FundedByMe Class at IE Business School's Global MBA

The Fastest Growing Crowdfunding Platform Connecting
Investors and Entrepreneurs.
September 2014
www.fundedbyme.com
@fundedbyme
www.facebook.com/fundedbyme
© 2014 FundedByMe España
Miguel Ángel L. Trujillo. Director General España
miguel@fundedbyme.com -  (+34) 626 007 140
+6M€ invested in 43 projects since November 2012

WHO’S MIGUEL?
• International Advisor in Finance, Crowdfunding, Management, and
Entrepreneurship
• Country Manager Spain. Fundedbyme Crowdfunding (Sweden).
• BA International Partners (Spain and USA)
– Investment Events. Business Angel Trainings
• European Business Angel Network - EBAN (Brussels), COO
– 100 members. 28 countries
• Crecer+ Accelerator (Basque Region, Spain). Director
– 15 companies. Investment Events. Business Angel Network
• University Knowledge Transfer Association (Madrid).
Spin-off Departament Manager
• Entrepreneur
• Investor: Partizipa, Samastah, Naturix, BrokerStars, FundedByMe

• Who has raised money for their venture
before?
• Who has invested in unlisted companies
before?
• Who has backed / invested a crowdfunding
campaign before?
WARMING UP!

• Why crowdfunding?
• FundedByMe
• What’s in a Crowdfunding Project?
• Safe and legal?
• How to do a successful crowdfunding
campaign?
• How to integrate a crowd of microinvestors in
the company (Spain’s case)?
• Success cases
CONTENTS

• Finance a project or company by collecting
small and medium amounts of capital from
many individuals, usually through the Internet
• The key lesson: “crowd” first. Then, “funding”
• Models
– Donation
– Reward
– Equity
– Lending
WHAT IS CROWDFUNDING?

Money
Visibility
Trust
WHY CROWDFUNDING?

MONEY VISIBILITY TRUST
•Entrepreneurs
get funded
•Investors earn
money
•Businesses are seen by
thousands
•Investors coinvest and
share risks with
hundreds
•100% legal,
secure and
transparent
WHY CROWDFUNDING?

“FBM opened an unexpected
financial opportunity for my
company”
“I reached hundreds of
international investors”
“A new way to impulse innovative
businesses”
WHY CROWDFUNDING?
FUNDEDBYME ENTREPRENEURS

“An innovative, trustful and
profitable way to invest”
“An alternative to traditional banks,
which helps entrepreneurs too!”
“A window to new projects and
good investment opportunities”
WHY CROWDFUNDING?
FUNDEDBYME INVESTORS

1. It works!
Spain’s Equity Success Cases at FBM
– Samastah: 76,800€ - 23 investors
– Brokerstars: 28,862€ - 52 investors (10% int’l)
– FundedByMe: 682.000€ - 384 investors – 5 days!
– Naturix: Launch in October. 28,5k€ compromised
WHY CROWDFUNDING?

• One crowdfunding campaign:
• Increases quarterly sales 351%
• 28% start-ups raise money from angels in 3
following months
• 1 hour of work on crowdfunding = ROI 813$
• 39% businesses create 2.2 jobs
Source: Crowdfund Capital Advisors
WHY CROWDFUNDING?

2. More than money
–Marketing
–Ambassadors
–Team test
–Market, value proposal, and MVP validation
–100% compatible with other sources of
finance: business angels, VC, participative
loans (ENISA), public money…
WHY CROWDFUNDING?

3. New possibilities
–Richer type of investors
• 70%: “I want to be part of the Next Big Thing”
• 30%: “I want a x4 ROI”
–Crossborder investors
–Shareholders’ agreement proposed by
entrepreneur
WHY CROWDFUNDING?

4. Market volume doubles annually since 2011
1200
2670
5100
9600
0
2000
4000
6000
8000
10000
12000
2011 2012 2013 2014
€ invested (1000s)
Source: Massolutions Report
WHY CROWDFUNDING?

5th platform in Europe!
FUNDEDBYME
Source:
Crowsourcing
Week, May 2014

40.038 registered members. 3rd in Europe!
FUNDEDBYME

FUNDEDBYME
Team Awards
Press
Recognition
Top 100 Europe’s StartUps
Investors

• Current legislation allows crowdfunding
– +70 platforms in Spain only
– 1000s of deals closed in Europe in 2013.
– 0 official frauds in Spain. 2 official frauds in USA
LEGALLY SECURE

• National cf laws in Italy, Denmark, and France
• Other countries (Sweden, UK) regulate cf by
general financial laws
• EU is touching financial laws and directives,
and would issue a directive to promote
continental harmonization
LEGAL SCOPE

• Current legislation allows crowdfunding
• Upcoming legislation (2015)
– Good: market regulation
• Compulsory registration at securities authority (CNMV)
and Bank of Spain
• Protection to retail investors
– Bad: excessive protections due to politicians’ cf
ignorance could jeopardize market’s growth
SPAIN’S LEGAL SCOPE

• Current law does not allow us to touch the
money in Spain
• After the crowdfunding round is over, the
invested companies are fully liable for any
legal and fraud issues that may arise between
the investors and them
LEGALLY TRUSTFUL

• FBM only presents high quality projects to
investors
• Miguel recognized professional of the industry
(IE, EOI and Deusto Business Schools, EBAN)
• High investment in legal knowledge in 7
countries
LEGALLY TRUSTFUL

• No easy money
– Microinvestors don’t get active by themselves
• No 2nd division money
– As important (and difficult) as angels or VC money
• No alternative but complementary money
– Business angels and public money want to
coinvert
LET’S BE CLEAR FIRST

1. Documentation and investment proposal
2. Marketing and comunication campaign
2 KEYS

• Prepare, prepare, prepare
• Time, time, time
• Resources, resources, resources
HOW TO SUCCEED?

• Identify, define and locate your targets
• Research their needs, problems, aspirations,
behaviors, demographics
• Typical equity investor persona
– 75% men, in their 30s-50s, urban, highly
educated, net worth +50k€ / yr, engineer, liberal
professional, entrepreneurial background,
business owner, some financial education
1. CLIENTS’ SEGMENTS

• Backers
– I want that reward!
• Great value for the backer
• Perceived value => economic value
– Average backing: 50-60€
• Investors
– “I want to be part of the next big thing”
– “I want an x4 ROI, and an exit in 4 years”
– Average investment: 1500-3000€
2. VALUE PROPOSAL

– Crowdfunding Plataform
• Description: Video, Presentation, Team Info, Social
Networks
• Documents: Exec Summary, Pith Deck, Financials,
Investment Proposal, Shareholders’ Agreement,
Annexes
• Walls of questions and activity
– Own Channels
• My crowd
• My social and media activity
3. CHANNELS

• Goal: find, motivate and build investor or
backer loyalty
– Fast and customized assistance
– Entrepreneurial team directly available for
questions by phone, mail, in events and exclusive
meetings
– Shareholders’ agreement ready
– VIP treatment for VIP investors or backers
4. CLIENTS’ RELATIONSHIPS

• Rewards
– Something the backer wants
– 4 levels recomended: 1st level is a “low-barrier”
one (cheap), 4th level is a “no-brainer” (expensive
but lots of value)
– Exclusive, scarce, much more vaule than price
• Investments
– Reasonable valuation, ROI, exit strategies
– Reasonable minimum investment (eg. 500€)
5. REVENUE STREAMS

• Upload in the platform professional
documents to stimulate investors
– Business-Angel standard quality
– Proof that your business is possible, viable and
investment-ready
– Document cascade
• Video > exec summary > pitch deck in power point >
business plan > financials > investment proposal
6. KEY ACTIVITIES

• Plan and execute a marketing and
communication campaign to reach 5,000-
10,000 targets
– Preparation: 1-2 months
– Minimum: 1-2 persons 2-3 hours / day
6. KEY ACTIVITIES

• 100 days before: presentation and web ready
• 80 days: list and first activity on relate fora and
groups online and offline
• 60 days: warm-up campaign in social networks
and own crowd. Build a mail list. First pre-
investments. People in waiting list
• 40 days: identify influencers (bloggers) and
talk with them in person
EXAMPLE OF COMMUNICATION PLAN

• 20 days: create campaign’s pitch in the platform
with the feedback received
• 1 day before launch: people queueing to invest
• 2 hours after launch: 20% goal raised. Big start.
Spread the news (press releases, blog posts,
social networks)

• 2 days after: launch party, potential investors
invited, speeches to talk about the launching
success, make people invest live
• During the campaign: request
recommendations to current investors,
organize meetings, webminars, new content
every day in social networks, personal
meetings, Facebook ads

– Entrepreneurs’ team
– My crowd (contacts, social network followers)
– Entrepreneurs’ knowledge
– Partners, consultants, collaborators (FundedByMe
advisors, lawyers, video producers, community
managers, event organizers, journalists, etc.)
7 AND 8. KEY RESOURCES AND ALLIANCES

• Platform’s commissions
• Payment Provider commissions (reward)
• Marketing and communication campaign
• Premium service providers (eg. Strategic
consultants)
• Lawyers, notary
• Total Estimate: minimum 10-15% capital
raised. Up to 30% in complex projects
9. COSTS

Solution 1: Direct Investment. No vehicle
• Agile & cheap option
• No need to go to the notary to purchase new
shares (“ampliación de capital”). Just invest &
sign. No problem for foreign investors
• The shareholders’ agreement could establish
limited political and economic rights (or
shares A and B)
• Samastah used this option
LOTS OF PARTNERS. NO PROBLEM!

Solution 2. Vehicle: “Comunidad de bienes”
• Fastest & cheapest option
• Potential conflicts should be foreseen in the
shareholders’ agreement
• No notary. Just a contract written by a lawyer
• No problem for foreign investors
• Very limited legal protection
• Investors a fully liable inside the “comunidad”
• Good option for small deals

Solution 3. Vehicle: SL (Limited Liability Co.)
• Most secure option (but higher cost)
• Foreign investors sign a power of attorney
(cost: 30€) not to be at the notary’s office and
to get the Spanish Tax ID
• Full legal protection to investors
• The most professional, recommended option

Solution 4. Phantom options
• Private contract that purchases only the
economic rights of the share, not its legal
property
• No notary. No problem for foreign investors
• Brokerstars used this option in their
crowdfunding round

Solution 5: Join Accounts Contracts (Cuentas en
Participación)
• Easy & cheap
• No share purchase, but a “right” in the
business
• Only economic rights. No influence in the
company

VERY GOOD OPTION FOR MATURE COMPANIES
• 2 options: participative loans & regular loans
– Best option: participative loans (loan money =
company equity)
• Private contracts. No notary
• No problem for foreign investors to join
• Waiting for the 2015 legislation. Current
legislation poses no problems.
• Available in FBM Spain in 2015
WHAT ABOUT CROWDLENDING?

• FundedByMe. March 2014. 682.000€ in 5 days
• Samastah. March 2014. 76.800€. 23 investors.
• Naturix. To be launched in October. Total deal
66.000€. Already raised 28.500€ from 4
investors (last 2 joined yesterday)!
SUCCESS CASES

1. Innovative, transparent, legal and safe
vehicle
2. Entrepreneur gets capital, an army of
ambassadors, an awesome marketing
campaign, clients, and lots of visibility
3. Attracts business angels and coinvestors
4. Market and entrepreneurial team is tested
5. Capital as serious and as difficult (or easy) to
raise as any other
KEY TAKEAWAYS

VC is now what private equity was
before. Angels are now what VC was
before. And crowdfunding is now
what angels were before.”
Hall T. Martin
Director. Texas Entrepreneur Networks, USA

Miguel Ángel L. Trujillo, Country Manager Spain
miguel@fundedbyme.com - (+34) 626 007 140
56
THANK YOU!

FundedByMe Class at IE Business School's Global MBA

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