User:LUUDwine/Symbid

Symbid

Symbid
Symbid B.V. is a Dutch crowdfunding company, located in Rotterdam. Its first five years were devoted to the legal, regulatory, and fiscal framework design. In April 2011 the crowdfunding platform went live. Currently, Symbid has several partners and is developing international partnerships. Additionally, Symbid is expanding its services by adding Symbid Angels and a Location Based Contract Management System to its core infrastructure. The company counted ten employees in September 2012.

General information About Symbid Symbid has unofficially been active for approximately five years and established itself officially in April 2011. The team has grown from four to eleven members acros the departments Legal, Marketing, Platform Management, Software & Project Development and Finance.

At 27-09-2012, nine propositions were fully funded with a compounded value of just over EUR 1.000.000. Seven of these propositions were funded in the first half of 2012, with a compounded value of EUR 410.000,- or an average of EUR 58.500,- per idea.

Industry development & JOBS act
One of the earliest instances of crowdfunding (including offline initiatives) was in 1997 when fans underwrote the entire U.S. tour for British rock group Marillion. Since then, multiple crowdfunding websites have launched, beginning with United States-based ArtistShare (2000/2001). Crowdfunding was often used for creative projects but has since been used to raise funds for a wide variety of activities, including disaster relief, citizen journalism, support of artists by fans, political campaigns, startup company funding,[2] movie[3] or free software development, and scientific research.[4]

Crowdfunding in the U.S. is currently limited to the pledge- or donations-based systems. Equity-based crowdfunding – which allows companies to offer shares in return for individual investments – is not allowed under current legislation. This is expected to change at any time: On April 5, 2012, President Barack Obama signed the JOBS (Jumpstart Our Business Startups) Act; this piece of legislation effectively lifted a previous ban against public solicitation for private companies raising funds.[19] As of September 17, 2012, the Securities Exchange Commission (SEC) has yet to set rules in place regarding equity crowdfunding campaigns involving unaccredited investors for private companies. These rules are expected to be set by January 1, 2013. Currently, the JOBS Act allows accredited investors to invest in equity crowdfunding campaigns, but not individuals.

The Dutch crowdfunding industry, where Symbid mainly operates (approximately 70% of its ideas and users are Dutch), has not yet been extensively researched but some data is available. According to the crowdfunding consultancy bureau Douw & Koren, the Dutch crowdfunding industry gathered EUR 3.000.000 in the first half of 2012, within 210 projects. The entrepreneurial or business category represented EUR 1.450.000,- of this total amount while the average goal capital acquired per project across the entire industry was EUR 10.000,-. It is expected that further research will continue to be conducted as the industry develops.

Symbid in the crowdfunding field
Symbid is a relatively old player in the field of crowdfunding, especially equity-based crowdfunding. Though the oldest initiatives are dated back to 2001 (start of ArtistShare) the industry has been gaining the most traction in the last couple of years. As Symbid started out unofficially approximately five years ago and officially two years ago, it is a relatively old company within the industry. The list of younger crowdfunding initiatives is growing every day though a mass shake out is expected in the next one to five years, especially after the U.S. market allows equity-crowdfunding in 2012-2013.

Products and Services
Symbid provides crowdfunding infrastructure that enables individuals to become investors in new and start-up companies and entrepreneurs to raise funding from many individuals as an alternative to debt or large investments. In addition to hosting its own platform, Symbid offers white-label services through its partner program.

Main Product
Entrepreneurs and Crowdfunding Companies and individuals submit a business idea for a new venture or a growth plan for an existing venture, called an idea or preposition. When the entrepreneur registers a proposition at Symbid, they indicate how much capital is required to start or grow the business. Symbid requires a registration fee for existing companies. No registration fee is required for entrepreneurs with only an idea (no legal entity). Symbid emphasizes the importance of amount of funding needed, the strength of the pitch and marketing efforts in reaching target capital.

Entrepreneurs can raise funds in two ways: through pledges and through equity (see Equity- v.s. Pledge-based Crowdfuning).

Symbid has developed a portal called “Crowdfunding Campus” designed to walk registered entrepreneurs through the crowdfunding process. This includes a step-by-step guide to developing a business plan, adding an informational video, and advice on how to effectively reach potential investors. Some related resources are available on the website for entrepreneurs who are using any crowdfunding provider, not Symbid specifically.

Investors and Crowdfunding Individuals can view and invest in a variety of propositions listed on the Symbid website. Individuals can invest amounts from EUR 20.00 to EUR 2.5 million. Investors can charge their electronic wallets to invest. Electronic wallets allow money to be invested and divested up until the campaign’s deadline comes and the target capital is reached. Investors can move their investment from one idea/proposition to another as long as the target capital has not been met. Investors using Symbid can manage their investment portfolios directly and online. There are no intermediaries involved in this process.

Limited Service to US Investors Currently the equity-based crowdfunding services of Symbid are not accessible for investors from the United States. This is likely to change as soon as the JOBS-act (signed by President Obama on the 5th of April 2012) has been implemented by the SEC. Investors and entrepreneurs from the US are able make use of the Symbid pledging system which does not rely on selling shares and is therefore legal for US citizens.

Crowdfunding via Pledging Individuals may wish to buy a product or "perk" in presales, or “pledge”, at a certain amount. This differs from investments because equity is not a presales of a product but a "buy-in" in the company. With pledging, the individual makes a commitment to back the company for a certain amount and the company makes a commitment to deliver a product or service in return.

Equity- v.s. Pledge-based crowdfunding
Currently there are four types of crowdfunding identified: equity-based crowdfunding, lending-based crowdfunding, donations-based crowdfunding and reward-based crowdfunding (NESTA Report). Symbid currently offers reward-based (pledging) and equity-based crowdfunding.

There are two models for collecting and providing funds through crowdfunding. With the equity-based model, an entrepreneur offers a certain amount of equity in his/her company in return for investment. This works very much the same way as venture capital and other investment models, only the investment, and therefore equity stake, is usually split among many smaller investors rather than one or two large investors. When equity is involved, there is a longer-term relationship between the entrepreneur and the investors (who, in the case of Symbid, are gathered into a single Investor Cooperative – see Legal Structure).

With the pledge-based model, equity does not change hands. The funder (or “pledger”) commits a certain monetary donation – called a “pledge” – in return for the company’s product or service – called a “perk”. In the case of Symbid, once the target capital has been reached and the pledge and perk exchanged, there is no longer a formal standing commitment between the entrepreneur’s legal entity and the one who pledged funds. Each has fulfilled their commitment.

In each case, the transaction is only completed if the entrepreneur reaches their target capital. If this does not happen, the money is refunded to the pledgers and investors. Both pledge-based and equity-based campaigns can be run simultaneously and toward the same target capital. The objective is to raise the target capital regardless of whether one method yields all or by combination.

Legal Structure
The legal structure developed by Symbid bundles all investors into an investor cooperative when the target capital has been achieven, which then acts as a single shareholder within the legal entity of the entrepreneur. Prior to the release of funds to the entrepreneur, investors’ money is collected by InterSolve (FEET) and deposited in a separate Trust bank which is under the supervision of DNB (De Nederlandsche Bank) and AFM. InterSolve provides coverage of funds of the members.

Once the proposition is fully funded (target capital reached), an Investor Cooperative is established. The Investor Cooperative U.A. is the aforementioned collective of investors. Each investor cooperative participates in only one legal entity (business). The entrepreneur transfers the agreed upon percentage of equity as indicated on its Symbid page. Each investor received the number of membership certificates in the Investor Cooperative proportionate to their investment. Each member has voting rights in proportion to their number of membership certificates. The memberships are subject to limited transferability (must be authorized by board of the Investor Cooperative). The “Inner Circle” is established as a place of collaboration between Entrepreneur and Investors. This is already accessible during the funding process, and remains active one the Investor Cooperative is established.

Symbid Angels
Not only smaller crowd investors are interested in private funding; larger investors, or Angels, are too. An Angel investor is someone who invests a large(r) amount of money from his own private savings. They might operate individually but most Angels cooperate in groups. Angel groups are generally local organizations made up of 10 to 150 accredited investors interested in early-stage investing. In 1996 there were about 10 angel groups in the United States and are over 200 as of 2006. Currently, Angels are also making the shift to online investing as the existence of platform as MicroVentures or SonicAngel shows. To service the group of Angel investors that do not meet the (budgetary) requirements of investment groups, Symbid is preparing to launch Symbid Angels. This seperate part on the platform aims to create crowdfunding opportunities for investors with a budget between EUR 2.000 and EUR 10.000. In relation to the overall crowdfunding industry such initiatives show that the audiences serviced by crowdfunding vary and that the product development within the crowdfunding industry has not yet come to a halt.

Partners
Symbid establishes and maintains a network of cooperative partners that share the objective of directing potential investors or entrepreneurs to the Symbid infrastructure in order to receive a financial kickback. Symbid promotes an interconnected environment, meaning that every newly added partner creates value for itself, but also for the ecosystem as a whole. Symbid offers different partnering options in order to appeal to organizations with different levels of ambition and scope considering crowdfunding.

Country Joint Venture Partners
A Symbid Country Joint Venture Partner is considered a subsidiary of Symbid Holding within a certain European Union (EU) country. The Joint Venture generally consists of Symbid, a local partnering team, and investors to support operating costs. Symbid offers the technical and legal frameworks, and crowdfunding expertise. The partner leverages knowledge of local market to establish or grow the crowdfunding industry and build awareness of the Symbid system among relevant stakeholders: investors, entrepreneurs, business angel networks, universities and other entrepreneurial associations. Ongoing collaboration between Symbid and the local partner explores and exploits opportunities in that local market.

The first Country Joint Venture will be Symbid Italy which is currently under development.

Niche Partners
A Niche Partner is a company/player which has a leadership role within a certain market and is willing to use its position to enable a crowdfunding platform on an exclusive basis. A niche partner reports to a Country Joint Venture partner, but is working on an autonomous basis within its market. Symbid offers the full functionality of the platform, but the Niche Partner has the option to offer the service fully white-labelled.

Niche Partners are encouraged to screen propositions in order to maintain a certain standard of quality on the Niche Portal. Symbid regards these partners as experts in their industry and, as such, directs entrepreneurs of a certain industry signing up on the Symbid portals to appropriate Niche Partner where applicable.

Examples of Niche Specific Partners are Gambitious (Gaming) and Enviu (or ImpactCrowd) (Sustainable Entrepreneurship).

Generic Partners
Generic Partners use white-label versions of the Symbid platform and functionality to create their own crowdfunding service. Unlike Country Joint Venture Partners and Niche Partners, Symbid remains largely uninvolved in the business activities of Generic Partners. This form of partnerships is suitable for larger publishers and website owners with high brand value and high volumes of traffic, or for incubators and innovation centers. The robustness of the Symbid crowdfunding platform combined with the brand value of the Partner creates great opportunity for building brand value for the Partner.

Example of Generic Partners are MKB Crowdfunding (Dutch), EFunding (managed by EFactor Netherlands) and Sproutfunding (Dutch).

R&D and Third Party Services
Symbid is involved in establishing the crowdfunding industry standards. While the market is still in development stages, there are multiple challenges. Symbid is active in efforts to overcome these by working together with several partners like the European Space Agency and its Business Incubation Center. Together they developed the Location-Based Contract Management System which aims to overcome implications of geographically different laws and regulations. This would increase the ease of international expansion for crowdfunding platforms. Cooperation with InterSolve EGI BV and FEET (First European E-money Trust) help ensure safety and security for all crowdfunding users. FEET is supervised by the Dutch Authority on Financial Markets (AFM) and the Dutch National Bank (De Nederlandsche Bank), and arranges the e-money traffic from and to the Symbid platform.

CAPS
The CAPS (Crowdfunding Accreditation for Platform Standards) accreditation is an initiative of Crowdsourcing.org. Crowdsourcing.org states that: "Designed to protect both crowdfunders (people pledging or investing capital) and fundraisers (people raising capital), the CAPS program's mission is to foster the sustainable growth of the crowdfunding industry to provide much needed capital for projects and initiatives, start-ups and small businesses" and that "Accreditation is awarded based on passing qualification criteria in four categories of platform operation": Symbid is amongst the first platforms in the world to receive the accreditation.
 * Operational transparency
 * Security of information and payments
 * Platform functionality
 * Operational Procedures

Awards
Shell Livewire Audience Award – 14 December 2011 Symbid was granted the Shell LiveWIRE Audience Award at the 13th edition of the Shell LiveWIRE Awards. They gained over 40% of the audience' votes via the Shell LiveWIRE website and were awarded a €2.500 prize. Xilloc Medical from Maastricht is the winner of the jury prize of this prestigious award and received the associated €10.000.

Developing Industry
One of the first crowdfunding industry reports published (by Massolution and Crowdsourcing,org), reports that the 452 existing crowfunding platforms worldwide gathered almost $1.5 billion in 2011. The growth expectancy of the industry according to this report is an estimated 60% for 2012. The Dutch crowdfunding industry accounts for EUR 3 million in the first half of 2012, which is a duplication compared to the first half of 2011. These developments, though still the subject of severe scrutiny, are promising and a reflection of an industry that after almost a decade is finally gaining traction. Though crowdfunding in the U.S. currently exceeds that of Europe or other geographical districts, this difference exists based on dontation- or reward-based crowdfunding as currently, equity-based crowdfunding is not yet legal in the U.S. That implies that all equity-based crowdfunding, which accounts for 18% of the $1.5 billion industry, is all gathered outside of the U.S. Currently the U.S. is progressing the Jumpstart Our Business Startups- Act, or JOBS-act. This act aims to legalize equity-crowdfunding in the U.S. opening up the market to both international crowdfunding as well as creating another financing method for U.S. based companies.

Despite major growth of the industry and the increase of public knowledge about crowdfunding, iExpats reports that “Crowdfunding is a mystery to 70% of businesses”. Though there is hardly any data to contextualize or counter this, it does indicate that the crowdfunding industry is still an early industry in development.

Criticism
Symbid as such has not yet received specific criticism and most of the concerns that Symbid has received are explained better by looking at the crowdfunding industry as whole. The concers listed below for the most part potentially also apply to Symbid though it has mostly been contacted to elaborate on these concers and has not been accused of actively allowing the following 'dangers' of crowdfunding to forment on its platform.

Genereal Insights into Marketing Though the amount of data about crowdfunding is currently increasing, some conclusions might be need further investigation. The Crowdfunding Industry states that “In stark contrast to equity-based and lending-based models, reward-based and donation-based models are characterized by non-financial motivations for engaging in crowdfunding.”. Yet such statements might be contrasted by the given of a “financial” reward, as “financial” may indicate “monetary” (supporting the statement) or “profit”. The “profit” might not be financial but the donations or reward-based models do incur some kind of profit, shifting the idea of a backer that expects nothing in return to the concept of a backer who chooses another form of profits. Though motivations have been researched on several accounts (Agrawal et al., Belleflamme et al., Ordanini et al.) there is no generally accepted idea of key motivations that remains without criticism.

Crowdfunding Practices Scrutinised Though the reception of the JOBS-act in the U.S. has been genereally positive there is still a lot of uncertainty amongst investors and target audiences. These doubts are often (but not exclusively) voiced in the shape of articles, like “The Road to Crowdfunding Hell” that identifies four main dangers: 1) inappropriate extrapolations; 2) stock purchases are too complex to standardize; 3) due diligence is too expensive and finally, 4) crowds are not intelligent. Additionally, doubts about fraud, scaring away larger investors and a lack of understanding and knowledge about the concept continue to exist.

The response to these worries currently exists of research into the field, initiatives like Crowdsourcing.org's CAPS-programma and from Symbid specifically, their partnerships with FEET (under supervision of the Authority Financial Markets and the Dutch National Bank), AKD (lawyers and notaries), BDO (accounting) and other partners that verify and test its legal and financial structure.