Introduction to Crowdfunding for the

Chinese Business andSocial Network

19 October 2015

What I’m talking about this evening

1. My career background that has brought me here today

2. What Crowdfunding is

3. What Crowdfunding is not

4. Broad categories of Crowdfunding

5. A Crowdfunding project is like an iceberg

6. Donations-for-rewards Crowdfunding

1. My background• 30+ years in varied marketing roles

– Planned £multi-million ad campaigns

– Negotiated with top media sales teams

– Transformed advertisers’ attitudes to advertising on commercial radio

– Provided independent research and marketing services to UK and overseas media companies

– Arranged for advertisers to part-pay media advertising bills with quantities of residual stock

– Marketed sponsorship of national sports and leisure events

• PG diplomas in digital marketing and business management• Launched Comanche in 2014 to advise crowdfunding project

owners on using marketing to help reach their financial targets

2. What Crowdfunding is• An alternative source of financial support for SMEs • An internet-based means to ask a lot of people

for relatively small sums of money• Projects are usually hosted by specialist crowdfunding

platforms, and project creators build and drive a crowd of people to their one

• Growing fast: a new crowdfund project is launched every three minutes, 500 per day*

• A good way to build awareness, a marketing tool

* Source: Jillion.com, a Polish website enabling people to donate their skills rather than money, http://www.nesta.org.uk/jillion

3. What Crowdfunding is not

• It is not a quick or easy alternative that– Runs by itself

– Is guaranteed to finance off-the-wall ideas

– Avoids preparing a SMART business plan

– Sidesteps due diligence exercised by commercial or professional investors

– Stops you having to ask people you know for their support

4. Broad types of Crowdfunding

1. P2P and P2B investment by ‘business angels’

2. Business finance through loans with fixed returns

3. Business finance through trading equity

4. Donations a. With nothing offered in return

b. Donations-for-Rewards projects Which includes using Crowdfunding

to generate pre-production orders, effectively using it as a sales channel to deliver a production budget

5. Crowdfunding is like an iceberg

What project creators find difficult

Sourcing funders and marketing

Developing campaign material e.g. a video

Developing the fundraising plan/pitch

Fulfilment and delivery of rewards

Communications with prospective funders

Setting up rewards/tiers

Finding the right platform

Application process

0 5 10 15 20 25 30 35 40 45

%

Source: http://www.nesta.org.uk/sites/default/files/understanding-alternative-finance-2014.pdf

6. Donations-for-Rewards Crowdfunding: the basics

• Determine a clear and demonstrable need for support and identify who will benefit

• Set a financial target with start and end dates– Allow for platform, transaction fees, costs of Rewards, marketing,

any temporary support (you will be very busy!)• Decide on a hosting platform to use• Pre-sell to your close contacts to raise 30% of your target• Build a crowd of people you will tell about your crowdfunding project,

using social media, events and PR• Drive them to it using more marketing and encourage them to donate

with a compelling written pitch and video • Encouragement can include Rewards – select, check, source and cost• Ask backers to tell their own networks about your crowdfund project• It’s usually ‘all or nothing’ so work hard to not waste your effort

Some Crowdfunding platforms• Biggest platforms: – US and global, Kickstarter and Indiegogo

– UK, Crowdfunder

• Specialist UK platforms include:– Local campaigns, CrowdPatch

– Marine projects, Mamawatta

– Educational and ethical causes, Hubbub

– Social enterprises and start-ups, Buzzbnk

Average success rates

• Indiegogo10%

• Kickstarter30%

• UK average for donations42%

• UK donations projects on a 88%standalone, branded platform

From one in ten to almost nine in ten

Crowdfunding as a sales channel• For crowdfunders with tangible products• Raises funds to meet first run production costs– Creates pre-paid orders prior to producing stock

and before achieving retail or e-tail distribution• Incentivise orders through offering your products at a

discounted rate against a verifiable RRP• ‘Rewards for donations’ are not ‘Sales’ and not covered by

the same legislation or expectations e.g. delivery time• Can demonstrate early consumer traction to encourage

retail stockists and future investors• A minimum donation target ensures achieving a breakeven

point or a given level of financial benefit

Other pre-order sales projects• Pebble– Wearable technology, $10.3m on Kickstarter

• Skully– High tech crash helmet, $2.3m on Indiegogo

• Zanos drones– A Welsh company, £2.3m on Kickstarter

• Kingii– Wearable, inflatable buoyancy aid, $633,000

• Vodka Mudshake– Currently on Crowdfunder, £320 raised out of a £60,000

target with 21 days to go

Clive Reffellwww.comcomms.com

clive@comcomms.com 07788 784373