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CROWDFUNDING TRAINING

TOOLBOX FOR SMALL AND MEDIUM

SIZED ENTERPRISES

Author: ikosom UG

Partner from Interreg Central Europe Crowd-Fund-

Port CE575

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Content

Crowdfunding Basics 3

The Definition of Crowdfunding 3

Crowdfunding and Alternative Financing 4

History of Crowdfunding 4

Crowdfunding and Crowdsourcing 6

The different types of Crowdfunding 7

The Crowdfunding phases 8

The main parties in Crowdfunding 9

The elements of a Crowdfunding Campaign 10

The Added-Values 10

Pre-Campaigning 11

Campaigning 12

Post-Campaigning 13

Crowdfunding tools 14

Crowdfunding Best Practices from Europe 15

Crowdfunding in Croatia 15

Crowdfunding in Slovakia 15

Crowdfunding in Hungary 15

Crowdfunding in Poland 15

Crowdfunding in Slovenia 16

Crowdfunding in Germany 16

Crowdfunding in Austria 16

Crowdfunding in Italy 16

Crowdfunding in Czech Republik 16

Crowdfunding exercises 17

What happens after your Crowdfunding campaign? 18

Key challenges you have to face after the campaign 18

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THE CROWDFUNDING TRAINING

TOOLBOX The content below is part of a training material created for small and medium sized

enterprises within the Crowd-Fund-Port-project, aiming to improve their access to capital

through online platforms. The purpose is to explain “Crowdfunding” and “Crowdfunding

campaigns”. You can access the full version of the training material in English here:

https://www.crowdfundport.eu/training-material/

Crowdfunding Basics

The Definition of Crowdfunding

The most common definition used by the scientific community is the following:

“Crowdfunding is an open call, essentially through the Internet, for the provision of

financial resources either in form of donation or in exchange for some form of reward

and/or voting rights in order to support initiatives for specific purposes.” (Lambert,

Thomas, and Armin Schwienbacher. 2010. “An Empirical Analysis of Crowdfunding.”

Available here: https://wenku.baidu.com/view/2de46229b4daa58da0114ac8.html)

Image 1: Crowdfunding Definition by Karsten Wenzlaff, Wolfgang Gumpelmaier-Mach, Crowd-Fund-Port.eu is licenced under a Creative Commons Attribution-NonComercial-ShareAlike 4.0 International License.

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Crowdfunding and Alternative Financing

Crowdfunding is part of the so called “Alternative Financing Tools”, meaning finance

which is not intermediated by a bank.

Image 2: Crowdfunding-Alternative-Finance by Karsten Wenzlaff, Wolfgang Gumpelmaier-Mach, Crowd-Fund-Port.eu is licenced under a Creative Commons Attribution-NonComercial-ShareAlike 4.0 International License.

History of Crowdfunding Through the Internet this alternative form of finance became an open and transparent

financing tool.

Artistshare is known as the first Crowdfunding platform, starting in 2003 as a “fan-

funding” website for musicians and artists in the USA.

In 2006, Sellaband launched a similar platform in Europe, helping bands to communicate

with their fans and getting financial support from them for recording new albums. Also in

2006, Wired-author Jeff Howe coined the word “Crowdsourcing”. In 2008 Indiegogo

launched as an international platform for financing social and creative projects. Soon after

that Kickstarter started its service.

In many European countries, platforms opened which imitiated the user experience on

Kickstarter and Indiegogo. In Germany, Startnext started with a similar concept in 2010, in

Austria Respekt.net opened its platform for social projects from NGOs following a

donation-based approach.

In 2011 the first studies on Crowdfunding were published in Central Europe, e.g. by the

Fraunhofer Institute as well as one about Crowdfunding in Germany by ikosom. A year

later the first international “Crowdfunding Industry Report” was published by US-company

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Massolution. The report analysed a few hundred platforms worldwide and gave a first

picture of the industry. Also the differentiation between different types of Crowdfunding

was published in this report. Since then, Crowdfunding exploded in Europe but also

worldwide. To date there are more than 1,400 platforms online.

Crowd-Fund-Port is an Interreg project aiming to improve skills and competences of all

relevant stakeholder groups to prepare them for taking advantage of the Crowdfunding

phenomena in CEE countries. www.crowdfundport.eu

Image 3: Crowdfunding-Timeline by Karsten Wenzlaff, Wolfgang Gumpelmaier-Mach, Crowd-Fund-Port.eu is licenced under a Creative Commons Attribution-NonComercial-ShareAlike 4.0 International License.

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Crowdfunding and Crowdsourcing

Crowdfunding is used as a subset of the term “crowdsourcing”, originally coined by Jeff

Howe, author of Wired magazine, in 2006. He described the concept of Crowdsourcing as

follows:

“Simply defined, crowdsourcing represents the act of a company or institution taking a

function once performed by employees and outsourcing it to an undefined (and generally

large) network of people in the form of an open call. This can take the form of peer-

production (when the job is performed collaboratively), but is also often undertaken by

sole individuals. The crucial prerequisite is the use of the open call format and the large

network of potential laborers.” Jeff Howe: The Rise of Crowdsourcing, 2006 in Wired –

https://www.wired.com/2006/06/crowds

Image 4: Crowdfunding-Crowdsourcing by Karsten Wenzlaff, Wolfgang Gumpelmaier-Mach, Crowd-Fund-Port.eu is licenced under a Creative Commons Attribution-NonComercial-ShareAlike 4.0 International License.

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The different types of Crowdfunding

In 2012, an US-agency called Massolution conducted the first global Crowdfunding Industry

Report. In the report they defined that there are at least 4 different types of

Crowdfunding. These types are now widely used in research and descriptions.

The different types of Crowdfunding are:

Donation-based Crowdfunding: mostly used for charitable projects

Reward-based Crowdfunding: mostly used for pre-selling

Equity-based Crowdfunding: mostly used for high-risk investments, returns are based

on profit- or exit-revenue-sharing calculations

Lending-based Crowdfunding: mostly used for low-risk investments, returns are based

on interest-based calculations.

Image 5: Crowdfunding-Types by Karsten Wenzlaff, Wolfgang Gumpelmaier-Mach, Crowd-Fund-Port.eu is licenced under a Creative Commons Attribution-NonComercial-ShareAlike 4.0 International License.

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The Crowdfunding phases

There are three phases: the pre-campaign phase, the campaign-phase itself and a post-

campaigning-phase.

Image 6: Crowdfunding-Phases by Karsten Wenzlaff, Wolfgang Gumpelmaier-Mach, Crowd-Fund-Port.eu is licenced under a Creative Commons Attribution-NonComercial-ShareAlike 4.0 International License.

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The main parties in Crowdfunding

Most Crowdfunding Campaigns take place on platforms – the whole Crowdfunding process

becomes a triangle of three parties: Platform, Project and Supporter.Each party has

different responsibilities:

The Project Owner is in charge of preparing and executing the campaign. The project

delivers texts, images, pitch videos and other communication material to the platform.

Often the project owner is also responsible for editing the campaign site.

The platform acts as an intermediary between Project and Supporters. It facilitates

the payments between Supporter and Project owner. The platform is also in charge in

discovering payment fraud and disabling campaigns that commit fraud. To that end,

the funds from the supporters are often kept in a special escrow account until the

campaign has ended.

The supporter enters an agreement with the project that it will transfer a certain

amount of money via the platform to the project owner at the end of the campaign,

given certain conditions (for instance in All-or-Nothing-Campaigns the reaching of the

funding volume.

Image 7: Crowdfunding-Triangle by Karsten Wenzlaff, Wolfgang Gumpelmaier-Mach, Crowd-Fund-Port.eu is licenced under a Creative Commons Attribution-NonComercial-ShareAlike 4.0 International License.

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The elements of a Crowdfunding Campaign

The campaign combines all elements to reach the Crowdfunding Goal.

Image 8: Crowdfunding-Campaigning by Karsten Wenzlaff, Wolfgang Gumpelmaier-Mach, Crowd-Fund-Port.eu is licenced under a Creative Commons Attribution-NonComercial-ShareAlike 4.0 International License.

The Added-Values

Crowdfunding is not only a financing tool, but also helps SMEs in many other ways.

Image 9: Crowdfunding-Added Values by Karsten Wenzlaff, Wolfgang Gumpelmaier-Mach, Crowd-Fund-Port.eu is licenced under a Creative Commons Attribution-NonComercial-ShareAlike 4.0 International License.

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Pre-Campaigning

The Crowdfunding process consists of three phases: the pre-campaigning phase, the

campaigning-phase itself and the post-campaigning-phase. But what exactly is meant when

talking about pre-campaigning? Simply said: everything that can be done in advance

BEFORE launching a Crowdfunding-project on a platform is part of the pre-campaigning

phase.

This includes conceptual and organisational tasks, like defining your goal, your budget and

team, but also explore Crowdfunding in general and learn about how the tools and the

platforms work and finally choose one platform that fits your purpose.

The pre-campaign phase also includes preparing a communication plan and start building a

crowd.

Last but not least, it is about building your project page on the chosen platform, add a

video, text and - if reward based - your rewards or - if equity based - your business plan.

Our experience is that a successful Crowdfunding campaign needs more than just

publishing your project on a Crowdfunding platform. A detailled preparation and your total

commitment is crucial for running a successful campaign.

Image 10: own Source

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Campaigning

After publishing your campaign there is a lot of work to do.

In the first few hours and days, you need to generate some buzz by telling as many people

as possible about your project. Send out emails, publish your prepared press release,

inform friends through direct messages and update your community in any given way.

After that, it is all about engaging with the Crowd. Try to answer their questions via

email, but also in the FAQ-section on your project-page. Also ask for feedback and involve

the Crowd and last but not least, communicate with your followers on your established

channels.

During the campaign it is crucial to also keep your community in the loop, not only

supporters, but also influencers and of course your family & friends. Update your project-

page, post published interviews, send a follow-up newsletter and remind people of your

campaign.

Image 11: Own Source

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Post-Campaigning

After a successfully finished Crowdfunding campaign, project owners often focus on their

businesses.

But do not forget your Crowd, as your supporters often are also your first customers and

influencers, who recommend your product or your brand. So thank everyone for joining

the campaign, fulfill your promises like rewards and last but not least, involve your

supporters to further grow your business by sharing insights and regularly communicate

with them.

Image 12: Own Source

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Crowdfunding tools

There are many helpful resources and tools out there, which you can use to improve your

campaign.

You can use external tools at every step of your campaign and there are a lot of online

resources that provide you with first informations about Crowdfunding.

But also you will find further insights and tips online, as well as tools and software for

supporting you in planning, communicating and also fulfilling your campaign.

Image 13: Own Source

Online Resources:

Crowd-Fund-Port: www.crowd-fund-port.eu

Crowdfunding Guidebook: https://www.crowdcreator.eu/crowdfunding-guide-book/

European Union Crowdfunding Guide: https://ec.europa.eu/growth/tools-databases/crowdfunding-guide_en

Eurocrowd: https://eurocrowd.org/

Kickstarter Handbook: https://www.kickstarter.com/help/handbook

Indiegogo support: https://support.indiegogo.com/hc/en-us

Backerkit Crowdfunding Guides: https://www.backerkit.com/blog/guides/

Crowdfunding Playbook: https://www.crowdfundingplaybook.com/

Communication tools:

eMail-Newsletter: https://mailchimp.com/

Facebook-Messenger-Newsletter: https://www.sendmate.io/

Collaboration/Chat: https://slack.com/

Collaboration/Project-Management: https://trello.com/tour

Multimessenger: https://meetfranz.com/

Pre-Launch-tools:

Pre-launch-pages: http://launchrock.com/

Pre-launch-pages: https://www.krowdster.co

Pre-launch-contests: https://upviral.com/

Pre-launch-analysis: https://predictify.co/#!/

Pre-launch-marketing: https://www.biggercake.com/

Pre-launch-marketing: http://tross.co/

Press & Promotion-tools:

US Crowdfunding press releases: https://app.krowdster.co/

Campaign boosting: http://www.jellopcrowdfunding.com/

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Campaign boosting: http://www.greeninbox.com

Affiliate program: https://kickbooster.me/

Cross promotion: https://www.biggercake.com/

Fullfilment tools and investor relations:

Fulfilment: http://crowdox.com

Fulfilment: https://www.backerkit.com/

Fulfilment: Crowdpilot.com

Shipping services: https://www.producthunt.com/ship

Investor relations: https://angelspan.com/

Investor relations: https://www.koreconx.com/

Investor relations: https://www.assetmatch.com/

Crowdfunding Best Practices from Europe

Crowdfunding in Croatia

Brlog - a cooperative brewery from the Croatian coast - used Crowdfunding to finance

brewery equipment. Brlog is run by women in a traditionally male profession and in the

region where making beer is not very common. Since it is the first women-run cooperative

craft brewery in Croatia, it gained significant media coverage on the local and national

level. As a result, the campaign surpassed its target of 8.000 USD by almost 50% to reach

11.856 USD. It is also one of very few cases where the campaign was entirely run by

women. Read more here: https://www.crowdfundport.eu/croatia-brlog-brewery/

Crowdfunding in Slovakia

The film, The Moon Inside You, explores a taboo subject of menstruation with humor and

sensitivity. The campaign was successful in that the film is now used as an educational

tool in schools not only in Slovakia, but also in English and Spanish speaking countries. This

campaign also pointed to the society's interest in this topic and addresses the stigmas

attached to it. Read more here: https://www.indiegogo.com/projects/monthlies#/

Crowdfunding in Hungary

Mark Bollobas is a Hungarian Game Developer and Designer. He started SBrick Smart and

SBrick Plus to create interactive lego-tools. Kickstarter was used twice to generate

international media awareness and a network of international distributors. Read more

here: https://www.kickstarter.com/projects/sbrick/sbrick-smart-way-to-control-all-your-

lego-creation?lang=de

Crowdfunding in Poland

Swimmo is a smart watch for swimmers created by four designers and engineers from

Poland, who are also passionate swimmers. The campaign is a good example of how to use

infographics for explaining the benefits of the product. Read more here:

https://www.kickstarter.com/projects/swimmo/swimmo-the-ultimate-swimmers-

smartwatch-improving?ref=nav_search&result=project&term=swimmo%20smart

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Crowdfunding in Slovenia

The Red Pitaya is an open source measurement and control tool that is plugged into the

smart phone/computer and eliminates many expensive measuring instruments by Rok

Uršič, director and founder of Instrumentation Technologies (invented Libera – electron

beam positioning). One reason why the turned to Crowdfunding was the money to start the

production and on the other hand, they wanted to test the market. Today the company is

a spin off from Instrumentation Technologies. Read more here:

https://www.kickstarter.com/projects/652945597/red-pitaya-open-instruments-for-

everyone?ref=nav_search&result=project&term=red%20pitaya

Crowdfunding in Germany

The project expanded the portfolio of an existing online only radio station, and add a

morning news section. The company behind detektor.fm had already run a crowdfunding

campaign on the same platform and built on the previous community. But more

importantly, it has used co-partnerships with Coffee Circle - a sustainable coffee maker -

and Tesla Motors, to offer funders additional perks. It shows how SMEs can use

partnerships to boost their campaign. Read more here:

http://www.visionbakery.com/detektorfm2

Crowdfunding in Austria

Neovoltaic is innovative energy supplier in the future market of Green Energy proved that

profitability and sustainability are not a contradiction: media awareness not only for

crowdfunding but in the same time for challenges of energy market. The single investment

of 50.000,- Euro confirms that the Neovoltaic project is a wonderful example of the fact

that Crowdinvesting is becoming a genuine alternative investment form. Read more here:

https://www.conda.eu/startup/neovoltaic/

Crowdfunding in Italy

La Synbiotec S.r.l. is a spin-off of Camerino's University, born in 2004. It deals with

probiotics, dedicating its research, development and production. Symbiotec is a best

practice, in the frame of SME Crowdfunding, because it demonstrates to have and to be

capable to use its strategic capacity. Read more here:

https://www.nextequity.it/progetti/synbiotec.html?

Crowdfunding in Czech Republik

Czech’ project Skinners is a pocket footwear designed for all your adventures, travels and

sports. The successful campaign on HitHit was innovative and reached 602% of the initial

goal. A second campaigned on Kickstarter was also successfull, showing that reward-based

Crowdfunding on a local platform can also help build the community for a larger

international campaign. Read more here:

https://www.hithit.com/en/project/1589/skinners-the-pocket-shoes

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Crowdfunding exercises

The most relevant questions you should ask the project-owner(s) before starting to work

on a campaign:

Does Crowdfunding make sense for this project?

Is it possible to summarize the project in three sentences?

Which intention is achieved beyond the funding (marketing, market research, public

relations)?

Is the time frame and the funding goal already determined?

In which stage is the project (Ideation Phase, Prototyping, Production)?

Team Who are the team members and which roles do they have?

Who is the person in charge of the Crowdfunding campaign?

Product

With the financing, how long will the development of the product take?

Is it possible to make different packages of the product, for instance as special edition

or luxury version?

Target Group

What do you know about the audience and potential customers?

Were there already contacts to the target group, for instance through earlier sales?

Can we use the feedback from earlier sales for the Crowdfunding campaign, for

instance through testimonials?

Marketing

Is there a website with a landing page? Who is responsible for the website?

Is there marketing material which already exists?

Which texts are already ready for the project?

Which fotos exist for the projects?

Press/Media

Have there been previous contacts to media?

Which media are being used by the target group?

Rewards in Reward-Based Crowdfunding:

How high are production and shipping costs?

Can some rewards be personalized?

Business Details (Equity-based Crowdfunding)

Is there a business plan and a financial plan?

Has the business model been evaluated externally?

Is there a pitch deck?

Social Media

Which Social Media Channels are being used right now, which need to be established?

Which Social Media Channels are used by the target group?

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Video

What kind of story does the video tell?

Campaign

Which funding threshold and which funding goal will be set?

Are there ways you can involve the Crowd in your campaign?

What happens after your Crowdfunding campaign?

Key challenges you have to face after the campaign

At the very beginning you need to diagnose the most important challenges you face. As

part of analysis „Analysis of survivability of CF ideas and SMEs needs after CF campaigns”

carried out in August/September 2018, 7 most important areas have been identified:

Project financing:

Badly adopted budget assumptions - underestimation of costs of both

the campaign itself and project implementation

Absence of a financial reserve for the financing of unforeseen

expenditure

Lack of other sources of financing / failure to secure such sources at

an early stage of the project

Need to amend the financial plan

Problems with preserving financial stability

Strategy and planning:

No strategy / vision of the project (where the crowdfunding campaign

is only one of the stages)

No long-term plans, focus on short-term plans

General problems with planning project activities

Lack of alternative plans that can be used depending on the

development of the project

Lack of evaluation activities after the completion of each stage of the

project (whether we achieved the objectives, what effect we

achieved, what we learned, what should be changed) and possible

modification of the business plan / redefinition of objectives.

Project management:

Lack of a person acting as a project manager (aware of the project

strategy, dealing with the control of individual stages of the project,

delegating tasks).

The team:

Problems with the creation or expansion of a project team (presence

of people with different competences, required experience,

responsible for different areas of the project).

Recruitment of specialists to the team

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Problems with motivating and building commitment of the team

throughout the project implementation period.

Too small team that is not able to cope with the challenges of the

project (too many responsibilities, lack of appropriate competences).

Transfer of know-how about the project (especially if there are

personnel changes in the team)

Distribution:

Problems with reaching / acquiring appropriate distribution channels

Problems with the expansion of the distribution network

Production:

Lack of appropriate contacts with subcontractors

Finding subcontractors too late

Costs higher than budgeted (contractors, materials)

Failure to adapt the schedule to realistic production deadlines

Communication and promotion:

Lack or limited promotional activities and activities building the image

of the project / brand / company / organization

Lack / limited communication with the community built around the

project during the campaign.

Lack of activities related to further expansion of the potential

customer base