DC* Updates
Vol.22 August 2013
• Crowd Funding ………..…………………...……………..……...……….…… 3
• Deal Watch………………………..……………..………………………………...13
• Global Business and Finance Scenario……………………..…………. 14
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Contents
DC Updates Vol. 22 August 2013
What is Crowd Funding?
”Crowd Funding” is a new form of funding whereby numerous
investors commonly known as “Backers” invest in a startup idea
/ product / art project.
Crowd Funding Work Flow
Project creators use online crowd funding platforms such as Kick
Starter/We Funder/ Rocket Hub/ Peer Backers etc. to attract
backers for their project. Creators introduce their product /idea
/ theme through a video introduction or a detailed write-up.
They then put up the funding required and a time frame within
which the funding needs to be acquired.
Most crowd funded projects work on a entire funding or nothing
(i.e.) the project creator gets funded if and only if his amount
has been successfully raised. If the funding falls short, the
project creator does not get any money which implies that the
backers were not convinced of the project.
All the platforms work on the “social connection” factor to help
creators raise funds for their project.
Pharmaceuticals
DC Updates Vol. 22 August 2013
Crowd Funding
Crowd Funding Model
Backers
Online Platforms
Creators
DC Updates Vol. 22 August 2013
So Far
Origins of Crowd Funding
The origins of crowd funding could be
traced back to a 17th century model called
“praenumeration” which involved financing
for publication of books. The current crowd
funding model has taken cues from a few
independent music bands who have used
internet to fund and raise awareness about
their artistic projects. Not surprisingly, even
today, majority of the projects that seek
funding are “creative projects”.
Crowd sourcing model’s success has
resulted in a wide variety of projects being
submitted for funding. Projects vary from
Art, comics, theater, technology, games,
music, photography, publishing etc..
DC Updates Vol. 22 August 2013
Crowd Funding Space
Homegrown Foreign
Promotional Body
Kickstarter and Indiegogo also operate in India
DC Updates Vol. 22 August 2013
Indian Scenario
Waking up to Crowd Funding
Indian market is waking up to the
concept of crowd funding. 3 platforms
have started recently based on crowd
funding project in India – Rang de,
Milaap and Wishberry.in
Such crowd funding websites
extensively depend on social media to
connect with potential backers and
contributors.
India has started to experiment with
micro-credit crowd funding model
whereby small time entrepreneurs raise
small amounts of debt for kick-starting
/ expanding their business.
Upcoming platforms – Fundapeer.com
and Pik-a-venture.com
India’s 1st peer to peer online crowd funding platform (debt based)
Launched in 2008 Small farmers and cattle
herders form a majority of borrowers in this group
Requirement ranges between Rs. 1,000 – Rs.10,000
Debt based crowd funding platform
Backed by First Light Ventures, Jayesh Parekh, Jungle Ventures, Linrock Capital, Rajiv Madhok, Toivo Annus, Unitus Seed Fund, Vijay Shekhar Sharma
Requirement ranges between Rs.1,000- Rs.3,00,000
India’s 1st reward based crowd funding platform
Launched in 2010 Attracts young creative minds
who use this platform to fund their music album, theatre, photo projects, nature conservation projects etc.
Requirement ranges between Rs. 1,000 – Rs.3,00,000
DC Updates Vol. 22 August 2013
Awareness about peer to peer concept
Potential for popularity
India and other emerging markets are
already familiar with the concept of peer
to peer lending. Crowd funding being on
the same lines, this can be expected to
become a major source of funding.
Impact of Social Networks
Social connections help a lot in spreading
the word about a project/idea /concept.
Social networks which hitherto has been
an urban phenomenon has also started to
catch on in rural areas. This has effectively
increased the popularity for crowd
funding.
Regulatory Concerns
In India it is necessary to get approval from
SEBI when more than 50 investors are
involved as it is considered as an IPO.
Limitation on the number of investors is of
concern as there is a heightened risk that
the project would not be completely
funded due to limited investor
participation.
“Microfinance” is very popular in India and they have played a very vital role in developing employment opportunities
DC Updates Vol. 22 August 2013
Pros Vs. Cons and Success Rates
Pros Cons
Not delivering on commitment
Risk of IP theft and plagiarism
Donor Exhaustion
Profile and Reputation
Engagement with the target group
Feedback
Categories & Success Rates
DC Updates Vol. 22 August 2013
Challenges and Solutions
Access to Capital
• Access to capital still remains a key challenge for entrepreneurs looking to start a business in India. Bank loans ,loans from friends, family and their own money form a major part of the seed investment. In crowd funding the investment comes in from a single source but a multiple sources which reduces the risk for both investors and backers.
Focus on Financial Returns –
• The focus on financial returns and cash flows alone hampers the growth of new and unconventional products/ideas/concepts. Crowd funding is not return focused but rather product/idea/concept focused. In a reward based model backers put in their money not expecting any financial gain but other benefits such as exclusive entry for the movie/ a copy of the book they helped -published/ Credits/ a pre-release version of the product that they helped developed etc..,
Equity Dilution –
• PE,VC and Angel investments in India are growing in India over the past decade, however many of them prefer startups backed by seasoned entrepreneurs. Seed funds have been playing a very vital role in filling that gap over the past few years. Taking up equity stake is commonplace in all these ventures. Entrepreneurs who do not want to dilute their equity at such early stage of operations have to resort to their own capital or borrowed funds. Crowd funding removes this limitation and helps the entrepreneur to “eat his cake and have it too”
Market Traction –
• In a traditional setup the company analyses the market then develops a product and commercializes it. In such a conventional setup it is very easy to misread the market (especially for startups). Crowd funding platform however has a built in feedback mechanism through which the ideas/concepts/ products can be further refined and altered to suit the needs of the end users. Entrepreneurs essentially crowd source the ideas.
DC Updates Vol. 22 August 2013
Some Indian ideas in Crowd Sourcing
Art & Literature
Crowd Funding sites initially started off
to help artistes and bands fund their
music production and tours. In
continuation of that one could find
aspiring writers, filmmakers, comedians,
photographers and other artistes have
resorted to crowd funding their projects.
Social Causes
Social causes appeal to the crowd and this
has led to many NGOs, social activists and
Individuals to use crowd funding sites for
such causes. Some of the projects include
publishing comics to spread awareness
about diseases, stray animal rehabilitation
programmes etc
Games
Independent game developers have
started to look at crowd funding their
games. Game development projects have
met with significant success mainly due to
fans’ feedback and involvement in
developing the storyline.
DC Updates Vol. 22 August 2013
Some Indian ideas in Crowd Sourcing
Traditional Manufacturing
Many of the traditional manufacturing
methods have been lost due to
industrialization and changes in trends.
Such situation has however given rise to
more demand for handmade products.
Traditional manufacturing such as
weaving, organic farming and other art
forms are being revived using crowd
funding.
New Technology
Indian entrepreneurs can use this platform
to introduce new-age products. Crowd
funding platforms have been hugely
successful in raising funds for such
technology products. Spreading the risk
over many investors can help in identifying
solutions for problems ranging from day-
to-day issues to more complex issues.
App Development
With the growth of smartphones and
tablets India has seen lots of small
companies develop apps on behalf of
foreign companies. Indian entrepreneurs
can use crowd funding platforms for
developing apps and funding them.
DC Updates Vol. 22 August 2013
Final Points
Seed funding as it stands today is only a decade old, however
during last year it was able to raise close US$1.5 Bn in 2011, in
2013 it is estimated that crowd funding raised US$ 5.1Bn terms
of funding. Considering that it has been raised from individuals
has it is quite a remarkable feat.
Currently 95% of the market is dominated by North America
and Europe , however the trend is catching on worldwide.
American crowd funding biggies like Kickstarter and Indiegogo
have allowed India based creators to run their campaigns on
their website looking at India’s potential.
What is required for successful funding?
Pitch
An effective pitch that would help the target group understand
your idea/ product/ causes etc.. This can be either through a
detailed description in the fund raiser page with a video
detailing an idea/concept/cause or prototype which would
help in reaching the target audience.
Social Connection
Promoting the campaign through social networking is another
way to getting the attention of the target audience. One needs
to tread carefully on social networks for his campaign to reach
his target audience.
Striking a personal chord
Fund seekers around the globe have followed the approach of
striking a personal cord with the target audience emphasizing
on the problems that they faced and how the problem led
them to build a solution for it when one was not available in
the market.
Realistic Funding Goals
Setting a realistic funding goal is a key to successful funding.
There is always a chance that if the project is very good it
might get funded more than what was initially expected. So as
a rule of thumb it is better to set a realistic funding goal rather
than over reaching oneself and fail with the fund raising
Deal Watch
Infrastructure, Engineering and Defense
Manufacturing
IT/ Technology
DC Updates Vol. 22 August 2013
Blume Ventures invests in Infollion, NowFloats, Paletly, Voxapp Regenersis acquires stake in Digicomp from Allied Digital BMC Software buys social collaboration tool KineticGlue Social media agency - Gozoop acquires Red Digital Thomson Reuters acquires Majority Stake In Omnesys Technologies ONS Interactive acquires Revosys Corp
Media / Telecom
Japanese Firm Recruit Holding Acquires NuGrid Consulting One97 Communications Buys Plustxt
Green Infra Acquires Majority Stake In
TVS Energy
GVK to divest Stake In Airport Biz
GMR to Exit Road, Airport Assets
Streparava acquires Sansera's Stake In
Indian JV
Kalindee Rail sells stake to Texmaco
Rail.
SBI Mutual Fund buys into Elgi
Equipment
Mitsubishi-Hitachi buys Concast India
Madhucon to divest stake in Road
Projects
TASL acquires majority stake in Aurora
Integrated Systems
Jain Irrigation to exit Its Wind Power Biz DLF Sells Its Gujarat Wind Power Project to BLP Vayu Somany Acquires stake In Vicon, Amora
Hospital / Food/ FMCG
Bajaj Corp Buys Ozone Ayurvedics' Nomarks Brand Cookie Man Buys Sathyam Cinema's Eatery - Idly And Dosa VLCC Acquires Majority Stake In Singaporean Wellness Firm – Gvig Prisma Global Buys Prisma Gmbh Beckman Coulter Buys ReaMetrix's Flow Cytometry Biz VLCC Acquires Majority Stake In Singaporean Wellness Firm - GVig
Global Business and Finance Scenario
DC Updates Vol. 22 August 2013
Asia and Oceania
• Capital Controls in India
• India’s financial troubles
• India’s gems and jewlery exports fall
• China’s credit boom
• Indonesia’s Economy
• China’s economy – A small step forward
• Alibaba in talks with Hong Kong Stock exchange
Americas and Canada
• American Newspapers – Chasing paper profits
• US markets crippled by NASDAQ outage
• U.S. labor market, factory data show economy firming
• Brazil central bank launches $60 billion currency intervention
Europe
• Eurozone economy
• Britain's recovery – Squeezing the hour glass
• Time to celebrate? Government-bond markets in peripheral
countries are soaring
• Economists don't expect eurozone growth
International
• The rising dollar
• Economic Growth – a rickety rebound
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Thank you
Vignesh Shankar Director
Hand phone : +91 94455 66386 [email protected]
K.J.Dandeker Executive Director
Phone : +91 4425220721 [email protected]
DC Updates Vol. 22 August 2013
Ganesh Sathyamurthy Director
Hand phone : +91 96000 01298 [email protected]