Crowdfunding – is it worth it?
The world’s largest crowdfunding platform can be found in the UK, but more and more projects of this type are appearing on the Polish market. Can they be an attractive source for obtaining investments for further business development to a technological startup, and if so, why? — we are attempting to answer these questions in an interview with Maciej Gajewski, CEO of Fundedbyme Poland — the Polish branch of the international equity-crowdfunding platform Fundedbyme from Sweden, which brings together over 100 000 investors. Crowdfunding is becoming more and more popular among people starting businesses. What is this solution about, what is its potential and what is behind its popularity?
Crowdfunding is financing a project by a dispersed community, usually by individuals from all over the world. We can distinguish three types of crowdfunding. The first one is Reward-based crowdfunding (Kickstarter type), i.e. a type of crowdfunding where the purchase of existing or pre-sold products takes place. This allows companies to determine the demand for their product and obtain money from future customers. The second type is Loan-based crowdfunding. It consists in connecting two groups of people on the Internet — those who need a loan and those who have money and can grant it. Finally, we have Equity Crowdfunding. It consists in connecting startups that look for financing with investors who receive shares in a given company in return for an investment. At FundedByMe, we deal only with the third type — equity crowdfunding, so we connect Polish companies looking for financing with a dispersed group of individual investors from Sweden and from around the world. As far as the potential of equity crowdfunding is concerned, it mainly stems from the combination of three areas: attracting investors who are, at the same time, brand ambassadors; attracting prospective customers; as well as marketing benefits. For this reason, crowdfunding is more and more often chosen by Venture Capital funds in the UK as a co-investment increasing the marketing reach of the company. An example could be Revolut on the Seedrs platform in the UK (https://www.seedrs.com/revolut), which already had USD 66 million in investment from Index Ventures, one of the best VC funds in the world, but — despite this — raised an additional USD 5 million on the crowdfunding platform in order to gain reach and publicity, which is important in the B2C market. I predict that similar transactions will soon also be concluded on the European market, including Poland.
Who is crowdfunding aimed at and what are its main advantages?
Usually, it is best to be propagated on the platform for B2C companies, since they have their own databases of users, followers, customers, which they can reach in connection with their campaigns. This helps in building outreach among people who know the service. B2C solutions are also easier to explain to a wide group in a 2-3-minute video than, for example, through back-office activities in the B2B sector. As I mentioned earlier, for many companies it is an excellent tool for attracting investors, prospective customers and increasing recognition.
Crowdfunding gained its greatest popularity abroad. What does this system look like on the Polish market? What platforms may be used by startups deciding on this form of raising funds for development?
In the world, the largest crowdfunding platforms can be found in the UK — those are Seedrs and Crowdcube. Interestingly, in the U.S. such solutions practically do not exist due to local regulations, so reward-based platforms, such as: Kickstarter and Indiegogo are much more popular, although Indiegogo is launching its equity crowdfunding with Microventures. In Europe, after the UK, the largest is Fundedbyme from Sweden, which I am currently launching in Poland and which has more than 115 000 registered investors. Apart from the EU, Israel is also a large market. OurCrowd is a marriage of equity-crowdfunding and VC investments. The market in Asia is also growing dynamically. In Poland we have such platforms as: Wspieram.to, PolakPotrafi and many others, as well as several equity crowdfunding platforms, such as Beesfund, Crowdway and a few others. This year we have also launched FundedByMe.
What requirements must be met in order to benefit from crowdfunding? Is it a good form of support for young business?
I know that other platforms in Poland also support young startups, which are only just verifying their business models. At Fundedbyme we focus primarily on start-ups in the growth phase, which have revenues of over PLN 30 000 per month, a large user base — at least 10 000 customers, users or followers, are present or want to be present in foreign markets. These are primarily companies operating in the B2C area, but we do not close ourselves to B2B projects if they have a sufficiently large community. It would be good for the company to be in the process of obtaining financing from a VC fund or Business Angels, we are also open to co-investments on the platform. Of course, not all the points have to be met — four are already a good result.
Who can become an investor? Can crowdfunding provide technological start-ups with a partner for business development?
Practically everyone can become an investor, minimum investments in Poland start from PLN 50. At Fundedbyme we will start from about PLN 500 for a minimum investment. We want investors to get involved and help startups in their development goals. We strive to make crowdfunding a window to the world and to ensure that investors who invest in a company from Poland also help it to develop on their local markets. To a large extent, however, it depends on the startup activity in communication with its investors. We advise our investors via monthly e-mails — it helps us build cooperation.
In order to register with us on the platform, feel free to visit www.fundedbyme.com