Crowdfunding Researcher Kevin Grell @ Crowd15

CROWDFUNDING RESEARCH Kevin Berg Grell, PhD CEO, APEN Designs, Inc.

Crowd15:Nordic Crowdsourcing & Crowdfunding Conference

Copenhagen, February 26-27, 2015

CROWDFUNDING RESEARCH - All the right questions

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- Why is crowdfunding a compelling research field?

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- Why is it relevant?

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- What are we interested in?

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Marketing ✔ ✔

Development Economics ✔ ✔ ✔ ✔

Finance ✔ ✔

- VCs/Angel investors ✔ ✔ ✔ ✔

- FinTech ✔ ✔ ✔ ✔

Accounting ✔

Investor Relations ✔ ✔

Policy/Law m

akers

Academ

ics

Entrepreneurs

Corporations

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Marketing ✔ ✔


Finance ✔ ✔



Accounting ✔


Policy/Law m

akers

Academ

ics

Entrepreneurs

Corporations

Outline

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Marketing ✔ ✔


Finance ✔ ✔



Accounting ✔


Policy/Law m

akers

Academ

ics

Entrepreneurs

Corporations

Outline

1





Marketing ✔ ✔


Finance ✔ ✔



Accounting ✔


Policy/Law m

akers

Academ

ics

Entrepreneurs

Corporations

Outline

1





Marketing ✔ ✔


Finance ✔ ✔



Accounting ✔


Policy/Law m

akers

Academ

ics

Entrepreneurs

Corporations

Outline

1





Marketing ✔ ✔


Finance ✔ ✔



Accounting ✔


Policy/Law m

akers

Academ

ics

Entrepreneurs

Corporations

Outline

1





Marketing ✔ ✔


Finance ✔ ✔



Accounting ✔


Policy/Law m

akers

Academ

ics

Entrepreneurs

Corporations

Outline

1

CROWDFUNDING RESEARCH - Academia

Some Simple Economics of Crowdfunding

Crowdfunding: Geography, Social Networks, and the Timing of Investment Decisions

The Dynamics of Crowdfunding: An Exploratory Study

Agrawal, Catalini, and Goldfarb Agrawal, Catalini, Goldfarb Mollick

The Crowdfunding Revolution

Crowdfunding: The Corporate Era Enterprise 2.0

Marom and Lawton Marom, Swart, Grell McAfee

Must (or should) reads

2


Ethan MollickJournal of Business Venturing 29 (2014)


1. 48,500 Kickstarter projects2. “Early” 2009 to July 2012

What drives fundraising success?

3





Findings:

(Pitch) quality- Conform to best practices

(video, updates)- Spelling


3





Findings:



Social network size


3





Findings:



Social network size

Funding goal


3





Findings:



Social network size

Funding goal

Duration


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Findings:



Social network size

Funding goal

Duration


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Agrawal, Catalini, GoldfarbIPE NBER


1. Multiple references2. Links current CF research with economic theory

Social Welfare and Innovation

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Observations:

1. Funding is not geographically constrained


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Observations:

1. Funding is not geographically constrained2. Funding is highly skewed


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Observations:

1. Funding is not geographically constrained2. Funding is highly skewed3. Funding propensity increases with accumulated

capital and may lead to herding


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Observations:


capital and may lead to herding4. Friends and family funding plays a key role in the

early stages of fundraising


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Observations:



early stages of fundraising5. Funding follows existing agglomeration


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Observations:



early stages of fundraising5. Funding follows existing agglomeration6. Funders and creators are initially overoptimistic

about outcomes


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Observations:




about outcomes7. Crowdfunding capital may substitute for

traditional sources of financing


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Observations: Challenges and Opportunities







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Social Welfare - Inexperience and recklessness leads to poor capital allocation decisions


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Social Welfare - Inexperience and recklessness leads to poor capital allocation decisions - Transactional gains from trade - Spillover externalities - “Sharing economy”-centric applications of CF


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Social Welfare - Inexperience and recklessness leads to poor capital allocation decisions - Transactional gains from trade - Spillover externalities - “Sharing economy”-centric applications of CF

Innovation - Decentralized capital allocation - Substitution of traditional capital sources


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CROWDFUNDING RESEARCH - Entrepreneurs

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Crowd-First

Source: Startups and Crowd-first tactics” (Wired.com)7


Crowd-First

Background

6 Kickstarter campaigns- 5 successful (1 still live)- 1 unsuccessful



Crowd-First

Background


Campaign parameters are set in collaboration with vendors

- Define minimum-run + price points- Revenue sharing offered to eliminate

setup costs



Crowd-First

Background




setup costs

CF is used to brand the company- Included on the company’s own site



Crowd-First

Background Impact




setup costs


Market testing- Spot price determined via crowdfunding- Product tweaks based on crowd “focus groups”



Crowd-First

Background Impact




setup costs



Product development - Selection 100% crowdsourced!- Social platform used as a tool for ideation



Crowd-First

Background Impact




setup costs




Market development



Crowd-First

Background Impact




setup costs




Market development

Professional investors



Network effects, competition, and future CF models

The Kickstarter / Indiegogo horse race

Source: Krowdster

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Source: Krowdster

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Source: Krowdster

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The Kickstarter/Indiegogo horse race

Source: Krowdster 9




Source: Krowdster

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Source: Krowdster

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Differentiation (Indiegogo)

Source: “Indiegogo Interviewed...” (Wired Innovation Insights)


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Differentiation (Indiegogo)- Perk-production



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Differentiation (Indiegogo)- Perk-production - Fulfillment



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Differentiation (Indiegogo)- Perk-production - Fulfillment- Post-campaign offering: InDemand



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Direction- Analytics - 360 entrepreneur solution



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Investment-based Crowdfunding

?



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Investment-based Crowdfunding- Indiegogo very active (or vocal) in

the JOBS Act debate- User-driven platform

development- Professionalization



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CROWDFUNDING RESEARCH - Corporations

FES Watch

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FES Watch

Qrio Smart Lock

12

https://www.makuake.com/project/qrio-smart-lock/



FES Watch

Qrio Smart Lock

MESH Kit

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Source: “Crowdfunding: The Corporate Era”

SONY

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New strategy- Minimized exposure (TVs and Smartphones)- Identify, cultivate, nurture, and build new

profit-drivers


SONY

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profit-drivers

Seed Acceleration - Internal accelerator program- Employees are granted short “leaves” to engage

in product development- Accepted projects leverage SONY’s assets


SONY

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profit-drivers



Crowdfunding is integrated for market testing and validation at the prototype stage


SONY

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profit-drivers




Marketing- Youtube- Athletes- Dodge


SONY Bigger picture

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profit-drivers





Innovation- General Electric- IBM- ABN Amro


SONY Bigger picture

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profit-drivers





Innovation- General Electric- IBM- ABN Amro

CSR / Corporate philanthropy- Coca-Cola- Televisa- The World Bank


SONY Bigger picture

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CROWDFUNDING RESEARCH - Industry stats

Source: “Moving Mainstream”

“Hot off the press”

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CROWDFUNDING RESEARCH - Q&A

Q&A15


1. How do we define Nordic Crowdfunding success? - Are there specific cultural/social/economic factors that need consideration? - What is the problem? Finance? Marketing? Reach? - What is the potential?

Q&A

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2. Disrupting (Entrepreneurial) Ecosystems - Which Nordic entrepreneurs can benefit from crowdfunding? - Are there any synergies with existing funding avenues?

Q&A

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2. Disrupting (Entrepreneurial) Ecosystems - Which Nordic entrepreneurs can benefit from crowdfunding? - Are there any synergies with existing funding avenues?

3. Nordic investor communities - Knowledge… Do people know we’re here? - Interest… Are people motivated to engage with entrepreneurial ventures?

Q&A

15

CROWDFUNDING RESEARCH Kevin Berg Grell, PhD CEO, APEN Designs, Inc.

THANK YOU!

Science

Crowdfunding Researcher Kevin Grell @ Crowd15