Finance - Crowdfunding

Sebastian Früh – Project Manager Swiss Institute for Entrepreneurship (SIFE)

16th of March 2023

Module overview

Date Lecturer Topic

BLOCK A
23.02.23 (KW8) Kerstin Wagner Business Model
02.03.23 (KW9) Kerstin Wagner Business Model
BLOCK B
09.03.23 (KW10) Sebastian Früh Finance
16.03.23 (KW11) Sebastian Früh Finance
23.03.23 (KW12) Sebastian Früh Lean Start-up
30.03.23 (KW13) Sebastian Früh Lean Start-up
06.04.23 (KW14) Sebastian Früh Digital Business
13.04.23 (KW15) Sebastian Früh Digital Business
BLOCK C
20.04.23 (KW16) Michael Beier Strategy
27.04.23 (KW17) Michael Beier Strategy
04.05.23 (KW18) Michael Beier Organization
11.05.23 (KW20) Michael Beier Organization
25.05.23 (KW21) Michael Beier Marketing
01.06.23 (KW22) Michael Beier Marketing
1
Crowdsourcing vs. Crowdfunding

• Basic Idea «Crowd»:

Instead of asking individuals, the open public is asked (mostly via Internet) for a concrete support.

• Crowdsourcing:
It is openly asked for support in terms of information or services to solve a concrete challenge.
Examples:
− Programming: Open-Source Software
− User Generated Content: Social Media
− Information: Brainstorming Platforms like Atizio

• Crowdfunding:
− It is openly asked for the financial support for a concrete project/enterprise.
− In return the money givers receive certain rewards.

2
Crowdfunding

The four types of Crowdfunding (categorized on basis of the reward):

• Crowdinvesting (Equity-based Crowdfunding):
Monetary rewards (equity/shares of company, profit shares)
• Crowdlending (Lending-based Crowdfunding)
Monetary rewards (interest payments)
• Reward-based Crowdfunding:
Non-monetary rewards (symbolic rewards, products or services)
• Crowddonating
No rewards (donations)

“If you utter the word ‘crowdfunding’ in front of a dusty old-fashioned securities lawyer, make
sure you have a fully charged defibrillator on hand. (…) It won’t be pretty.” – Financial Post, July
31, 2013
3
Crowdinvesting (Equity-based Crowdfunding)

• Rewards: Equity and shares of a company or profit shares

• Primarily for (scalable) start-ups

We invest in the most promising European startups and

systematically accelerate their growth. We focus on digital,
tangible and health technologies and invest from the Seed
Stage onward…
we grant private investors access to top-tier European startups.
With investments starting at EUR/CHF 10’000, you can build
your own tailored portfolio over time and diversify across stages
and sectors.
Quelle: https://www.verve.vc/invest-startups/

IN STARTUPS INVESTIEREN
«Explore with the market leader for Crowdfunding very die
interesting Start-ups and secure with your early investment
and extraordinary profit potential!».
Quelle: https://www.seedmatch.de/ Quelle: https://www.companisto.com/de/investments

4
Crowdinvesting – What do start-ups need? (seedmatch.de)

How we define start-ups:

Generally, a start-up is a young, innovative not established company which is seeking for a sustainable and
scalable business model.

Requirements for seedmatch:

- The start-up is a GmbH or a UG
- The company is headquartered in Germany
- You need a website which shows your business model

Source: www.seedmatch.de

5
Crowdinvesting – What do start-ups need? (seedmatch.de)

The start-ups need:

1. Enthusiasm: The founders and the team need to be able to inspire the Crowd.
2. Innovation: The product or service offered is innovative and shows a clear USP.
3. Scalability: The business model is sustainable and can be adapted to different frame conditions on the
market, because it is easy and fast adjustable.
4. Founders team: The founders are willing to take the challenge and bring competencies and experience in
their field of works into the start-up.
5. Communication: As a start-up you need to communicate a lot and you are willing to go into a critic
questioning by investors.
6. Proof of concept: The idea is already working and placed in the market.

Source: www.seedmatch.de

6
Crowdinvesting – Investment process (Seedmatch.de)

1. Application 4. Crowdfunding-Campaign
− Hand in of pitch deck − Regular timeframe: 60 days
− Internal evaluation − News and updates for the crowd
− Detailed information − Benefit from feedback of the crowd
− Personal meeting − Implement first milestones and goals
2. Kick-off and Funding Preparation 5. After the funding
− Juristically agreement − Building up the company
− Inline content (video, investment story) − News and updates for the crowd
− Communication work − Use platform for further communication with the
3. Start of Funding crowd
− Preview: Publishing of the video and story
− Preview +: Publishing of business plan and dialogue
feature
− Funding start: publishing of all content and investor
relation section
Source: www.seedmatch.de

7
Crowdinvesting – Investment process (investiere.ch)

Quelle: investiere.ch

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Crowdinvesting – Investment process (investiere.ch)

Quelle: investiere.ch

9
From Investiere to Verve Ventures

Quelle: Verve Ventures

10
Crowdinvesting – Example
Happy Ocean Foods auf Seedmatch - https://www.econeers.de/investmentchancen/happyoceanfoods

11
Crowdinvesting – Example
Wearonize auf Companisto - https://www.companisto.com/de/investment/wearonize-pre-series-a-spv

12
Crowdinvesting – Example
ELLO – electrical Rollator https://www.seedmatch.de/startups/ello#project-navi

13
Crowdinvesting – Summary

Stages of use: Early Stage

Target group: Private individuals, Business Angels, companies
Funding consultation: partially
Management support: situational
Entrepreneurial independence: Medium restricted
Support relationship: commercial
Time until availability: 3 - 6 months
Finance volume (in CHF): 200’000 – 1’500’000
Financing duration: 3 – 6 years
Platform costs: Investiere: 4% of the amount raised + 3’000 CHF in shares
Seedmatch: 5-10% of the amount raised
Financing costs: 10 – 30 % (shares)

Pros: Big financial volumes are possible, uncommitted capital, build up of contact network to follow up
investors
Cons: Possible difficulties for trade sale or exit, no feedback from the market or the customers, marketing
character is moderately low 14
Crowdlending

• Reward: interest payments

• Risk assessment , almost no possibilities for “Storytelling»
• For privates and SMEs

Quellen: https://www.cashare.ch/de/loan ; https://www.cashare.ch/de/loan/auction/4256; www.lend.ch; www.lendico.ch

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Crowdlending – Mode of operation

Crowdlending is that easy

Loan

Borrower Interest payment Private investors

Under the term Crowdlending we understand the giving of loans from a crowd of
people via a platform to a borrower.

1. Fill out the loan application on our website.

2. Fill out the details for the auction and the credibility check.
3. Your credibility will be checked directly online.

Source: cashare.ch 16
Crowdlending – Examples

Quelle: cashare.ch
17
Crowdlending – Example

Quelle: lend.ch
18
Crowdlending – Summary

Stages of use: Expansion-Stage

Target group: Private individuals, companies
Funding consultancy: none
Management support: none
Entrepreneurial independence: Strongly restricted
Support relationship: commercial
Time until availability: 2 - 3 months
Finance volume (in CHF): 1’000 – 250’000
Financing duration: 1 – 60 months
Platform costs: 0.75 % of the amount raised
Minimum 300 CHF
Financing costs: Max. 15% of interest

Pros: Low effort to set up platform presence, fast availability, no shares have to be handed out to
investors
Cons: Cash is committed to an object/purpose, companies have a cash out flow (interest payments and
acquittance of loan) 19
Reward-based Crowdfunding

Definition:
• “An open call, mostly through the Internet, for the provision of financial resources either in the form of donation
or in exchange for the future product or some form of reward to support initiatives for specific purposes.”
(Belleflamme et al. 2014, p. 588)
• Main model: “all-or-nothing” (Mollick 2014)

Focus:
• Funders are less investors but more customers “buying” an innovative product or service as reward
(Beier and Wagner 2015)
• RBCF can be applied as a collaborative innovation tool (Beier et. al 2019)

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Reward-based Crowdfunding

• Rewards: symbolic rewards, products or services

• Additional benefits for companies: PR, Marketing, Pre-Sale, Open Innovation,
Community-Building
• For private individuals and companies
• “All or nothing” vs. “keep it all”

21
Source: www.wemakeit.ch
Source: www.100.days.net
Reward-based Crowdfunding – Mode of operation
Ablauf von Crowdfunding Projekten

Fainancial support

Quick Screening

Crowdfunding
Platform
(Intermediary) Publishing
Initiator Potential Supporters
(Private individual or (Crowd)
company) Set-up of
project

Gets reward if the campaign is successful

(Donation/Non-monetary reward/ product or service )
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Reward-based Crowdfunding - Example

Quelle: www.100.days.net
23
Additional benefits of Reward-based Crowdfunding for companies

Source: Beier, Früh, Wagner 2014

24
RBCF – Summary

Stages of use: Early-, Expansion- and Later-Stage

Target group: Private individuals, companies
Funding consultancy: passive
Management support: none
Entrepreneurial independence: Not to weakly restricted
Support relationship: Emotional/commercial
Time until availability: 3 - 4 months
Finance volume (in CHF): 15 – open
Financing duration: 1 – 2 years
Platform costs: 10 % of the amount raised
Financing costs: Depends on the rewards

Pros: Additional benefits for companies, money can be used very independently, no shares must be
handed out to investors
Cons: Very challenging to prepare and conduct a successful campaign
26
Reward-based Crowdfunding: A success story

Source: www.crowdify.ch / www.kickstarter.com 27

The Crowdfunding sector in Switzerland

Source: Dietrich & Amrein 2022

28
Entrys and Exits of Crowdfunding-Platforms in Switzerland

Source: Dietrich & Amrein 2022

29
Crowdfunding in Switzerland
Overall

Source: Dietrich & Amrein 2022

30
Crowdfunding in Switzerland
RBCF and Crowddonating

Source: Dietrich & Amrein 2022

31
Crowdfunding in Switzerland
Crowdinvesting

Source: Dietrich & Amrein 2022

32
Crowdfunding in Switzerland
Crowdlending

Source: Dietrich & Amrein 2022

33
Why VC is still needed for certain business models

34
Fachhochschule Graubünden
Pulvermühlestrasse 57
7000 Chur
T +41 81 286 24 24
info@fhgr.ch

Thank you for your attention!

Sebastian Früh
Project manager – Swiss Institute for Entrepreneurship (SIFE)

E-Mail: sebastian.frueh@fhgr.ch
Tel.: +41 (0)81 286 37 47
LinkedIn: www.linkedin.com/in/sebastianfrueh

Fachhochschule Graubünden
Scola auta spezialisada dal Grischun
Scuola universitaria professionale dei Grigioni
University of Applied Sciences of the Grisons