy adventure. Father Christmas should place his bets on Augmented Reality children’s books!

Augmented what? Books where the characters fly straight through your living room. Armed with iPad and special book, the founders of Dara Technologies Margara Tejera Padilla and Dennis Ippel, try to adjust our reality so that it seems as if the protagonists launch themselves into ‘your reality’. And that makes reading a lot more multidimensional!

Maragara Tejera Padilla, Dara Technologies

Aren’t we nipping reading books in the bud? Not according to Padilla and Ippel. In a time where children spend a considerable amount of time on ‘screen time’, a connection between book and screen might just offer that little extra that evokes kids to rediscover the book. And with such a funny and amusing concept like the Time Tub Twins, that step becomes very small indeed!

Augmented Reality is the technology that enables to superimpose virtual elements onto the real world

So what’s Augmented Reality exactly?

“Augmented Reality is the technology that enables to superimpose virtual elements onto the real world, such as images or objects”, says Padilla. “These virtual elements are linked to the real world. For example, if a 3D scene is linked to an image, if this image rotates or translates, the 3D scene rotates and translates with it. In my opinion, this is where the magic of AR resides.”

Dennis Ippel, Dara Technologies

But what about the underlying technology? How does that work?

Padilla continues: “Augmented Reality is generally powered by image recognition algorithms. These algorithms can recognise an image when a set of features are identified in it. These features can be, for example, the most apparent contours of the image. Once these features are found and the image is recognised, these algorithms have also the power of tracking the movement of these features, which makes possible what I mentioned in the paragraph above: when the image moves (translates, rotates, etc.), the 3D content linked to it also moves with it.”

Sounds like a technology that could be used in medical product development or engineering. Why children’s books?

“Dennis and I are particularly passionate about the creative possibilities of this technology and its potential applications in educational entertainment”, Padilla says. “We believe children are the right audience for AR-displayed content: they don’t judge; rather, they simply enjoy the experience of witnessing how the screen of their tablet becomes a magical window that displays content that is not there when looking with their bare eyes”.

“Moreover, we are very keen to explore how this new form of storytelling we’re offering can be exploited for children to learn. This could be in the form of educational add-ons to the book, e.g. maths, languages and more.”

Our app enhances this experience by offering an additional layer of information, fun and entertainment

But are kids still really reading books if they’re looking at an iPad screen? Does this still count as a book?

“What differentiates us from pure storytelling apps is that we want our app to be an enhancement to a physical book, rather than a substitute.” Padilla explains. “The book is the medium through which the story is told, but our app enhances this experience by offering an additional layer of information, fun and entertainment. Also, out of 40 pages of the book, 17 will be augmentable, so it’s not necessary to use a mobile device for each page.”

“We are thinking very carefully about how the reading/tablet dynamic is going to work in the book. Children will read the book directly on its pages, not through the screen. Rather than being a substitute to the book, the app (screen) will offer something the book can’t: the ability to interact actively with the story. We like to think of it as making the imagination of children a reality: they read a page, imagine it in their little heads, and then we realise these thoughts in the form of interactive content on top of the pages of the book.”, Padilla concludes.

What will you be achieving in the next 6 months? How’s the crowdfunding campaign going to help with that? 

“We have two very ambitious objectives for the next 6 months: finishing the development of our first book and completing our seed round of investment. A successful crowdfunding campaign (on 37% after 4 days, ed.) is part of the plan because it will enable us to prove there’s a market for a product like ours, which is something that investors need to see. We’ve received an initial small investment which has helped us to get to the point we’re at right now, but we need the funds raised through crowdfunding to complete the development of the book!”

The book will be available arond the end of July 2016.

Lekker discussiëren met je wethouder? Argu regelt het!

“Politiek is te veel marketing en te weinig inhoud”, zegt Joep Meindertsma, co-founder vanArgu, het platform voor oplossingsgericht discussiëren. En met de eerste gemeente (Houten) als klant en 500 gebruikers in de afgelopen paar maanden, werd het tijd om deze startup onder de loep te nemen.

Geen vuilbekkerij, gezeur of belaagde politici maar een echte grote-mensen-discussie waar zowel burgers als bestuurders wat aan hebben.

Via Argu, dat tevens werd opgericht door Thom van Kalkeren en Michiel van den Ingh, kunnen burgers met elkaar maar ook met politici discussiëren over problemen of oplossing die worden aangedragen via Argu. Er is een landelijk forum maar iedere gemeente die mee doet krijgt uiteraard haar eigen plek om van gedachten te wisselen met haar inwoners. Het technische format van gespreksvoering wordt sterk gestuurd: en dat werkt goed!

Discussies worden gestructureerd aan de hand van een vraagstuk, met daaronder mogelijke oplossingen. Onder die oplossingen kunnen mensen argumenten voor of tegen toevoegen. Geen vuilbekkerij, gezeur of belaagde politici maar een echte grote-mensen-discussie waar zowel burgers als bestuurders wat aan hebben.

De huidige standaard is duur, tijdrovend en bereikt maar een klein publiek

“Argu biedt gemeenten een moderne manier om burgers te bereiken”, vertelt Meindertsma wanneer we hem vragen: ‘Waarom Argu?’.”.

“Je kunt stellen dat onze grootste concurrent de offline democratie is: denk aan het bellen van politici, het sturen van brieven naar de gemeente en het aanwezig zijn bij inspraakavonden. Wij licenseren discussie-omgevingen aan gemeenten. Met zo’n Argu forum kan een gemeente op een eenvoudige manier een grote groep mensen bereiken en constructief laten meedenken over beleid in de gemeente. Dat helpt een gemeente bij het vergroten van draagvlak voor beleid en het geeft inspiratie voor creatieve oplossingen.”.

Mooi dat Argu dat kan, maar wat hopen jullie nou echt te bereiken?

“We zijn als maatschappij te veel bezig met het praten over Tv-optredens van politici en te weinig met het voeren van rationele, goed onderbouwde en oplossingsgerichte discussies. We gebruiken het internet tegenwoordig voor alles van shoppen tot kattenvideo’s kijken, maar onze democratie blijft achter. Het internet maakt het mogelijk om met heel grote groepen mensen na te denken over de problemen van onze maatschappij, maar bestaande social media platforms zijn niet ontworpen voor inhoudelijke discussies: ze zijn bedoeld om leuke, korte berichtjes te delen.”.

“Wij hebben een discussieplatform ontworpen om helder te krijgen welke problemen er bestaan in onze maatschappij, welke oplossingen er te bedenken zijn, en welke voor- en nadelen er horen bij die oplossingen. Zo wordt een onderbouwde mening toegankelijker voor zowel kiezers als politici.”.

Mensen hebben geen interesse in beslissingen of politiek: gaan er genoeg mensen naar Argu komen?

“Onze democratie verandert. Steeds minder mensen voelen zich goed vertegenwoordigd en hebben vertrouwen in politieke partijen. We zijn de politieke spelletjes zat, maar zijn wel geïnteresseerd in wat er speelt in de wereld. We tekenen massaal petities en gaan gepassioneerd met elkaar in discussie, terwijl de politieke partijen leegstromen. Onderzoek laat zien dat bijna elke vorm van politieke betrokkenheid afneemt – behalve online. Wij vervullen een opkomende behoefte: om mee te denken over beleid, zonder mee te doen aan de politieke spelletjes.”.

Onderzoek laat zien dat bijna elke vorm van politieke betrokkenheid afneemt – behalve online.

En hoe gaat Argu ervoor zorgen dat de mensen zich meer verbonden voelen met politiek?

“Argu is een platform waar iedereen aan mee kan doen – je hoeft geen lid te zijn van een politieke partij om je stem te laten horen en mee te denken. Minder dan 3% van de Nederlanders is lid van een politieke partij, maar meer dan 50% zegt op een manier met politiek bezig te zijn. Met het internet is de rol van de partijen minder groot geworden. Met Argu kan je meepraten over de onderwerpen die jij belangrijk vindt, wanneer jij dat wil, zonder dat je naar jaarcongressen moet gaan en jaarlijks moet betalen.”.

En als Argu straks groot is en mensen kunnen met elkaar discussiëren over ideeën in plaats van personen, hebben we dan geen politici of politieke partijen meer nodig?

“De rol van de politicus als volksvertegenwoordiger wordt minder groot wanneer het volk zichzelf kan vertegenwoordigen. Ook de rol van de politieke partij is kleiner wanneer je niet meer naar een congres te komen om inspraak te hebben op een partijprogramma. Dat gezegd hebbende is ons systeem afhankelijk van politici en mens tot mens interactie, dus kunnen die nog lang niet vervangen worden met software. Wel geeft Argu een nieuwe, veel directere manier waarop inwoners mee kunnen praten over wat zij anders willen en waarom zij dat willen.”.

Jullie zijn erg hard gegroeid in gebruikersaantallen en hebben investeerder aan je weten te binden: wat zijn de plannen voor de komende tijd?

“We willen interessante data uit de politiek makkelijker beschikbaar maken. Wat gebeurt er precies in de gemeenteraad en in de tweede kamer? Deze informatie is vaak wel openbaar beschikbaar, maar de manier waarop, dat kan beter. Het meeste daarvan staat verstopt in talloze documenten op ingewikkelde websites. Hoe vet zou het zijn als je direct kan zien wat een politieke partij of politicus heeft gestemd in de tweede kamer? Dat je kunt zien welke voorstellen er zijn ingediend en welke er worden aangenomen? Welke partijen elkaar vaak wel steunen of juist niet? Door gebruik te maken van open data die in de nabije toekomst wordt vrijgegeven door de Open State Foundation en de Tweede Kamer, kunnen we dit mogelijk maken.”.

Om de ontwikkeling te bekostigen, zijn we op 16 september een crowdfundingcampagne gestart

“Deze nieuwe functionaliteit ontwikkelen we als een losse dienst, zonder verdienmodel. Iedere gemeente die het ondersteund kan hier dus gebruik van gaan maken. Om de ontwikkeling te bekostigen, zijn we op 16 september een crowdfundingcampagne gestart in samenwerking met de gemeente Utrecht en de 1%-Club. De gemeente Utrecht verdubbelt het bedrag dat er wordt gedoneerd als we ons bescheiden doelbedrag van €2500 halen, dus doe vooral mee als je ook gelooft dat onze democratie transparanter moet zijn!”.

Hurrah: I’m in the Top 19 Crowdfunding Experts Worldwide!

This article has been published earlier by Murray Newlands on Inc.com

Top 19 Crowdfunding Experts Startups Need to Know

Crowdfunding has grown to become a very large part of startups’ success plan. Many companies are launching their businesses on sites like Kickstarter, Indigogo as well as several other sites to give their business a social proof.

Crowdfunding has grown to become a very large part of startups success plan. Many companies are launching their businesses on sites like Kickstarter, Indigogo as well as several other sites to give their business a social proof. I’ve organized a list of some of the top experts from around the world to help you get the best advice possible when it comes to crowdfunding. The following is our list of the top 19 crowdfunding experts we used inPowered for the data:

Samantha Hurst

Samantha Hurst is presently a staff writer with Crowdfund Insider. She works alongside crowdfunding experts and lawyers to get the most recent news on the latest campaigns, platforms, and press releases. In the past, she has worked in numerous industries which include social media, engineering, entertainment media, and event planning.

Michael Ibberson

Michael Ibberson is an expert writer from Toronto, Ontario, who specializes in press releases, blogs and newsletters. He contributes to Crowdfunding–education/strategy, campaign promotion, and campaign management.

Kamni Gupta

Kamni is a lover of knowledge, a strategist and a leader. She is a self-proclaimed start-up junkie, with more than six years of expertise working with various early phase start-ups, the latest being CrowdFoundme, CoFoundersLab, and TheM2Group.

Erin Hobey

Hobey writes and researches original copy which covers international and domestic crowdfunding campaigns, which include Atlas Wearables, AngelPad, BoatSetter, and Boatbound, just to name a few.

Robert Hoskins

Hoskins is a Fortune 500 Corporate communications leader who has been fortunate enough to appreciate a long corporate communications career which has involved planning marketing campaigns for known brands and firms, which include: American Airlines, Halliburton, Rockwell International, Bell Helicopter, Texas Instruments, MCI, Sprint, etc.

Catherine Clifford

In the ten years that she has been a journalist, she has worked with The New York Daily News, CNNMoney.com, CNN, and Entrepreneur.com. She has intentionally driven her path in journalism toward the topics which excite her. Clifford’s latest work covers crowdfunding and social entrepreneurship and, according to her, has been the most rewarding of her career.

Aaron Djekic

CEO and founder of CrowdClan, Aaron Djekic, previously spent almost ten years helping startup businesses that needed capital to launch their companies. Djekic has designed the Beta version of CrowdClan, amongst the most successful and reputable crowdfunding resources out there today.

Bill Huston

According to statistics, 60 percent of crowdfunding campaigns never become completely funded. At My Crowd Rocks they think the reason is simple. Crowdfunding includes a compound term and if you do not build an excited and engaged crowd you won’t get the funding desired.

Darryl Burma

Burma is a crowdfunding industry thought leader and forward thinker. For the last couple of years he has been highly involved within the crowdfunding field and is the CEO and Co-founder at CrowdMapped.com, the globe’s first 411 search directory and global geo-location based crowdfunding company.

Fritz Parker

Parker researched, wrote, and managed blog content to spotlight the work of the crowdfunding industry and Launcht, which includes industry developments and trends.

Ludwine Dekker
Dekker is the senior contributor for CrowdfundInsider. Dekker has been coaching entrepreneurs and executing their fund raising for 3 years. As a digital marketing expert, Dekker specializes in entrepreneurship, fund-raising, and technology. As a Symbid campaign manager, Dekker strategically manages the entrepreneur’s requirements and campaigns, frequently writes for many platforms, organizes pitch events, as well as gives workshops

Paula Newton

Another crowdfunding expert. She writes comprehensive guides on how and what to do for every crowdfunding situation.

Kendall Almerico

Crowdfunding expert, attorney, as well as JOBS Act Expert named within January of 2014, by VentureBeat, as the seventeenth Most Influential Leader Within The Crowdfunding Industry.

Simon Dixon

Dixon is an active banking reformer as well as director of the United Kingdom Digital Currency Association and founding member of the United Kingdom CrowdFunding Assoc., who consistently speaks about the future of finance to financial institutions, investors, businesses, and governments.

Clyde Smith

Hypebot Sr. Contributor Clyde Smith blogs of music crowdfunding at Crowdfunding For Musicians.

Devin Thorpe

Thorpe’s books on crowdfunding and personal finance draw on his entrepreneurial finance expertise as a CFO, an investment banker, mortgage broker, and treasurer, assisting individuals utilize financial sources to do good.

Chance Barnett

Barnett is the CEO of crowdfunder.com. He democratizes early phase investment for entrepreneurs via the power of the JOBS Act and equity crowdfunding.

Vann Alexandra Daly

Vann Alexandra includes a creative services agency which gets projects financed via crowdfunding. In the last 2 years, the business has produced multiple crowdfunding campaigns-with a 100 percent success rate-and raised millions of dollars for customers who include Neil Young, critically acclaimed journalists, and Emmy and Oscar nominated filmmakers.

Carolyn M. Brown

Brown is Sr. Producer at Black Enterprise, and is responsible for the editorial direction of content about franchising, entrepreneurship, small business financing, and entertainment around multimedia platforms–live events, broadcast, digital and print.

The Big Boys Say Crowdfunding is a Drop in the Ocean: And They’re Right

Crowdfunding ­is ‘hot & happening’. So ‘hot & happening’ in fact, that a lot of valid criticism, however badly formulated at times, is discarded. One of the points made that is taken as an outright insult, is the mention that “Crowdfunding is just a drop in the ocean” in terms of funding. Often heard from larger investors, VC’s, banks and traditional funders, this comment is denounced as treason. But in an industry that continually promotes itself the new (and only) way of funding by boasting about growth percentages of 400%, it’s time to come back down to earth and see what truth there is in the comments experienced financial experts have.

The amounts funded are tiny

British Pounds Money £10

This statement is not to be confused with ‘you have small dick’, though judging by the responses, it’s often interpreted like that. The average investments raised during crowdfunding campaigns are usually smaller amounts than the traditional approach.  If you review recent data just published from Nesta in the UK, their report indicates an impressive 201% growth year over year for total volume in 2014.  That type of number makes one stop to wonder but when you compare the aggregate capital raised, Nesta shows £84 million in total with an average amount raised per deal standing at £199,000.  Compare this number from a recent report byBeauhurst depicting a booming private placement market in the UK.  Inclusive of crowdfunding through Q3 of 2014 capital raised totals £1.62 billion with a quarter remaining.  This means that equity crowdfunding amounts to little over 6% of total funding – a mere drop in the bucket.

According to at least one data source the average funding for all Title II, 506(c) offerings in the US since inception has been approximately $405,000.00.  The total funding amount up to this past September is not small coming in at over $385 million.  These aforementioned numbers attempt to align with small and emerging companies but if you add back real estate and other areas, this number will certainly rise.  According to a report compiled by DERA, the research arm of the SEC, total Reg D private placements hit almost $1 trillion in 2012 alone.  Again in contrast the amount that is transacted online via crowdfunding is small in comparison to the potential addressable market.

Wall Street Metro Station Downtown Brooklyn

So are the ‘big boys’ right if they say that crowdfunding is a drop in an ocean? Yes they are. Does that mean that crowdfunding isn’t important? Of course not. For example, in 2013 over 1250 companies got funding via 29 crowdfunding platforms in the Netherlands.  The UK had 44 platforms in 2012, the US had 191 platforms. Of course you can’t extrapolate the data directly, but it’s a great indication of the amount of companies that are being started and the jobs they create. The fact that ‘normal’ people are willing to spend money is also encouraging in terms of economy.

Crowdfunding is for social companies only

Another less well documented idea hovering around is that crowdfunding is for social projects or companies mostly or only. Because crowdfunding projects, especially in rewards based and donations crowdfunding, tend to do better when there’s a higher meaning behind it. Yet the semantics of the deliberation show that there’s a tendency to discard crowdfunding as a ‘soft’ way to fund a company. And that if a company isn’t fully commercial, it’s not benefitting the economy.

That notion is nonsense. On the one hand I agree that attracting an intrinsically involved group of crowdfunders will lead to a more dedicated and interested group of ambassadors, which is logical. But the idea that social or sustainable companies don’t benefit the economy and are therefore not worth funding is ridiculous. It would mean that Greenpeace doesn’t provide jobs as well as a commercial company, or that it pays less for other company’s services.

On top of that, lending seems to defy the notion that social or sustainable companies aren’t worth funding very strongly. If we look at what gets funded most quickly and raises that highest amount of money, it’s the project or company that offers the lowest risk for the highest interest rate. Be it a commercial, sustainable, social, ‘green’ or any other type of company: money is money. And no matter how much we say crowdfunding is about ambassadors, ideals and involvement, if you don’t get the money your campaign has failed.

Crowdfunding:  the end of banking as we know it

Royal Bank of Canada Toronto

Tony Greenham is a well-established financial expert that has spent quite some getting to know crowdfunding. And when he wrote “Crowdfunding: the end of banks as we know it” on the New Economics Foundation blog, he was clearly expressing a wish for betterment within the financial industry, a sentiment that is much reflected in the industry.

But ‘the end of banks as we know it’ isn’t anywhere near. There are some elements that need decent adjustments, but banks won’t disappear nor will they radically be forced to adopt a smaller position. “They’re to big to fail”. Crowdfunding has been here for about 4-5 functional years, depending on what source you turn to. The pillars of the financial system won’t be able to change in that little time, even if they wanted to.

Then what will happen to the banks? They will mainly change their roles. The idea that crowdfunding is cannibalizing on their incomes is ridiculous, even taking into account “the large potential” (a tell-tale sign that’ll ring the alarm of any experienced investor) of crowdfunding. The part that crowdfunding is currently picking up, is only a tiny piece of funds that banks or VC’s wouldn’t have provided in anyway. Most banks can’t service the larger part of entrepreneurs knocking at their door, so it really doesn’t matter if platforms take a share in that funding part. The only direct threat as described by Capgemini’s Patsy Neville, which is still very small, comes from the side of investors who’d rather get interest on their crowdfunding investment than on their savings because the latter is hardly anything.international money europe euros

Of course, this is from an environment (Europe) that geared towards banks providing loans and not having (well enough developed) services for investors, whom as a result, finally have a decent alternative. Conclusion is that crowdfunding in terms of money processed is not even close to what is being processed in established financial markets. But a lot of entrepreneurs ánd investors think crowdfunding is a much friendlier way to raise money than going to a bank. In the future a hybrid funding structure will be developed, continuing the interplay between traditional funders and crowdfunding.

How can we leverage the potential of the crowdfunding market? 

Because the equity crowdfunding market isn’t there yet, it doesn’t mean it’ll never get there. The two main strategies that could be used to unlock the (U.S.) crowd investing market, are less strict requirements for (accredited) investor or a more powerful Regulation A+.

Accredited Investor Qualifcations featured

With regard to the firsts change, the rules for accredited investors may be eased up, as clearlyexplained by Anthony Zeoli. One option that has been heavily discussed is measuring the suitability of an investor by the extent of his knowledge, not his wallet. Though the arguments are valid the implementation of a structure that would support this is hard. As a result, the other option that could be used, is making use of a more vibrant Regulation A+ – another tenant of the JOBS Act with final regulations still outstanding.

What does this mean in terms of capital? That the crowdfunding market could share in the almost $1 trillion investment market that is currently in existence through Regulation D

Tarte tatin pie food

From 2009 to 2012, non-financial issuers (typically private companies and not PE, VCs Funds, Hedge Funds etc.) raised $354 billion. Hedge funds were in first place raising $1.2 trillion.  Yet at the same time (during the same period) the number of non-financial issuers stood at over 40,000 dwarfing all others in this regard.  It is this segment that investment crowdfunding has great potential to not only share the pie but grow it even more.

It is understandable that legislation and regulations may take some time. But excluding a segment of society due to their money in the bank as opposed to the ability they possess just seems rather wrong.  It would seem there’s reason enough to update legislation for the better. Though it’s hard to say something about the exact timing of the implementation of new regulation, it’s sure that when it’s being activated, the equity crowdfunding market will benefit most.

This article has previously been posted on CrowdfundInsider

Convertible Loans as a Band-Aid Solution to the Valuation Problem in Equity Crowdfunding

What’s happening: the industry wants equity

It’s ironic that crowdfunding makes it possible to set up companies that otherwise never would’ve come into existence, only to ruin them later by postponing the valuation issues that any start up will have to solve sooner or later. Might the positive start of crowdfunding come to a halt due to unsavoury developments, convertible Crowd Fans Audience Trafficloans specifically, within the equity-crowdfunding branch?

The good news first: crowdfunding continues to grow, especially equity crowdfunding is catching up. From the beginning of this year, equity crowdfunding has seen a delayed but sharp increase compared to the other forms of crowdfunding (donations, rewards, loans). A development that is projected to continue along with the funding volumes in this niche. The fact that (somewhat) complicated capital forms are being adopted means that entrepreneurs and investors are ‘reading up’ and that the industry is maturing. Reason for some platforms take their chances and claim they’re offering equity crowdfunding: without solving the valuation issue.

The sweet and sour of equity crowdfunding

During the last decades, Europe has been heavily hooked on bank loans much like the U.S. was in the ‘80’s. Since the financial downturn (and now its projected upturn) entrepreneurs have had to develop some creative financial income streams, one of them being crowdfunding.

Equity vs DebtEquity crowdfunding is a specific type of income generation that a lot of people have never learnt to control or deal with sufficiently. They’re simply not educated in this field, which explains why peer-to-peer lending has seen a major increase in the beginning of the crowdfunding era whereas equity has been a slow starter: people don’t understand so people don’t use it.

Now that equity is increasingly being adopted by investors and entrepreneurs, more platforms are eager to claim that they offer equity-crowdfunding. But the problem they run into is valuation. It’s hard to valuate a company that (often) hardly exists. And in contrary to traditional entrepreneur- investor settings, there is no discussion on how much a company is worth because.

The crowd often receives a certain valuation as a ‘take-it-or-leave-it’-offer, and investing means you agree with the valuation. Some platforms like CrowdCube offer the opportunity to ask for a “Alternative Offer” but 99% of the equity platforms isn’t that well developed. On top of that, even when the crowd does discuss a company’s worth, they often lack the knowledge to create a factual, calculated value.

So what do platforms like ReturnOnChange, Fundable, Seedrs or the Dutch platform Wekomenerwel (“We’ll-get-there”) do: they offer convertible debt as a way to delay the valuation issue.

Why are convertible loans bad for the crowdfunding industry?

Mark Suster, a two-times entrepreneur turned VC, has written extensively about the pros and cons of convertible debt in the traditional setting (not crowdfunding), explaining the difficulties in this form of equity instrument.

For those not informed, a convertible loan is a loan you get from a (potentially) future investor with oftentimes a very low interest rate, because the creditor belies that at a later stage he’ll be able to acquire part of the company for a relatively low price.

What’s so great about convertible loans?

If you don’t know exactly how equity investing works or what it might mean for your company (which unfortunately is the case more than we’d all like to admit) let alone cracking your head over a reasonable valuation, convertible loans sound pretty good. It’s a loan against fairly low interest rates. And when the creditor in a later stage becomes shareholder, he often doesn’t own voting rights.

The only catch: you don’t know what price you’re selling your company for, you’ll decide that later. I understand that in specific cases a convertible debt seems a good decision to make, especially for start-ups who often can’t (or don’t want to) spend a lot of time and money on the legal requirements of setting up the entry of a (direct) investor in the company (which is an invalid point in equity crowdfunding if you have the right legal structure). But in comparison you’d never agree to buy a car, put down a certain amount of money on forehand and find out later that you should’ve paid much less considering the milage. You’d run the risk of a scam.

Within the crowdfunding industry the tendency has arisen to do exactly that: expose your company to bad deal. The risks include not being able to pay back the loan or develop crucial parts of your company because you have a loan, unreasonable and/or unnecessary dilution and even losing control of the company. And all because we don’t want bust our balls over a valuation.Discounted Cash Flow Valuation Firm Value

Valuation is unfamiliar, complicated and expensive and it belongs in the financial department according to many starting entrepreneurs, not in the product/marketing department of which most start-ups are made up of. That still doesn’t mean taking up a loan now and hoping for the best (which is what convertible loans often seem to come down to), is how we should develop equity-crowdfunding. Convertible loans in the crowdfunding area are used as an excuse to delay the valuation problem: not to solve it.

The answer to the valuation problem? Do a valuation.

Which is very strange, considering a solution is already at hand. There are several alternatives at hand besides going to your accountant.

One example is EquityNet’s Calculator, extensively described in this article, which aims to create a quick scan valuation allowing the entrepreneur to have valuation within a few minutes straight into your e-mail inbox.

Stack of Coins MoneyAnother example that was started as a side project by SmartAsset, is Startup Economics. Though the tool is great for getting insight in the relation between raised funding amounts and share prices, for starting entrepreneurs it might be a little too much too soon, asking questions “the maximum pre-money valuation at which the notes may convert into equity”. It’s great to ‘play’ around with the figures and see the immediate feedback so that you can quickly get a grip on what is what in terms of numbers.

Another option is Equidam which has developed an entire company around online valuation. You won’t be done in two minutes, but based on a combination of your quantitative and qualitative input and five valuation methods; you’ll receive a 20-page report (paid) or the first free pages including your valuation for free.

These might not be the only solutions, but for now, they’re the best online start-up valuation methods I’ve seen. It offers an objective basis for supporting you valuation and for a lot of entrepreneurs (if the data is realistic) it’s a wake-up call as well as a good bottom-line for the valuation discussion. The DCF with DG, DF with multiples, Scorecard Method, Checklist Method and the VC method are all included and the report covers 20 pages of data and explanation to back up the start-up’s value.

Like I’ve argued before, the crowdfunding field can learn a lot of things from the traditional capital markets, with convertible loans as a beautiful example. Crowdfunding platforms should take responsibility for the products they help to sell and actively work towards a qualitative solution for valuation instead of adopting a ‘head-in-the-sand’-attitude. Instead of polluting the feeble and merely developed crowdfunding market with exotic investment vehicles that often don’t work in a traditional setting either, let’s focus on creating a real solution: a decent valuation method for start-ups.

Editors Note:  Symbid holds a small equity position in Equidam

This article was previously published on CrowdfundInsider

The Real Difference Between VC and Crowdfunding? Investment Marketing

A few weeks back the value of VC’s for the crowdfunding industry was extensively discussed. Why? Because there are lot of areas where crowdfunding and VC’s can connect. And though traditional funding and alternative funding are not as rigorously separated as many want to believe, there are some inherit differences that characterise crowdfunding as a different form of funding.

Tanya Prive in 2012 wrote an article on Forbes describing crowdfunding as “the practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the Internet.”. Rachel Chalmers refers to as VC money as “fuel for hypergrowth”. In addition, VC’s are in the business of making money for their own investors. Besides the target audience (crowd vs. VC) there doesn’t seem to be clear difference if we look at equity crowdfunding.

In both cases the investor profits financially, entrepreneurs are requested to deliver certain information and investors need to be convinced. Then why worry about the differences? Because, despite being marketed as the go-to Holy Grail of funding, most crowdfunding campaigns fail, only 1 in 10 succeeds on IndieGoGo (according to The Verge’s great article). And not because they were all bad investment opportunities. The problem was marketing.

Timing of the money

A first, very well visualised differenced can be found via Startup Guide: the timing. As you’ll see the type of funding for each phase varies a lot. Of course there’s some overlap but in general, VC’s won’t invest in anything that isn’t creating revenue yet. Crowdfunding on the other hand, has the reputation to be solely for start-ups. In my everyday job as Symbid‘s proposition manager where I coach the entrepreneurs in their funding, I see very different companies.

Small companies that have been in existence for quite a time (between 5-25 years); film funds that have a million dollar budget but want to do some form of inspiring marketing; individual entrepreneurs who still have to write down their business plan; growing start-ups that come back every year for another round and companies want fast forward their growth, using the money for “hypergrowth”.

Because crowdfunding lets the entrepreneur be in control of their own funding trajectory, it can be used any time they feel the time is right. Of course there are some exceptions (if you have no time for it, then don’t do it), but it is the entrepreneur that is fully responsible for the how and when of the funding process.

The reputation and differences in outcome

Crowdfunding was the first aid kit for capital when no one else will give you money. Crowdfunding is a necessary evil, having a VC is a luxury. But is that true?

Chalmers gives five very compelling reasons why you’d want to stay away from Venture Capitalists as an entrepreneur. In summary, a loss of control and narrowing down business development options. The idea that most successful companies raise money via a VC is a urban legend in Entrepreneurship Town; lots of companies succeed without that money.

Again, via crowdfunding the entrepreneur stays in control for the most part. Though a good VC investment can bring lots of good for a company, the company is a product that the VC needs to make money in. While in crowdfunding, there’s a sense of togetherness, sharing and support backed by money. Different ways of funding your company that have different results and different outcomes for you company. And with all the sustainable, social and consumers as “fans”, one might start to think equity crowdfunding is starting to become the epitome of involving your customer.

Self regulated fund raising as a basis for the process & dynamics

Entrepreneurs prepare a campaign when starting with crowdfunding, instead of a single pitch that appeals to all VC’s alike. This also means “one at a time” vs. a full blown marketing crusade: that’s a VC funding quest vs. a crowdfunding process. Whereas getting the right network and subscriptions to VC-networks gets the entrepreneur one appointment at a time, crowdfunding requires to think about ways to reach your audiences and target markets as successfully as possible.

Questions like: what am I selling to whom, who is my target audience, is my own network a seperate group, is there a difference between my customers and investors, where are they, how should I address them, should we send out a press release, and so forth are not at all uncommon during crowdfunding. Whereas a entrepreneur wouldn’t send out a press release about his appointment with a VC, nor would he continuously (almost obsessively) update his network about the progress.

Though the information used as a basis of communication (business plan, financial projections, etc.) is often the same, the ideas and literal message are very different. If an entrepreneur decides to root for VC, their business will be tailored for a specific payback. In crowdfunding, the campaign in itself, a small ROI and the opportunity to make something possible, are the expected outcomes.

Instead convincing the VC’s the entrepreneur engages; instead of saying “your investment makes ABC possible” and entrepreneur has to focus on “together we can..”; instead of talking to a superior or someone the entrepreneur is dependent on, they’ll talk to their peers. Crowdfunding is weeks of continued marketing efforts in order to gather funds bit by bit, while VC money are intermittent,  singular conversations that aim to get a large amount of money at once. These differences highlight the difference between the characterizing dynamics for each type of funding.

Investment marketing

In short, whereas VC’s money is hauled in by “closing the deal” and single selling moments, crowdfunding really is investment marketing. If we look at the dynamics during the campaign I could swap “the company” for any other product and it wouldn’t be called “crowdfunding” but “marketing”. Analysing and setting up various campaigns, the 4 (or 7) P’s are a great way to make entrepreneurs think about what they’re selling and how they’re attracting enough customers, emphasizing the strong marketing dynamics that really separate crowdfunding from VC funding raising.

 

McKinsey says ‘Business Needs More Women’: Crowdfunding Can Support This Goal

Why do we want more women in business? Practicing gender equality is usually not the reason one starts a company. Are men making a mess of our economies and companies? Is “the men’s world” not functioning or failing in creating sustainable growth within our economies? No, not really. The vast majority of men in companies are good people and devoted individuals. By no means are men the ‘wrong-doers’ and should be replaced because of such a (faulty) reason.Then why does this discussion matter?

Women make companies perform better

Numbers don’t lie, especially not when they’re provided by McKinsey & Company: companies with some 30% or more women in top level functions, perform better. A lot better actually, according to McKinsey & Company’s yearly report “Women Matter”. These companies have better return on equity, 11.4% vs. companies who have significant lower amounts of women in their top layer of the company. In addition, operating results are better (11.1% vs. 5.8%) and stock price growth is also significantly better (64% vs. 47%). Women like Marissa Mayer and Sheryl Sandberg are examples of what women could potentially contribute to a company.

In addition, in 2040 Europe is expected to need another 24 million people to tackle the workload, and women are already there. Another reason why we need more women on the work floor is that they’re usually the main decision unit in household purchases, and I’m not talking about groceries. Women spend 71% of the household budget. In Japan, 60% of the women are responsible for choosing a car (now there’s a man’s-world industry for you) and in Europe 47% of the PC’s are bought by women. Notice the “glam” redesigned notebooks that are now available? Notice the advertisers bragging about low weight PC’s? You know why. Then why is it that, according to the Boston Globe, a company pitched by men is 40% more likely to receive funding? And how can crowdfunding change that?

It’s Partially Women’s Own Fault

A lot of women simply approach things differently. If you ask women why a project was successful, about 70% will tell you they were lucky, they worked hard, etc. Men will tell you they’re awesome, says research. In addition, women tend to not discuss their success and attribute it to others (the team). Costa Rica’s first female president, Laura Chinchilla says women are seen as weak because of this: “We understand success not as the result of just one person but as the result of a team,” she told Forbes’ writer Jenna Goudrau. “[It’s a] different way of dealing with power [that] is misunderstood as a kind of weakness.”.

On top of that, women deal with “double trouble”. First, it’s difficult to what Sandberg (and McKinsey & Company) to the “double workload”: raising a family and developing your career. Reports show that in the case were equal companies pitched by either a man or a woman, the man was more likely to receive funding. The reason? Maybe a story sounds more familiar to man when it’s told to him by another man, we don’t like what’s unfamiliar. Much the same way society might prefer a female child care taker instead of male childcare worker, a.k.a. “Manny”..

The Solution is Part of the Problem

If we want more women in business, what’s stopping us? Well, the women are actually. They stick together in Women’s Clubs, Women’s Awards, etc. Personally, if someone ever handed me the award for “Best company with a female CEO”, I’m not sure I’d appreciate it: “Here’s your consolidation prize, now go play with the other kids”, or, “You’re not bad at all.. for a woman”. It sucks to be considered a second rank “leader”, or cheerleader, as was Sarah Palin.

Then why do women do this? Because men do it too. The (in)famous “old boys network” didn’t spontaneously come into existence. Men-only business and networking clubs (as insightfully described by The Guardian)  have existed for over hundred years, plenty of time to establish the beginning of the just as infamous glass ceiling. And even though “Women-only clubs” aren’t going to completely solve the problem, I can definitely imagine that it’s easier to pack some punch when somebody has your back. And why desperately try to build that back up framework with a group of people that need some serious convincing (men), when you have another group of people that is very willing and open to support you: women. And though I have some serious doubts about this form of separatism, there is one specific area in business where women might actually help each other conquer the business: online investing.

Women Investing in Women: online

In order to get more women in (offline) businesses we need to activate women to pick up projects or start up companies. Tough when you’re faced with the barriers above but much easier when you create an environment where those barriers are minimized. Women have the tendency to fund a larger part of their company themselves as it’s harder for them to come by via men, according to USA Today. The result? A company that has fewer resources to fully develop its potential. The solution? Ask a woman to crowdfund the initiative instead of raising funds in the traditional way.

First, the chances of raising funds via a lot better. 42% of Indiegogo’s successful projects are run by women, says Geri Stengel’s Forbes contributor. These crowdfunding campaigns are often mostly funded by other women, according to. They also raise some 11% more money than men, and according to USA Today, women make better investors because: 1) they focus on long-term, non-monetary goals; 2) they are less prone to take unnecessary risks and do quality research; and 3) that men trade 45% more than women, leading to a loss of 2.65% on men’s net returns. And women lead campaigns get 1.3 more followers than men lead companies, according to CrowdExpert.

How does crowdfunding success get more women in business?

Women get a fair chance. No (or less) bias, more access to more investors, both men and women that, in contrary to the established funding industry, are willing to take chance in a woman lead company. There is more money flowing in women’s initiatives, giving women the chance to prove their potential. In establishing great cases, more women like Sandberg and Mayer earn a place in the spotlight, increasing the society broad idea that women can actually achieve something. That way, more and more people (men and women) get the live demonstration of what already has been proven: women make business better.

Final note of the authorI’ve never been much of “we need more women”-person. I believe in hiring the best and if that’s not a woman, I’m fine with that. As a result I was totally unaware of the fact that companies with a certain amount of women perform better, before writing this article. In addition, doing my research for this article I’ve noticed this discussion is very extensive (and quite interesting really) and I haven’t addressed all the related points on purpose. If you have any subjects you’d like to touch, feel free to share them in the comments.