A Crowdfunding Snapshot Dr Richard Swart UC Berkeley, CCA Group

@richardswart

Alternative Finance represents:

A growing and viable international market for

institutional investments, allocation of capital in debt instruments, and relatively low risk equity transactions into microenterprises A proven means of accelerating capital infusion into microenterprises resulting in job creation, increased revenues, and follow-on investment activity/loans

 A new channel for product validation, market

testing, and customer engagement for brands A possible disintermediation of charitable giving A mechanism to activate communities of interest and increase long-term brand/cause engagement Deal sourcing for Angel and VCs rise of hybrid models An organizing tool for Diaspora / Foreign Direct Investment into developing economies

Econometric Modeling of Crowdfunding Market Size and Growth Sectors Review of Existing Literature/Report In-depth analysis of UK market CCA report on Outcomes of Crowdfunding Recent similar work by Prof. Mollick Discussions with Regulatory Bodies

Consumer Crowdfund Investing Globally by 2025 93B If you account for institutional infusions of capital, approximately 300B by 2025 China has outsized market potential and is accelerating P2P and P2B while crushing equity UK, Israel, Western Europe, US, Canada will rapidly grow Next wave will be South America, MENA region Asia is sleeping tiger 100M in equity CF in Korea last year

CCA group study focused on all forms of CF activity with inclusion of Europe, UK, US and a couple from Africa Mollicks recent study analyzed Kickstarter data only so does not reflect CF equity and debt Universal constants of CF: 2.2 and 39%

95% had some college education 84% male Nearly 50/50 self-employed and working 35 years old Average firm size is 2 employees Largest reported firm size was 20 Women set lower goals, but are more successful than men at reaching those goals

Average Kickstarter campaign had 440 backers Average equity (UK, EU) campaign had 96 backers Average raised across all methods was $107,810 mean of $40,300 Average equity raise - $178,790 Firms sold between 5% and 50% of their companies, with an average of 15%.

CCA Report:
Average quarterly growth in revenues 24% Average growth in revenue for companies raising

equity? 351%

Revenue Bands Not launched 0-25,000 25,0000 to 100,000 100,000+

Pre-Campaign 44% 31% 13% 11%

Post-Campaign 38.5% 24.5% 32%

Over 90% of groups raising more than $5,000 in successful CF projects turned into viable ongoing ventures Greater than 70% of ASSOB backed firms still in business after 5 years Evidence suggests CF associated with selection of more viable firms challenges 70% failure rate

CCA data (mostly non-US)

28% of firms had closed funding round (Angel, VC) 43% in talks with investors, funders

More than 10% received bank loans

Mollick
8% another crowdfunding campaign 3% VC

15% Angels
5% Bank Loans 18% Friends and Family 21% Self

Average Equity US equivalent $1,050 Average Non-equity US - $3,790 Average Non-Equity Europe - $490 Average hours per successful project = 136 hours post launch (no data on preparation) Top reasons for failure: Contrary to beliefs, for successful raises, 70% of founders say friends and family contribute little to success of project
Marketing not well designed Target audience not well identified

Better understand customers Connect to customers Connect to community Increased self-confidence of founders/team 60% of failed campaigns continue with product development Find/Hire employees Generate Publicity

39% of firms quickly hire 2.2 employees However, about 6% hired 10 new employees Without more evidence, we suspect:
Campaigns were run by larger firms, or as market

experiments monetary goals were secondary to market intelligence Interns may post projects rather than using corporate brand Product validation hire a team to launch

Lack of integration of media, marketing and campaign promotion Need syndication across regions/cities Many issuers/campaigners need support for projects Create network effects leveraging media Best in class example is bit.ly/BNNFunding

Peer-to-Peer and Peer-to-Business Platforms will grow 10X over equity platforms with 100-200% ACGR for next 2-3 years Title II Crowdfunding will grow tied to vertical industries or affiliations (OurCrowd, HealthIOS Exchange) Real Estate Crowdfunding will gain significant traction Significant experimentation continues in technology commercialization

Government and Economic Development authorities will syndicate Title III will start slowly and many platforms are undercapitalized and will fail We know major brands are using CF mechanisms 2014 is the year Madison Avenue and Wall Street engage crowdfunding First round of acquisitions and mergers

rswart@berkeley.edu
richard@theccagroup.com @richardswart