Nordea Bank launches crowdfunding platform in Finland

The Nordic financial services group offers a technology bringing together investors and startup businesses

The Finnish arm of Sweden’s Nordea Bank will be the first Nordic bank to offer businesses access to the crowdfunding market by launching a technology platform in the summer of 2016.

The technology will enable investors to provide capital for growing businesses through automated processes – a major change for a bank as it will not be providing the capital but enabling other organisations or individuals to do so.

Startup businesses are increasingly turning to crowds for financing – the European crowdfunding market topped €6bn in 2015.

“Digitisation is transforming the banking industry and we want to be part of that transformation,” Topi Manner, CEO of Nordea Bank Finland, told Computer Weekly. “We will offer startups and growth companies the chance to find funding through a digital platform and bring together investors and companies in need of financing.”

Crowdfunding Industry Overtakes Venture Capital and Angel Investing

By 2016 the crowdfunding industry is on track to account for more funding than venture capital, according to research firm Massolution’s annual report. With an estimated market value of $34 billion in 2015, crowdfunding has come a long way since its valuation of $880 million in 2010.

In comparison, the VC industry invests an average of $30 billion each year. Meanwhile the crowdfunding industry is doubling or more, every year, and is spread across several types of funding models including rewards, donation, equity, and debt/lending. In particular, equity crowdfunding – now being legalised in the US – holds huge disruptive potential.

Crowdfunding industry growth figures, as reported by Massolution

The crowdfunding market grew by 167% in 2014, continuing the exponential growth of previous years. Two months ago the thriving British FinTech (financial technology) sector witnessed its first billion-dollar business. The company? Funding Circle, a five year-old crowdfunding platform. Their $150 million funding round was over-subscribed.

Read more →

Four tips to improve impact investing in Southern Africa

It is clear that every country in Southern Africa has its own particular set of conditions that affect the ways in which impact investing is handled. Impact investors must therefore take their time to carefully learn about the conditions in each individual country. While a country-specific approach is obviously needed, GIIN researchers, in their report entitled Landscape for Impact Investing in Southern Africa, have compiled four key considerations that apply to Southern Africa, which are:

1) Leverage technical assistance (TA) facilities to build the pre-investment pipeline:

More pre-investment support is required in order to to develop a strong pipeline of investable opportunities for businesses; TA funders like USAID and DFID are recognising the importance of getting companies to the point where they can successfully raise capital.

The report says: “Targeted, tailored support requires an upfront commitment of resources but has proven effective in preparing potential targets for investment and in building high-quality deal flow. This process can also dramatically reduce diligence timelines if the investor is able, before investment, to increase familiarity with and visibility into a business.”

2) Develop sector specialisation:

Impact investors can also drive growth, impact and solid returns by narrowing down their focus on sector-specific portfolios. This has enabled some to use their existing knowledge to target some less well-known opportunities earlier and also to reduce diligence timelines.

The report expands: “Sectors such as agriculture, energy, and financial services present large opportunities where different companies often face similar challenges; learnings can be shared across portfolio companies.”

Read more →

Crowdfunding helps Europe’s businesses boom

Crowdfunding is no longer a niche, it’s booming in Europe. In this edition of Business Planet, from Finland, Serge Rombi finds out how these platforms work and what makes a successful campaign.

Crowdfunding: a big deal

“Global crowdfunding was more than 30 billion euros last year,” Lasse Makela, CEO of the Invesdor crowd-funding platform, told euronews’ Serge Rombi.

“It’s growing by more than 100 percent per year. And it’s going to be larger than venture capital financing this year.”

Crowdfunding puts sparkle in drinks company

In the autonomous Aland islands in the Baltic Sea, a family-run SME produces 100 percent natural lemonade, using only local products.

In 2014, Tony Asumaa – founder of Amalias Limonadfabrik – realised that he needed to expand production and he immediately opted for crowdfunding.

“We chose crowdfunding because it was cheap, efficient, fast and, above all, non-bureaucratic – to get new capital into the company,” he said.

Through Lasse’s platform, Tony won more than 86-thousand euros in equity crowdfunding.

In other words, those who invested in his company are now shareholders.

“We have 163 new shareholders. As our ambassadors, they promote our products, they sell them. Some restaurant owners sell products throughout the country,” said Tony.

Thanks to the fundraising, Tony Asumaa will soon automate part of his drinks production.

He wants to drive up sales from 90-thousand to 200-thousand euros.

For Tony, it’s given his SME new impetus, but it’s a way of boosting the regional economy too.

“The most important thing for us is to use local, raw materials, fruits and berries,” explained Tony.

“We export 40 percent using local transport services and we’ve created new jobs for young people here, on Aland.”

Read more →

The Fix Crowdfunding Act is Mostly About Investor Protection

Last week the House Subcommittee on Capital Markets, part of the powerful House Financial Services Committee, debated several important bills that may boost access to capital for SMEs.  One of the bills, the Fix Crowdfunding Act (HR 4855), has the profound potential to turn Title III crowdfunding (Reg CF) into something quite powerful by addressing several shortcomings prescribed in existing rules. But probably the most important aspect of the Fix Crowdfunding Act is the fact that it will incorporate significant changes that will dramatically enhance investor protection while providing improved opportunity for smaller investors to generate wealth.

While much of the discussion regarding HR 4855, sponsored by Congressman McHenry, lined up along party lines, what was striking was the disconnect between the empirical and the speculative. Several Representatives expressed a “wait-and-see” approach – something that may do their constituents harm.  The Fix Crowdfunding Act should be pushed forward quickly – for the benefit of all.

Why Wait?

A major criticisms of existing Title III rules is one of negative selection. While the intent was to protect those individuals who could least afford to lose money, the cumbersome rules may ironically do the exact opposite. The law of unintended consequences is at play here. Using Reg D, the most popular securities exemption, is a far easier method of raising capital. All you have to do is make certain your investors are accredited (wealthy).  As the thesis goes, some of the companies raising capital under Title III will be businesses that were unable to raise smart money using Reg D.  If the VCs or professional Angel investors aren’t interested perhaps you can convince the “crowd” of retail investors.

One of the most glaring shortcomings of existing Title III rules is the inability to use a Special Purpose Vehicle or SPV.  An SPV can be a legal entity where a group of individuals invests in a company while being represented as a single investor on the cap table. Small companies need to be spending their time building their business and not dealing with the whims of every small investor.  At the same time, a bloated cap table may be a disincentive for future investors to come on board.  The SPV, if allowed to be structured correctly, may allow a professional investor to help guide smaller investors along the way. This approach has been described as the “killer app” of equity crowdfunding by MIT Sloan Professor Christian Catalini. His research has correlated nicely with some of the most successful investment crowdfunding platforms around the world.

Read more →