FundedByMe Class at IE Business School's Global MBA

The Fastest Growing Crowdfunding Platform Connecting Investors and Entrepreneurs.

September 2014

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

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

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

Team Awards

Recognition

Top 100 Europe’s StartUps

Investors

CONTENTS

THE CROWDFUNDING PROJECT

CONTENTS

• 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

CONTENTS

• 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?

USE A CANVAS TO GET PREPARED

• 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

CONTENTS

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?

CONTENTS

• 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

WOULD YOU JOIN NATURIX?

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

THANK YOU!

FundedByMe Class at IE Business School's Global MBA

Economy & Finance

JUBAIL INTERNATIONAL SCHOOL'S

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