Crowd Control: How Kickstarter's Loss Became Sweden's Gain

Mar 30 2014, 6:14am CDT | by

Entrepreneurs are starved of investment alternatives. Investors are starved of investment alternatives.

Crowd investing offers a solution for both, but even the most successful crowd platforms have funding issues of their own, and nowhere more so than in Europe.

Sweden, like other Scandinavian countries, survived the global financial crisis and was attracting investors while the Eurozone teetered on the brink of collapse, yet the funding climate for start ups is as bracing as its winter weather.

Back in 2010 Romanian art curator Daniel Daboczy and Namibian coder Arno Smit, who had both moved to Sweden and had met up when they collaborated on a web project, had a business idea that needed funding.

IdeasForChange was based on a concept of connecting people globally to ‘crowd share’ information. The scarcity of seed funding in Sweden sent them looking overseas for the capital they needed, and put them on the trail of crowdfunding, where the only real source they could find was Kickstarter. They duly completed the application process…and were duly denied.

“We weren’t US citizens, didn’t have US bank accounts and in general they didn’t think that the idea would strike a good tone with their audience,” said Smit.

Necessity, the mother of innovation

However, once the frustration of rejection had subsided, innovation went into overdrive. There was a huge gap in the European start up funding market that needed filling, and in January 2011 the first version of FundedByMe went live.

Their prototype rewards-based platform was essentially a web page, connected to a payment service provider, which raised €11,500 ($15,800) in 60 days by offering t-shirts, caps, hugs and lectures about crowdfunding.

Then the first flaws started to appear. Crowd feedback was along the lines of ‘This is great but, I don’t see how I can use this for my app company; charging €20 to €50 for something that will eventually be free in the an app store.’

The following year the founders added equity crowdfunding to their offering; by September, had secured their first angel investment, and four months later closed their first equity case; Virtuous Vodka, a Swedish organic vodka that raised €113,000 ($155) in eight weeks.

Since then Fundedbyme equity crowdfunding has raised more than €5,000,000 ($687 million) for around 20 companies, largely consumer products and tech startups, that include Goodio Cools a Finnish ice cream company that raised €50,000 ($ 68,700) in less than two weeks and Samastah a Spanish self improvement platform through gamification that raised €76,000 ($104,000).

A few weeks ago FundedByMe completed a crowdfunding round of its own, raising €677,000 ($930,000) in six days.

Global crowd

But the founders’ real goal was to become a major cross-border crowd-investment platform. From the start they had been successful at attracting the interest of and established links with international investors; 95% of their start ups have had cross-border investments.

Using what Smit describes as a ‘tollgate approach’ to broaden their footprint, they quickly identified Germany, with its population of more than 80 million people and a similar culture to Sweden, as a key market, and also a springboard for their new profit participating loans-based offering. Peer-to-company loans and convertible loans, initially to be launched in Sweden, are also in the pipeline.

The eclectic mix of crowd offerings gives FundeByMe its USP. The challenge will be overcoming the often complex legislation around crowdfunding, which varies between individual European markets, and is almost non-existent in some./>/>

“We are working with a legal firm and the relevant local authorities to make sure we comply with local legislation, and thus far we’ve seen that FundedByMe and our business can scale pan-European,” says Smit.

Last week the European Commission published its Crowdfunding consultation touting a pan-EU forum to improve standards, create best practices and develop a ‘quality label’ for platforms, but stopping short of pan-EU legislation on crowdfunding.

With the threat of strangulation by EC red tape removed, at least for now, the Swedish roll out continues, and has already exceeded European borders.

At the end of last year FundedByMe launched in Singapore, a capital rich country with a high proportion of expats….just waiting to be connected with projects and investment opportunities back home. Which raises the question, in the race to become a global leader in the industry, is FundedByMe risking over stretching itself and risking becoming lost in the crowd?

They’ve already thought about that, says Smit, adding: “We are in eight countries; now comes the most important part, showing traction in all these markets. ninety five per cent of our cases have found international investors. We want to make sure we can facilitate even more of these and have success cases in each and every country. So for the time being expansion is important, but so is market validation.”

Source: Forbes Business

 
 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

Russia calls for free trade zone between EU and EEU
Moscow, Nov 23 (IANS) Russia has said that it is in favour of a free trade zone between the European Union (EU) and the Eurasian Economic Union (EEU).
 
 
Global entrepreneurship summit boost for SMEs
Marrakech, Nov 22 (IANS) Nine agreements were signed between the Moroccan General Confederation of Enterprises (CGEM) and several small and medium enterprises (SMEs) as well as between major Moroccan banks and start-ups at the 5th Global Entrepreneurship Summit (GES 2014) held in Morocco.
 
 
NASA's flying saucer among 'Best of What's New'
Washington, Nov 22 (IANS) NASA's Low-Density Supersonic Decelerator (LDSD), a spacecraft that aims to facilitate the safe landing of future Mars missions, has earned a place in the the Popular Science magazine's "Best Of What's New" list.
 
 
Indian helping to light up Gambia (Diaspora Feature)
Banjul (Gambia), Nov 22 (IANS) Like many Indians who are proving to be philanthropists around Africa, Ram Mohan has set up a social business called Comafrique Intelizon Initiative and has embarked on the replacement of candles in villages in the Gambia with solar lights from India.
 
 
 

Latest from the Network

UN slams terrorist attack in Kenya
United Nations, Nov 23 (IANS) UN Secretary-General Ban Ki-moon condemned the terrorist attack on a bus in northern Kenya that left at least 28 people dead. "The secretary-general condemned the attack Saturday on a...
Read more on Politics Balla
 
Two dead as 6.3 magnitude earthquake hits China
Bejing, Nov 23 (IANS) At least two people were killed and around 54 injured when a 6.3 magnitude earthquake on the Richter scale hit China, media reported. The earthquake hit south-west China's Sichuan province,...
Read more on Politics Balla
 
6.7 magnitude earthquake hits Japan
Tokyo, Nov 23 (IANS) Over 50 people were injured and about 10 houses collapsed after a 6.7-magnitude quake on the Richter scale hit Japan, media reported Sunday. The quake hit Nagano City and Hakuba village in Japan...
Read more on Politics Balla
 
Messi sets new scoring record as Barca thrash Sevilla
Madrid, Nov 23 (IANS) Leo Messi made La Liga history when he scored a hat-trick which gave FC Barcelona a 5-1 win at home to Sevilla. Messi's goals, on Saturday night came thanks to a magnificent 21st minute free kick...
Read more on Sport Balla
 
English Premier League standings
London, Nov 23 (IANS) Following are the English Premier League standings after Saturday's matches (tabulated under games played, won, drawn, lost, goals for, goals against, points), according to Xinhua. Chelsea...
Read more on Sport Balla
 
'Western actions during Ukraine crisis contradictory to democracy'
Moscow, Nov 23 (IANS) Western countries' actions during the Ukraine crisis were contrary to democratic principles, said Russian Foreign Minister Sergei Lavrov . "Our Western partners played an 'all-or-nothing' game in...
Read more on Politics Balla
 
Release of army general expected: Colombian president
Bogota, Nov 23 (IANS) Colombian President Juan Manuel Santos said that he expected to secure the release of five hostages next week, including an army general, whose capture by the FARC rebels led the government to...
Read more on Politics Balla
 
Brook dating model James Crabtree?
London, Nov 23 (IANS) Actress-model Kelly Brook seems to have moved on from her on and off relationship with actor David McIntosh. Brook is reportedly dating a male model James Crabtree. The pair went on a romantic...
Read more on Celebrity Balla
 
Russia calls for free trade zone between EU and EEU
Moscow, Nov 23 (IANS) Russia has said that it is in favour of a free trade zone between the European Union (EU) and the Eurasian Economic Union (EEU). This was reiterated by Russian Foreign Minister Sergei Lavrov...
Read more on Politics Balla
 
Messi scores hat trick, becomes all-time highest scorer in La Liga
Madrid, Nov 23 (IANS) FC Barcelona superstar Lionel Messi scored a hat trick in a 5-1 triumph against Sevilla at the Camp Nou Saturday, to become the all-time highest scorer in La Liga history. Messi scored his first...
Read more on Sport Balla