introduction to crowdfunding

Merolla Consulting • Luca Merolla • luca@merollaconsulting.com

Introduction to Crowdfunding

Luca Merolla

SPEAKER

Luca MerollaManagement, Business & Technology consultant

■ PG Business Certificate in International Business

■ Master in Business Administration (MBA)■ Diploma in Managerial Economics■ Diploma in Management of Technological

Innovation■ Diploma in Management of Information Systems■ B.Sc. Information Technology Engineering

linkedin.com/in/lucamerolla

@lucamerolla

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luca.merolla@gmail.comluca@merollaconsulting.com

INTRODUCTION TO CROWDFUNDING

PART I

TOPICS

Overview

PART I■ What is crowdfunding?■ How does it work?

PART II■ Who can benefit from crowdfunding?■ Advantages and disadvantages

WHAT IS CROWDFUNDING?

A possible definition of crowdfunding

"use of online communities to collect capital from groups of people with common interests in

order to fund a project or an initiative"

History and evolution○ "Self-made" (Wikipedia - crowdsourcing

and crowdfunding)○ Crowdfunding platforms (CFPs)

■ Kiva - (2005) - Micro-lending

■ Kickstarter, Indiegogo - 2008 - Reward based

■ GrowVC (2010), Symbid (2011) - Equity based

Innovations introduced compared to a "self-made" solution

○ integration with social media and social networks

○ more viable and less expensive○ simplified bureaucracy○ experience and know-how of CFPs

CF and its evolution from the web■ crowd, people get together in groups, associations,

cooperative, etc...■ proliferation of social media and social network■ knowledge sharing (ideas, projects, etc...)

■ Make usage of:○ virtual environments○ transparency○ "viral effect"

The importance of the social media

○ transparent communication○ easy to obtain information on the activity of the

company○ can reach a high number of contacts at a relatively

"lower cost"○ maximize the "viral effect"○ keep the "fans" updated

Different types of CFPs, based on:

■ Business Model

■ Nature of exchange and relations between investors and entrepreneurs

■ Localization

■ Target (Niche sectors, Generalist, etc...)

The 3 CF models

■ Donation/Reward based

■ Equity based

■ Lending based (micro lending)

Donation/Reward and Equity based are often divided into 2 sub-categories

■ All or nothing - Pledged money is collected only if the goal is met.

■ Keep it all - The funds are collected regardless if the goal is met or not.

Despite the model, CFPs are identified by the nature of the accepted projects

■ Specialized - for a specific sector (i.e. SellABand for music)

■ Activity-specific - for different sectors and industries but focalized on certain kind of projects (Kickstarter only for creative projects)

■ Generic - they have no specific restrictions (start-up, artists, no-profit, etc...)

HOW DOES IT WORK?

CFPs user roles

■ Entrepreneurs - publish the CF projects and all the relative information

■ Investors - invest/donate money to the CF projects in order to obtain a monetary or non-monetary reward

HOW DOES IT WORK?

Common characteristics of CFPs

■ online procedure (almost entirely)■ time frame limit for the CF campaign■ limits of national legislation (especially for

equity)■ rewards (monetary or non-monetary)■ commissions based business model

HOW DOES IT WORK?

Main advantages of using crowdfunding platforms

■ community■ social media integration■ typically big number of investors/donators■ reduced costs and bureaucracy■ useful for pre-sale, test marketing and

eventually pricing strategy■ feedback and interaction with potential future

customers

HOW DOES IT WORK?

The process for Publishing Projects■ chose the CFP■ define the details/aims of the projects■ set a realistic funding goal■ set the time limit of the CF campaign■ define the rewards■ keep investors/donators informed on the

activities. Provide constant updates to engage with them

■ loyalty

The investment process for an equity project

1. user sign up (also with social media profile)2. chose the project/idea where to invest3. transfer funds on an electronic wallet (not always necessary)4. if the campaign does not reach the funding goal within the time limit, funds are not transferred to the entrepreneurs.

HOW DOES IT WORK?

The investment process for an equity project

5. if the project reach 100% of the funding goal the funds are transferred to the company6. the investors obtain equity shares of the new company7. entrepreneur and investors can cooperate and communicate through the CFP

INTRODUCTION TO CROWDFUNDING

End ofPART I

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