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EQUITY CROWDFUNDING
1
MaGIC Startup Academy Presentation – Investor Day
October 17th, 2014
crowdonomic.vc@Leo_Shimada
@Crowdonomic
Facebook.com/C
rowdonomic
2
Professional Team with fintech/investment expertise
Senior
Consultant
Asia Strategy
LeadMBA BA. Law
Senior
Consultant
Interest rate
TraderMBA Engineering
Reona Shimada
Co-founder & CEO
Nicola Castelnuovo
Co-founder & CCO
S.E. Asia
Innovation
S. Korea
Finance
China
M&A
South Asia
Tech
Japan
Strategy
UKS.E. Asia India
Tech
W.EuropeNorth Asia
Finance Operations InnovationInvestment
Experience and expertise
3
Headlines
• Equity Crowdfunding (ECF)…Fundraising Disruption
• Secret sauce… Social Media (Distribution) + Democratic Participation
• From: Difficult and inefficient = > To: Modern way to do a difficult thing
• Def. Online crowdsourcing a company’s venture financing needs
• Complementary to higher quality VC / Angels (Leads)
• Malaysia – a pioneer market, power to Start-ups
Crowdfunding… This is Finance 2.0
What it is: Crowdsourcing for
venture capital
How it Works: Fundraising accelerated by the power of social
media and harnessing the wisdom of the crowds
Fill standard
offer templates
Publish Online
Advertise via
social media
Access virtual
investor community
Reach $ targetGrow your
business
Smaller amounts of money from
many people to reach higher targets
5
Publish Offer Page
Access virtual
investor community
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Acceleration Validation Traction
ECF: Fundraising accelerated by the full power of
web, social media and technology
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ECF Regulatory Framework – Highlights*
(*) Note: Contents in this page are based on SC ECF Public Response Paper and they are still pending parliament final
approval. Source: http://www.sc.com.my/wp-content/uploads/eng/html/consultation/140925_PublicResponse_2.pdf
Who: All Malaysia incorporated private companies + SC Registered Micro Funds
How much: Private Companies (RM 3 mn / RM 5 mn) + Micro Funds (uncapped)
Share Types: Common Shares (preferred and ordinary); single type per Offering
Fundraise Type: All-or-Nothing (Oversubscription is allowed)
Offer Types: Primary (new share sale); Secondary (existing shares; 2 wks per 6 months)
Advertisements: May advertise to the public but ONLY via the ECF platform
Investors: Retail (RM 50k) + Angel (500k)+ Sophisticated Investors (Uncapped)
DISCLAIMER: This does not constitute any legal or financial advice
Disclosures: <300k (not mandatory); 300 – 500k (case by case); >500k (Audited)
Modernization of Fundraising Regulations and
Activities
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No General Solicitation
Prospectus Exemptions: Limitations
on Advertisement; Investor Types; #
Public Offerings = Costly
Disclosures / Prospectuses
Fundraising: Extremely Difficult and
Restricted Activity
Advertisement Flexibilities
Full use of Web / Social Tools
Template and Standardized FR
Process for Efficiencies
Fundraising: Still Really Difficult Activity
but Equipped with Modernized Tools
It will be a Game Changer for both Start-ups and
Investors
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Efficient outreach to
multiple investors via internet
Startups
Low – mid digit FRsRecord millions
8 -12 weeksAverage online fundraise period
Centralized deal
sourcing platform
Investors
Crowdsourced due
diligence community
$1 to 5KBite-sized investments to
diversify investment portfolio
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ECF: Issuer post-crowdfunding performance
Business Survival
Rate
Follow-on Investment
Rate
Exit Multiple for
Crowd Investors
86% 71% x10+
*1 *2 *3
*1: 86% of all sampled Equity Crowdfunded businesses still operational on ASSOB since 2005 vs 59 % of companies still
in business 3 year after establishment according to US Bureau labor of statistics
*2: % of sampled Equity Crowdfunded businesses by Crowdfund Capital Advisors who have already secured follow on
investments (28%) or were in discussions (43%)
*3: Rewalk estimate: Rewalk raised $1.3 mn via ECF platform in 2013. IPO valuation was $191M in September ’14. At its
maximum, its market valuation was $428 mn
Source: Various; Crowdonomic Team analysis
No reported cases of
Fraud
Shareholders can be
bundled up into a
vehicle
Investors are also chosen;
Use lead investors to
inform market
Lead investors will create
investment momentum
“I’ll be stuck with managing
Thousands of Shareholders (and
forced to IPO)!”“High Risk of Fraud”
“if it’s a great idea, everyone will
invest”
The Market will be over-flooded
with NVA Capital creating a
bubble
We are tackling Common Equity Crowdfunding
Concerns
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Content: Building Up Credibility on Your Offer page
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Board & Team
with relevant
credentials
Endorsement from
fans and industry
experts
Strategic
Partnerships
IP
Attractive
valuation and
desirable exit
Demonstrate
ability to achieve
milestones
Additional Items:
• Business Plan
• Investor Pitch
Deck
• P&L
• Cash Flow
• Balance Sheet
• Sell the vision / dream
• Ground the business plan
• Nail the delivery
• Form as important as Quality
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Visual: Supporting Your Offer Page with Video
Do
• Be vague
• Be boring
• Be awkward
• Show only the product
Don’t
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Video Case Study: Twenty Something London
Watch this video at https://www.youtube.com/watch?v=f2SqVkGmRX4
Team: Assembling a Capable Fundraising Team
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Charismatic Front
Person
Graphic Design/
Video Person
Social Media
Person
Document and
numbers person
• Media
spokesperson
• Investor
Meetings
• Brand
Ambassador
• Social media
updates
• Site updates
• Answering
enquiries
• Putting
together the
offer page
• Putting
together the
financial
documents
• Designing
visuals
• Creating video
and other
creative assets
Dance Floor Theory
How can you get a crowded dance floor?
You need a proper execution plan to draw in early supporters.
Building up a Follower Base to Share Your Story
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source: ASSOB
Fundraising Target Minimum Followers
$500K 100
$750 150
$1M 200
$1.5M 300
$2M 400
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Marketing and activation support a Crowdfunding
Platform will provide
Expected
reach via
platformPlatform Social
Media Updates
Platform Blog
Platform
Newsletters
Membership
Access
Templates
Platform
Marketing
Cannot rely fully on
a platform’s reach to
hit your target
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Extend your reach with your own execution plan
Expected
reach via
platform
Reach via own
initiatives
Public Relations
Personal Mail
Outs
Media Interviews
Blogger Outreach
Product Demos
Social MediaAwards
Competitions
Site Visit/ Factory
Tour
Awards
Competitions
Company Blog
Updates
Investor Meetings
Offline Events
Converting a follower to an investor
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Become a
FollowerDownload Offer
Documents
Become an
investor
MYTH: Followers will convert once they visit your offer page
Converting a follower to an investor
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Become a
Follower
Download Offer
Documents
Become an
investor
REALITY: Conversion needs constant engagement
View Company
Profile
Request More
InformationBecome a
follower
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Campaign Execution: Best Practices
Prepare follow
up videos,
creative assets
and regular
campaign
updates
Be quick to
respond to queries
and comments
Show your
appreciation and
thank all your
investors
Contact press only
once you have
obtained some
funding to have a
newsworthy angle
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Recap
• Secret sauce… Social Media (Distribution) + Democratic Participation
• ECF: Difficult and inefficient = > To: New way to do a difficult thing
• Malaysia – a pioneer market, power to Start-ups
• Combine with Lead Investors + Conventional best practice
• Promote, Market and Execute…make full use of this New Freedom
www.crowdonomic.vc