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Who wants to become an investor?

  • Published 04/02/2014
Crowdfunding is a relatively new, but fast growing, phenomenon, giving entrepreneurs the opportunity to apply for funding from the general public, who may believe in the concept when investors don’t.

– It is a way of democratizing investments, meaning you don’t necessarily have to be a wealthy, professional investor to invest in a new venture, says Rotem Shneor from University of Agder in Norway, project manager for the project Nordic Crowdfunding Alliance for Entrepreneurial Growth that has received funding from Nordic Innovation through the Nordic High Growth Entrepreneurship Initiative.

 

Shneor adds that crowdfunding may provide a solution to the critical period at early stages of a venture, when access to seed capital is limited and the company is not yet mature enough to engage and interest professional investors and venture capital.

 

But how does it work in practice?

Entrepreneurs looking for crowdfunding can promote their project in the online community of a crowdfunding platform, with experts providing feedback and advice prior to and during the launch of each campaign. Before the launch, the entrepreneurs set a goal for the campaign – a minimum sum that needs to be met in order for the project to get started. Of the money that comes in from the crowdfunding, a small part goes to maintaining the platform.

 

Except if the campaign falls, then the service is free. The crowdfunding campaigns can be run as reward-based or equity-based, meaning that the investors can be rewarded with everything from a sample of the product to shares in the company.

 

Checking the concept

Shneor points out that a concrete business plan is recommended before launching a campaign. How will the product be brought to market? Marketing skills are a great advantage for entrepreneurs looking for crowdfunding.

 

– As the crowdfunding platform allows the entrepreneurs to present their product online for a few months before the actual funding process begins, it provides a great opportunity to check the concept as well, letting people respond to it and suggest improvements, Shneor says.

 

In most cases, backers of successful campaigns are likely to become active promoters of the venture during and after the campaign, while being directly engaged in positive word-of-mouth and brand loyalty in consumption.

Rotem Shneor

 

Scaling up to a Nordic level

At the moment, there are only a few crowdfunding platforms in the Nordic region. By scaling up these national operations to a Nordic level and sharing resources, entrepreneurs can reach out to a bigger audience – getting access to a larger pool of potential investors and customers across Nordic borders. In the same way, investors can find more interesting projects across the Nordic countries for investment, while also monitoring actual market reactions to each campaign.

 

This is the purpose of the Nordic Crowdfunding Alliance for Entrepreneurial Growth – in which five crowdfunding platforms from Denmark, Finland, Iceland and Norway, have joined forces. Projects looking for funding on a Nordic level can publish their product on a common Nordic platform scheduled to be launched around mid-2014.

 

– Based on its success, the Nordic Crowdfunding Alliance will eventually become an independent organisation, Rotem Shneor says.

 

­– A first step towards acceptance

Andrea Di Pietrantonio from the Finnish project participant Invesdor, says that they, by joining a Nordic crowdfunding platform, see the chance of creating interaction and synergies across national platforms and projects in order to deliver a higher added value to the consumer – and to boost Nordic entrepreneurship and growth companies.

 

– The Nordic countries have similar values in terms of both consumer and investor behaviour, and we believe that this project can strengthen the crowdfunding culture in the region.

 

Di Pietrantonio says that teaming up in the Nordics is a first step to a public acceptance of crowdfunding as a business model, scaling from early adopters to mass market in the innovation adoption life cycle.

 

– Our goal is to facilitate the creation of a fertile business environment where companies have access to finance and are able to validate their product and maximize their marketing efforts.

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Project participants

Norway: University of Agder, Gründerløkka AS/FØND

 

Finland: Invesdor Oy, Mesenaatti.me OY

 

Iceland: Karolina Fund

 

Denmark: AMOX/Boomerang.dk