Crowdfunding in Sweden Claire Ingram, Stockholm School of Economics Robin Teigland, Stockholm School of Economics
Dec 02, 2014
Crowdfunding in Sweden
Claire Ingram, Stockholm School of Economics
Robin Teigland, Stockholm School of Economics
Stockholm success story: Flippin’ Burgers
Money raised: SEK 36,502 / €4,000
Number of investors: 186
Date funded: September 2011
Sector: Food
Enabling local solutions
Top 5 Best American Restaurants in Europe
http://travel.cnn.com/best-americana-restaurants-europe-023346
What is crowdfunding?Accumulation of small investments in individual projects by large number of individuals (the “crowd”) via or with
help of the Internet and social networks (De Buysere et al., 2012)
Picture: FundedByMe
Form of Funding Benefits for Funders
Donation Donation Intangible benefits.
Reward Donation or pre-purchase
Rewards in addition to intangible benefits.
Equity Investment Return on investment if company does well.
Rewards sometimes also offered and intangible
benefits may motivate too.
Debt Loan Repayment of loan with interest. Alternatively
intangible benefits if loan given interest-free.
Royalty Royalty Royalties on creation. Also potentially intangible
benefits.
Investment Role and Type Investment Value, 2012
Angel Investors
Invest large amounts, make few investments and take
equity share.
3.3-3.9 billion SEK p.a. (approximation, based on
2008 data)
Soft LoansState loans at high interest
rates, but which can be written off on enterprise dissolution.
2.4 billion SEK p.a. (ALMI alone)
Venture Capitalists
Invest large amounts, make few investments and take
equity share.
1.8 billion SEK p.a. (2010 data)
Crowdfunding
Either donation, pre-purchase/reward-based or equity, depending on platform
and entrepreneur’s preferences.
Estimated 37 million SEK p.a. (end of 2013)
Ingram & Teigland, 2013
Who are the funders?
Educated experts? 85 % of respondents have university degree (vs16% of
women and 22% of men in general population, 2013) 42% had knowledge in same field as project they funded 49 % reported to have been better at judging project
qualitydue to previous experience
The “in-crowd” 47% of “the crowd” classified themselves as entrepreneurs
– compared to only 7 % of Swedish population (2012)
77 % never bought shares in unlisted company before 41 % risk lovers
Skoglund & Stiernblad 2013
Skoglund & Stiernblad 2013
Democratising?
• Women make up less than 30 percent of business owners in the United States, and fewer than 20 percent of businesses that have any employees other than the business owner herself (U.S. Census Bureau 2010).
• Women make up less than 15 percent of angel investors and less than 10 percent of venture capitalists (Coleman and Robb 2012).
• On Kickstarter, women made up about 35% of the project leaders and 44% of the investors on the platform.
• About 23% of projects that men invested in had female project leads.
• More than 40% of projects that women invested in had female project leads.
Marom, Robb and Sade 2014
What are the limits?
EU/EEA No country can require a prospectus to be
prepared for rounds of less than 100 000 EURFor rounds of 5 million EUR or more, an EU
prospectus is always required
In Sweden The limit is 2.5 million EUR without a prospectusLess than 150 ‘non-qualified’ investors without a
prospectusALSO shares in non-publicly traded companies
cannot be advertised in Sweden
Chris Devers on Flickr.com, available here: https://flic.kr/p/9NEwpU
A true storyThat made 2 million GBP for cancer research at Uppsala University
Why crowdfund?
Test the market or establish a user baseMarket your product or serviceObtain funding Screening device for investorsReach investors further afield or people without the
right “connections”Because you can’t find other funding (be careful)Because you think it’s easy (it’s not!)Source skills and connections?BUT in Equity crowdfunding: Lots of small investors –
a problem?
Ingram & Teigland, 2013
Requirements to succeed?
What kind of project is it?Choose the right platform – and crowdfunding
type – for your project (keep in mind platform fees)
Make the concept easily understoodMake it personal?Ensure that you have initial critical mass (social
media, newspapers) – NB in donation- and reward-based
“Feed the crowd”Keep followers up to date
Some ”big” questions
Skills: How to ensure knowledge/awareness and necessary skills for crowdfunding?
Lack of support and strategic advice for funders/investors, entrepreneurs, public sector?
How to deal with many small investors in equity crowdfunding?
Regulation: How to protect investors without stifling innovation?
Cross border investments? Secondary markets for crowd equity shares? Taxation issues for investors and entrepreneurs?
Local market: How to protect/ensure local markets against foreign competition?
Local platforms vs global platforms? Significant/sufficient level of funding from local market? How to better leverage “crowd” for resources?
What’s Next?
Claire IngramStockholm School of Economics
[email protected]@Claire_EBI