Crowdfunding Alameda County SBDC Reach Center San Leandro March 30, 2018
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Lee Lambert Director, Alameda County SBDC since 2014 affiliated as advisor since 2008 Founder/CEO, Simple Buyout Plans and Hollywood Partners Founder, Cambridge/Samsung Partners (venture fund) Samsung Electronics, Van Kasper & Co., Deloitte, Ernst & Young Harvard Business School, UC Berkeley
Crowdfunding Crowdfunding is forecasted to pass venture capital as a source of business funding in the near future 2014: $16.2 billion worldwide 2015: $34.4 billion worldwide 2020 forecast: $90.0 billion (World Bank) 2015 Venture capital: $124 billion 2015 Crowdfunding - $34.4 billion, up from $16.2 billion
Crowdfunding Segments Source: Massolution
Platforms
Crowdfunding Players Rewards Based Donation gets you a promised product Donation Giving for nothing in return Equity Owning a part of the project Lending Money returned, with interest Kickstarter GoFundMe Wefunder LendingClub Indiegogo CrowdRise StartEngine Prosper PledgeMusic YouCaring Seedinvest Kiva RocketHub Causes Equitynet FundingCircle Barnraiser GiveForward Rockethub SoFi Crowdtilt Fundrazer Angel List SoMoLend Source: Crowdfundingpr, social media & marketing campaigns
Crowdfunding Purposes
Large and Successful Fundings
What is Crowdfunding? 3 Basic Models Reward/Donation Lending Equity
History of Global Crowdfunding
Recent History 2003: Artistshare website for artists to raise funds to make recordings Example: Maria Schnieder (Jazz) raised $130,000 Premiums: $9.95 first right to download $250 name listed on notes $10,000 listed as Executive Producer Won a grammy in 2005!
Rewards Based Sites Rewards Based Sites take Off! 2008: Indiegogo 2009: Kickstarter Rewards Based sites encompassed arts, social causes, entrepreneurs and small businesses
Kickstarter Through March 28, 2018 396,000 campaigns All or Nothing launched 141,174 successful projects (36%) $3.6 Billion from 14.4 million backers 31.8% over $10,000 3.3% over $100,000
Famous Kickstarter Campaigns https://www.kickstarter.com/projects/ryangrepper/coolestcooler-21st-century-cooler-thats-actually https://www.kickstarter.com/projects/getpebble/pebble-epaper-watch-for-iphone-and-android https://www.kickstarter.com/projects/elanlee/explodingkittens?ref=most_funded
Indiegogo Through August 20, 2017 275,000 campaigns launched $1 Billion raised from 11 million backers Lower average funding raised than others 47% of campaigns are run by women Lower success rate than Kickstarter
Indiegogo Notable Campaigns https://www.indiegogo.com/projects/flow-hive-honey-ontap-directly-from-your-beehive-environment--5#/ https://www.indiegogo.com/projects/ubuntu-edge#/ https://www.indiegogo.com/projects/super-troopers-2#/
Most Popular Reward Platforms Kickstarter Need US Bank Account Must reach your goal 5% fee 3% bank fees Must be approved to start Indiegogo Accepts Paypal Do not have to reach goal 5% fee to goal 3% bank fees 3%-5% Paypal Fee No approval process
Donation Based Crowdfunding 2010: GoFundMe platform launches Charitable giving Medical bills, Disaster Relief, Little League Teams Over $3 billion raised About 8% fee all-in https://www.gofundme.com/success Charitable fundraising often done on Kickstarter and Indiegogo, + many other sites
Peer to Peer Lending Born out of Financial Crisis of 2008 Dissatisfaction in consumer & small business lending market Global P2P market expected to be $900 Billion by 2024, up from $26 Billion in 2015. Lending Club, Prosper and Upstart are the top players. Can be expensive Kiva-0% Loans from your network & extended parties Source: Transparency Market Research
Peer to Peer Costs Lending Club Rates
Equity Crowdfunding Emerged in 2011 with Regulation D Platforms Microventures Tech companies CircleUp Branded consumer products and retail Reg D allows only accredited investors Generally, $1 million net worth other than home Or, income of $200,000 last 2 years ($300,000 if married) and expectation to continue at same level
JOBS Act of 2012 Allowed advertising for many types of crowdfunding offers Opened up market to solicit non-accredited when regulations published by the SEC in May, 2016. Intended to help small companies raise up to $1 million per year Many requirements before offering securities and ongoing reporting requirements. - Up front attorney/accountant fees to make an offering - Ongoing financial reports
Equity Crowdfunding Options
Equity Crowdfunding Sites
Crowdfunding vs. Venture Capital Potential Advantages: Easier to access Valuation may be higher Investment terms may be better Publicity Broader stakeholder base Note: VC s don t like to be side by side with unsophisticated investors some won t consider investing after a crowdfunded equity offering.
Regulation CF - 2016 Intended to help small companies raise up to $1 million per year Many requirements before offering securities and ongoing reporting requirements. - Up front attorney/accountant fees to make an offering - Ongoing financial reports
Reg CF - JOBS Act
Reg CF Deals through 2017 Source: Wefunder
Reg CF Deals to September 2017 Source: StartEngine
Top 10 CF Raises in 2017
Another Way to Use Reg CF Use Reg CF to obtain a loan Example: Red Bay Coffee (Oakland) Raised $160,000 on Wefunder Terms: Repay with 5% of net revenues until investor is returned 150% of investment (early investors received 200%). Forecast return in 3-5 years https://wefunder.com/red.bay.coffee
Strategy
Tell Your Story 1. Have a character (can be family, neighborhood, etc.) 2. Share a problem/opportunity that character encounters 3. Make your donor a guide in your story 4. Give them a plan 5. Call them to action 6. Study unsuccessful campaigns to know what not to do
Examples https://www.indiegogo.com/projects/mr-dewies-cashew-milk-ice-cream#/ https://www.kickstarter.com/projects/1648197953/sequoia-diner https://www.indiegogo.com/projects/books-on-b-new-hayward-bookstore-independentcommunity--2#/ https://www.kickstarter.com/projects/480091182/temescal-brewing-a-new-oaklandbrewery-and-beer-ga https://www.kickstarter.com/projects/1764790454/core-kitchen-the-worlds-mostnourishing-restaurant https://www.indiegogo.com/projects/the-core-wireless-speaker-system#/ https://www.indiegogo.com/projects/who-gives-a-crap-toilet-paper-that-builds-toilets#/
Steps to Launch Build Your Team Team Leader Social Media Killer Networker Extraordinaire Funder Liaison Content Developer PR Maven
Starting Your Campaign Name Your Idea Set Your Funding Goal Set Campaign Length
Create Your Media Database
Set Rewards Digital > Tangible Set reward tiers & themes $25 & $100 most popular tiers What can you give away that is meaningful? Doesn t need to be expensive
Build Your Fan Base Create Your Story Create Facebook/Twitter Accounts Create Newsletter signup What can you give away that is meaningful?
Build a Campaign Calendar
The Kickoff Personal email to friends/family Have them donate right away After 15-20% in then blast to crowd
Spread the Word Update your email signature Send out a newsletter Facebook/Twitter Tap existing networks Mainstream media
What to Share Quotes from funders Behind the scenes pics/videos Endorsements Specific perks/rewards Media coverage received
Facebook Facebook once a day Ask questions Ask for shares/likes Include photo Always include a call to action
Twitter Tweet all the time Ask for retweets (RTs) Thank RTs Use popular #hashtags Seek influencers Always include call to action
Platform Updates 1-2 times per week Be personal Include them in the story Ask for continual help
Extras Add perks half way through campaign Find more partners to cross-promote Continue reaching out to blogs/mags/newspapers Release more short videos
Homestretch Final week create a sense of urgency Campaigns that reach 50% of their goal are 95% likely to succeed On Indiegogo, over 90% of successful campaigns have repeat contributors
Lastly Collect the Money Fulfill the Rewards Don t Forget Your Funders
Key Statistics Per Indiegogo statistical study: 30-39 Day campaigns work best Keep updating the campaign page makes a difference Start strong, finish strong 42% of funds 1 st and last 3 days Add new perks after launch successful campaigns add 12 more after launch Work with a team team approach raises 3x more Include a pitch video raises 4x more https://go.indiegogo.com/blog/2015/10/crowdfunding-statistics-trends-infographic.html
Thank You! Questions?