The ‘Crowdlottery’ campaign – an update

The ‘Crowdlottery’ campaign – an update

The path to success is paved with “failure”, says author Sarah Lewis in this interview with Forbes. Lewis points out that failure is a matter of perspective, and successful people or corporations can measure themselves against unmet goals and consider themselves failures. Forbes also writes that 90% of startups fail and, as grim as that sounds, the rest of the 10% change the world, become the Apple, Facebook, Microsoft and Spotify of the future, because they had an idea, a few hard working entrepreneurs and investors who believed in them early on.

Crowdlottery, a campaign on FundedByMe that was fully crowdfunded in 2014 has just informed their shareholders that it can’t sustain it’s operations due to lack of funding and not enough growth. For us, this news is extremely sad as we have been in contact with the Crowdlottery entrepreneur and we know how hard he has been working to make his company fly.

Nobody expects every investment to become The Next Big Thing, but investing in early companies or growth companies increases the chance to be part of that or at least be part of change. We remind you that investing in start-ups and early stage businesses involves risks, including illiquidity, lack of dividends, loss of investment and dilution, and it should be done only as part of a diversified portfolio and after great consideration.

/Daniel Daboczy CEO FundedByMe

Read the words of Jasper Versteege and watch his video where he tells his story:

“Dear crowdlottery members,

Unfortunately we have to close down operations. We could not secure enough funding to continue. This means we have to fast-forward our draws in order to play out all tickets before the 27th of March (the date we would need to renew our license). After that we will cease all operations.

So from today onwards we will have a draw each 2 hours until all the remaining tickets are played out.

Good luck, and keep an eye on your inbox! 

Even though I couldn’t reach enough people to make it work, I still believe the world deserves a crowdlottery concept, a concept which is fairer and more transparent than the lottery systems governments offer, so hopefully we can make a comeback one day.

 Thank you all for participating and believing in the concept. I wish you the best of luck in all your endeavors. Power to the crowd!”

Our response to the Breakit article

Our response to the Breakit article

Vi blir alltid glada när Breakit eller andra medier skriver om crowdfunding. När vi satte igång med crowdfunding 2010 var det få som ville skriva om det eller ens försökte förstå potentialen i att kunna finansiera tillväxt genom att koppla ihop många människor med lovande entreprenörer som annars har svårt att hitta kapital. Sedan dess har vi kämpat konsekvent med att hitta det absolut bästa sättet att ta tillvara på kraften bakom de globala uppkopplade nätverken för att finansiera bolag. Vägen vi valt är att skapa en introduktion mellan dem som letar efter kapital och dem som söker bra möjligheter. Vi har blivit bättre och bättre och kan nu stolt se att vi har en stor del av den Nordiska marknaden och är mycket starka i Europa samt Asien. Den formella processen i investeringen, det vill säga att signera papper, att överföra pengar etc har vi alltid låtit andra hantera tillsammans med entreprenören. Det är ett klassiskt, vedertaget och analogt tillvägagångssätt som sker genom namnkunniga partners.

FundedByMe har utvecklat sin plattform helt enligt nuvarande aktiebolagslag och i nära dialog med ledande advokater, Finansinspektionen, politiker, investerare och kunder. Vi har vidare brottats med fördomar och förlegade uppfattningar om att det inte är fördelaktigt att ha många delägare eller att det skulle vara komplicerat att ha många delägare, men vi har gång på gång visat hur effektivt det är när många delägare motiveras att verka tillsammans för ett bolag och vilken kraft det finns i crowdfunding jämfört med traditionell finansiering som varken räcker till eller det stora flertalet entreprenörer har access till. Vi har tusentals nöjda kunder och success stories som gladeligen delar med sig av erfarenheten från crowdfunding, något som jag är mycket stolt över. 

Då enormt många entreprenörer brottas med att hitta riskkapital och de flesta dörrar är stängda för exempelvis förstagångsentreprenörer, kvinnliga entreprenörer, entreprenörer med fel bakgrund, utbildning, ålder eller bostadsort har både vi som driver FundedByMe och många svenska politiker försökt säkerställa att bra entrepenörer kan hitta bra investeringar för att kunna bygga bolag som i sin tur skapar jobb och tillväxt.  

Vi är därför mycket glada att Finansinspektionen äntligen kommit med en rapport där de går igenom de rådande frågeställningarna. Inget i den rapporten är några nyheter för oss på FundedByMe, inte minst eftersom vi har en ständig dialog med Finansinspektionen kring hur crowdfunding ska kunna utvecklas och bli det nya trygga, stabilt och effektiva finansieringsverktyg som världen behöver. Som det också tydligt står i rapportens inledande stycke så är Finansinspektionens tolkning att nuvarande reglering eventuellt behöver kompletteras om fenomenet crowdfunding växer. Det vill säga att nuvarande aktiebolagslag sannolikt behöver utvecklas och förbättras för att möta nya tider, med nya metoder, med globala nätverk och med annorlunda verktyg och processer än tidigare. Men man måste samtidigt vara mycket tydlig i sammanhanget att FundedByMe fullt ut följer nuvarande svensk aktiebolagslag och varken bryter mot några lagar eller regler. 

Och aldrig att vi kommer att vara obekymrade om att bryta mot lagen, såsom artikelrubriken säger. Tvärtom kommer FundedByMe att fortsätta leda utvecklingen av fenomenet crowdfunding i dialog med alla berörda parter och alltid inom ramarna för gällande lagar och regler. 

/ Daniel Daboczy

Read the original Breakit article here:

Guest blog by Synch – a legal perspective

Guest blog by Synch – a legal perspective

Lately, equity crowdfunding has emerged as a real and important alternative for growth companies to ensure access to the capital necessary to realize the business idea. This is of course an attractive option as the entrepreneur, in addition to funding, often gets a whole bunch of ambassadors, in the form of shareholders, who will spread the word in their networks.

It is, however, important that the entrepreneur takes a moment to evaluate how a crowdfunding can be structured to be as successful as possible to the entrepreneur, incumbent shareholders and the new investors. Such questions include:

Ownership structure: It may be tempting to keep the cap table as clean as possible by having the crowd investors exercising their ownership through shares in a SPV (Special Purpose Vehicle), e.g. a company with shares in the entrepreneur’s company as its only asset. This can facilitate the management of the company, i.a. by having a shareholders’ agreement with the SPV rather than each crowd investor. It shall thus be considered that the SPV as such must be administered and managed, and that the procedure for the investors’ to realize the proceeds from their investment is more complicated than when the shares are held directly in the entrepreneur’s company.

Influence: All shareholders have fundamental rights and influence in a Swedish limited liability company, but the entrepreneur often wants to maintain control over critical decisions for the business. A common solution is to allot series B-shares, with less voting power, to the crowd investors. The entrepreneur should also consider whether the crowd investors should be entitled to representation in the board of directors, to safeguard their interests in relation to the majority owners.

IR: Likely even more important than formal influence, is the fact that an informed shareholder can be expected to be a happy shareholder. The company should take into account that shareholder relations will take management time and ensure that it has the resources for this.

Exit strategy: A successful company will eventually be subject to some sort of exit. When structuring a crowdfunding campaign, the company should take into account the consequences in different exit scenarios.

At Synch, we assist companies in these and other legal and strategic questions in connection with a crowdfunding campaign. We would gladly meet up to tell you more. For further information, please contact Oskar Belani, oskar.belani@synchlaw.se or +46 (0)76 176 19 15.

Grant Thornton and crowdfunding platform FundedByMe enter partnership

Grant Thornton and crowdfunding platform FundedByMe enter partnership

Crowdfunding – when companies turn to a crowd of investors to fund projects or ideas – is growing rapidly. Now, auditing and consulting firm Grant Thornton in Sweden partners with the crowdfunding platform, FundedByMe, with more than 50,000 investors in over 160 countries. The success stories include – among many others – Berries by Astrid, Virtuos Vodka and Isbjörn of Sweden.

The purpose of the partnership for Grant Thornton and FundedByMe is to develop entrepreneurship and support companies in their startup phases. For Grant Thornton this primarily means offering valuation services to entrepreneurs, hence facilitating for entrepreneurs and investors to connect and close deals at the right level.

– We believe that FundedByMe’s digital service is completely in tune with the times and that crowdfunding will continue to grow fast, both in Sweden and internationally and especially among young entrepreneurs. We are happy that through this partnership, we are able to support Swedish entrepreneurs in need of funding and thereby contribute to growth, says Carl-Johan Regell, authorized accountant and partner at Grant Thornton Sweden.

We realized several years ago that we wanted to partner with big, established players in the market, in order to develop crowdfunding in the sharing economy. We feel that Grant Thornton, just like FundedByMe, operates in the spirit of companies with increasing growth, and with the right focus for the entrepreneurs and companies who turn to us. We are very happy to announce this partnership and we see Grant Thornton Sweden as a strong partner for the exciting journey that lies ahead, says Daniel Daboczy, founder and CEO of FundedByMe.

The partnership begins with advisors from Grant Thornton participating in different activities, which FundedByMe arranges for investors and entrepreneurs this fall. After that, the companies will draw advantage of their respective networks to help entrepreneurs grow.

Grant Thornton already supports well-known entrepreneurial sponsorships and networks, such as DiGasell, Founders Alliance, YEoS and SUP46.

For more information, contact:

Lisbeth Larsson, Head of Communications, Grant Thornton

T: 0708-21 71 56, 08-563 071 56

E: lisbeth.larsson@se.gt.com

Twitter: @GT:_LisLar

www.grantthornton.se/press

Twitter:@GrantThorntonSE

Lena Flykt Rosén, Head of Partnerships, FundedByMe

T: +46702-86 66 12

Email: lena@fundedbyme.com

www.fundedbyme.com

About Grant Thornton Sweden

Grant Thornton Sweden is one of the fastest growing audit and consulting firms in Sweden. With more than1100 employees and 23 offices, the company is an independently owned and managed member firm of Grant Thornton International Ltd. The member firms provide audit, tax and advisory advices.

Grant Thornton” refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton International Ltd (GTIL) and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate, one another and are not liable for one another’s acts or omissions

About FundedByMe
FundedByMe is a leading international player in crowdfunding through equity, loan or reward. The company has successfully funded hundreds of companies from 25 countries. The members represent a rapidly growing network of more than 57,000 investors from over 160 countries. FundedByMe with headquarters in Sweden has a presence in countries around Europe and in Singapore.

Should Crowdfunding be Regulated in Sweden?

Should Crowdfunding be Regulated in Sweden?

Crowdfunding seems to be on everyone’s lips. Surprised? During 2014, the global crowdfunding market impressively injected 16 billion USD into different projects – making it hard for governments to turn a blind eye on the phenomena. FundedByMe grew more than 640% in Q1 and Q2 2015 vs. Q1 and Q2 2014 and the client base has increased to more than 55,000 active members.

For 2015, the global crowdfunding market is projected to double and FundedByMe especially sees a big growth in Asia. Don’t believe the myth that there’s tons of funding out there, especially to those who would like to become business angels with small sums (although the average investment on FundedByMe is €5,800 thus not so small amounts are invested).

The Swedish market is maturing and the governmental ruled Swedish Financial Supervisory Authority has started to implement information about crowdfunding as a natural part of their reports (page 15). Also, they have now scheduled a meeting to analyse the benefits and risks of crowdfunding on the Swedish market, read about it in SvD here . The Minister of Financial Markets, Per Bolund (MP), expressed his interest and belief in the market by saying that regulations need to be implemented, helping the market to grow even further. In addition, he recognises the need and therefore the huge demand for these types of financial services, enabling funding in a way that the traditional funding market can’t today. Also, Robin Teigland, researcher in crowdfunding at Stockholm School of Economics, claims that the distrust towards the traditional bank sector is growing – acknowledging the benefits of Crowdfunding to an even larger extent.

Today, the regulations for Equity and Loan based crowdfunding are severe due to distribution regulations and the Limited Companies Act (Aktiebolagslagen) and thus Sweden is very monitored. FundedByMe has been complying to the Companies Act since it’s inception and us also already registered by Finansinspektionen for it’s crowd-lending branch. However, FundedByMe couldn’t be happier about the news, since it proves the seriosity of the market which the company has strived for since the start in 2011. Bringing the topic to a political level recognises FundedByMe and other players on the market as well as it helps people to use the service more effectively. Even though nothing is legislated yet, it’s being talked about which FundedByMe thinks is a step towards a market expansion and development!

What do you think? Should crowdfunding in Sweden be regulated and should equity crowdfunding and crowd lending, already regulated by the Companies Act (Aktiebolagslagen) be regulated?

3 key trends for Asia that will change crowdfunding in 2015

3 key trends for Asia that will change crowdfunding in 2015

Many people wonder, what will happen in the future. Well, we at FundedByMe don’t have a crystal ball, but we can forecast how they year 2015 will be for crowdfunding in Asia. So here it is.

Right now you may observe 3 main phenomenons in the APAC region that let you to estimate about the future of crowdfunding:

  •      The social / mobile / chat obsessed citizens
  •      Economics of E-commerce and E-finance
  •      Innovation in reducing the unbanked rate

Some numbers proving this you will find below. But what do they actually mean for the industry? Let’s take it step by step. More and more people who spend their lives on mobile chat applications will result in changing global pattern behaviours.  Not only will we be able to do anything using our mobile devices, but we will also expect shorter offers, long creditable relationships and faster payments that we can handle with any smartphone. And you know very well there is always supply where the demand is.

Strong growth of e-commerce is usually the first step of strong growth in P2P finance. If you want to talk about e-commerce market in Asia, the relevant word would be “explosion”. And so it is with crowdfunding you should probably use “booming” as well. In China alone we can see a market size of estimated 40 billion USD, while a couple of years ago the industry didn’t exist at all. The Asian states are being more aware of the role of the industry and start to implement regulations for it – Malaysia was the first country doing this (and btw. FundedByMe with its partner are one of the first companies receiving the license for equity based crowdfunding).

Finally, crowdfunding significantly helps to decrease the rate of people who are not banked at all or are underbanked. Why? Because it can be used by people who have no credit history! Just check what happened in Kenya thank to M-PESA, a Mobile Phone Payment System. Right now the number of M-PESA users is higher than bank account holders.

Want to learn more details? Watch the performance by Adrian Koh,in the APAC region, and check a presentation by him.

Speech

 

Mormor Magdas Ice Cream success story

Who can turn the opportunity to own shares in their own favourite Ice Cream factory. (some even bought them as gifts for their kids)

FundedByMe

 

The Swedish magazine “Entreprenör” published recently a column describing how crowdfunding looks from an entrepreneur perspective. The author – Angela Håfström – is the CEO of the company called Mormor Magdas. In March she closed successfully her crowdfunding campaign at FundedByMe, raising €180 000 for  ca. 18% of shares of the company.

Not every successful campaign needs to be closed and overfunded in first couple of days. Mormor Magdas was live at  the FundedByMe platform for 45 days. In fact what counts is how much money you raised at the end, not how fast you did it.

“It was a bit scary during the time of the campaign. Some days were good, others were terrible and we felt that the campaign could not be so successful as we expected. But the last week was like a huge wave! It turned out in the end that there were many who wanted to become investors. In the last five days we reached 101 percent of our funding goal, while the first 40 days brought us only 39 percent.”

Mormor Magdas also benefited from non-financial advantages of crowdfunding.

“You can imagine yourself the positive impact it can have for our brand. Together with our shareholders we are really stronger. For hand on heart – it is thanks to the crowd the 142 new partners that Grandma Magdas Därproducerade ice cream is available today in many more places then before. Thanks to this, we can now keep growing, continue to create jobs and revolutionise the market with real, honest, tasty ice creams. This is what is called a success story!”

Read the whole article “So I managed crowdfunding” at the “Entreprenör” website.

 

Welcome to Sweden, Kickstarter. We have a gift for you!

Welcome to Sweden, Kickstarter. We have a gift for you!

Finally! You’re here! Now we are two major forces building awareness on crowdfunding in Sweden and The Nordics; Kickstarter.com and FundedByMe.comIf you want to read the story on how Kickstarter turned our idea down and why we started FundedByMe please read what Forbes writes here: “How Kickstarter’s loss became Sweden’s gain

Ever since 2010 when Kickstarter, then still in a very infant stage, declined our submission to fund one of our ideas we’ve been hoping that they would realize the full potential of Sweden, The Nordics and Europe. We decided already back in 2010 that this market needs a crowdfunding alternative and we launched our first version of our crowd investment platform in march 2011.

Since then we’ve seen som many amazing ideas, creatives, entrepreneurs, companies, storys, investments and successes. We’ve grown to 18 employees, have offices in 8 countries and see our selves as part of the top sites on equity crowdfunding. We actually owe Kickstarter a big “thank you for turning our other idea down”, because that inspired us to build FundedByMe.

In September 2012 we finally chose our path and saw the future of crowdfunding. We do love Kickstarter and reward-based crowdfunding but true participation is: Ownership. Since September 2012 we our main focus is on funding companies rather than gadgets and we offer reward-based crowdfunding, equity crowdfunding and will soon be launching the final third leg peer-to-peer lending or social lending. (Or, actually peer-to-company lending.)

Both entrepreneurs and investors are starved of investment alternatives and thats why we are building a one-stop-shop to fund companies. Having offices in 7 european countries and one in Singapore gives us an edge since we see that more and more people invest from different corners of the world – and that shows us that Internet has truly democratized the world of financing and funding. 

So, when we are asked how we feel that Kickstarter opens in Sweden, we truly and honestly welcome them  and hope that we can find ways to collaborate on educating this market since we actually do not compete but rather complement each other.

Daniel Daboczy,
CEO and co -founder of FundedByMe

 

P.S. I almost forgot about the gift I was writing about! Here it goes: We saw that someone had snatched the domain name kickstarter.se and we grabbed it for you. If you want it – please let us know!

 

Crowd Control: How Kickstarter’s Loss Became Sweden’s Gain

Crowd Control: How Kickstarter’s Loss Became Sweden’s Gain

Read a great story on Forbes written by Alison Coleman:

Entrepreneurs are starved of investment alternatives. Investors are starved of investment alternatives.

Crowd investing offers a solution for both, but even the most successful crowd platforms have funding issues of their own, and nowhere more so than in Europe.

Sweden, like other Scandinavian countries, survived the global financial crisis and was attracting investors while the Eurozone teetered on the brink of collapse, yet the funding climate for start ups is as bracing as its winter weather.

Back in 2010 Romanian art curator Daniel Daboczy and Namibian coder Arno Smit, who had both moved to Sweden and had met up when they collaborated on a web project, had a business idea that needed funding.

….

Read the rest of the story here: http://www.forbes.com/sites/alisoncoleman/2014/03/30/crowd-control-how-kickstarters-loss-became-swedens-gain/

The art of company valuation

The art of company valuation

One of the most common question we get is “How do we valuate our idea or business” or “How can I know if this company is correctly evaluated”.

How to correctly assess the value of a company is virtually impossible. A good valuation to one person might be seen as hideous by another. FundedByMe will never judge the valuation of any of the companies seeking capital through its system, however, we can try and educate our visitors, enabling them to make smarter decisions.

Rule No 1.

The correct market price is what the market is willing to pay. This does not mean that the market is correct in its assumption regarding future returns or growth in asset values. The well-known US investor Warren Buffett put it correctly when he stated: “Price is what you pay. Value is what you get.”

So, it is hard to judge at the time of investment whether or not you will see your fortune melt away or grow at a tremendous rate.

Rule No 2.

Remember that the offerings on FundedByMe has been priced by the seller, not through a market-driven process. Even though the so-called pre-round exists for the reason to let prospective raisers of funds get feedback from potential investors, there is no guarantee that insights gained through the pre-round results in a correctly priced offering.

Rule No 3.

Always remember why you invest. At FundedByMe we like to talk about Value From Investment (VFI), which is all those things you get out of your investment. Financial returns can be one, but it might also be the joy of supporting an individual you like, a context to exist in, a good story to tell your friends, products you like, possible discounts, etc.

Rule No 4.

You are solely responsible for any investment decisions. It is risky to invest in unlisted stock. You might never see your money again and it can be hard – not to say impossible – to sell stock in such companies. But then again, some will make it big and pay back handsomely.

Rule No 5.

Be prepared to loose everything.

That being said, the question remains how to correctly assess the value the entrepreneur says his or her company has. Rest assured that the entrepreneurs are optimistic – that is why they became entrepreneurs in the first place – but sometimes their expectations seem sky-high.

Please bear in mind that many of the companies on FundedByMe seek funds in order to grow, sometimes very aggressively. High growth affects the future value of a company very positively.

Other factors, besides growth, you should look for are:

–       Cash flow

–       Margins

–       Strategic position and potential in their sector

–       The existence of patents or trademarks (can be very important)

–       The team (most early stage investors would say that this the only thing they are looking for)

–       Realistic expansion plans

–       Competition

–       Risks they are facing

–       Traction (high growth in user base, increasing sales, press reports, etc.)

Please also think over what you, as an individual, can bring to the table. After all, crowdfunding is only partly about the funds a company can raise. It is also about the networks the companies can amass and as an investor you are part of that network.

Your own individual experience from a sector or a specific type of investment might guide you well but please also be an active information seeker, for instance through the Internet, but also by asking other FundedByMe investors. Crowdfunding is, after all, all about the crowd.

If you want to drill down into specific valuation models, there is a vast territory to cover and we at FundedByMe will not recommend a specific one. Rather, read books, blogs and news reports. One good book to start with is “The Financial Times Guide to Valuation”:

http://www.amazon.co.uk/Financial-Times-Corporate-Valuation-Guides/dp/0273729101/ref=sr_1_3?s=books&ie=UTF8&qid=1367232773&sr=1-3&keywords=The+Financial+Times+Guide+to+Valuation

It has been written by David Frykman and Jakob Tolleryd, who themselves are Internet entrepreneurs and investors.

Please also note that valuations differ enormously from sector to sector and from time to time. To get a hunch of what the situation is like right now you can always try and compare key numbers with those of listed companies in the same sector.

Daniel Daboczy – FundedByMe