22 June 2017 Oliver Gajda Executive Director Crowdfunding 22 June 2017 Oliver Gajda Executive Director

Who is ECN and what are our objectives? The European Crowdfunding Network AISBL (ECN) is a professional industry network Promoting transparency, (self-) regulation and governance of the crowdfunding industry Fostering policy discussion and public opinion building Aiming to increase the understanding of crowdfunding as key support for entrepreneurship LOBBYING EDUCATION RESEARCH GROWTH Ongoing dialogue with EU insitutions Joint statements with fellow trade bodies Publications 2 annual conferences Seminars, webinars and workshops Own research EC research projects ECN Code of conduct Best practices Transparency Brussels, 22 June 2017 Slide 2

Overview Types of crowdfunding We can differentiate four major types of applications. Donation: a donor contract without existential reward Reward: purchase contract for some type of product or service (pre-sales) Lending: credit/debt contract, principle is being repaid plus interest Equity: shareholding contract, shares, equity-like instruments or revenue sharing in the project/business, potential up-side at exit Brussels, 22 June 2017 Slide 3

Motivation of crowdfunding Crowdfunding is based on the fact that people want to help other people and projects they like and that are close to them, emotionally or geographically. Motivation of funders : There are three different motivations for people who want to participate in crowdfunding: social return, material return and financial return. Motivation of business/project owner : Besides raising money, crowdfunding allows to gain feedback on critical parts of the product before its release into the public marketplace in a short period of time. Brussels, 22 June 2017 Slide 4

Value added of crowdfunding Helps to validate pricing, demand, product design, demographics. It can reduce market research cost while delivering more genuine input Innovates customer services by aligning motivations between the business and its customers on the same goal. It can establish a common value between the business and the customer Reduces funding needs in product development, production and ordering by creating efficiences in forcasting. It can help identify priorities and reduce cost of over production/stocking Empowers consumers to be co-creators and links them directly to the product (business). It can create customer loyalty and word-of-mouth recommendation Brussels, 22 June 2017 Slide 5

Risk of crowdfunding Next to potential benefits, there are also risks attached to crowdfunding Reputation risk linked to the teams ability to deliver, the performance of a product or service over time (there have been cases of deliberate fraud in the US in reward crowdfunding) Distrust from customers as to the reasons for crowdfunding - perceived deception Lack of return on investment, both in financial instruments (equity, debt) and pre-sales (non-delivery or bad quality) Brussels, 22 June 2017 Slide 6

Overview RES crowdfunding About 29 active crowdfunding platforms worldwide in renewables (with 10-20 to launch) About 400 projects published (and counting) Europe (Germany, United Kingdom, Netherlands) starts the sector in 2012 USA following in 2013, since then dramatic growth Investments in mix of technologies, i.e. solar photovoltaics, wind, biomass, hydropower Brussels, 22 June 2017 Slide 7

Crowdfunding for Renewable Energy The part of the public that has an interest in investing even very small amounts of their savings in renewable energy projects Brussels, 22 June 2017 Slide 8

Crowdfunding for Renewable Energy Community members Other citizens Brussels, 22 June 2017 Slide 9

Crowdfunding for Renewable Energy Intermediaries facilitating the financial transaction between the public and the project developers Brussels, 22 June 2017 Slide 10

Crowdfunding for Renewable Energy Renewable energy project developers whose access to financing is getting more challenging Brussels, 22 June 2017 Slide 11

Crowdfunding for Renewable Energy Commercial developers Cooperatives, Public entities + PPPs, etc Brussels, 22 June 2017 Slide 12

What makes a good project? Large markets - high growth and value above €1bn. Fast & Rich customers - willing to pay your price and move quickly. Focus - simple product with a singular value proposition. Pain killers - the one thing that is of burning importance to your customers and the one and only compelling solution. Think differently - always reiterate what you are doing, improve Team DNA - Top level founders attract a top level team and investors Agility - Stealth and speed will usually help beat-out large companies. Frugality - Focus spending on critical priorities and maximize profitability. Inferno - Force discipline and focus. Brussels, 22 June 2017 Slide 13

Due diligence of platforms Identify crowdfunding platforms that cater your needed form of funding, look for those that might have carried projects in your sector previously Study related projects, both successfull and unsucessfull ones Closely study the platform (information provided, funding process, fee structrues, legal terms (you might have to register to find these) Check numbers of projects, funding amounts, success rates, geographic focus and other historic data Compare the most important KPIs to find the most suitable platform(s) Decide and consider one or more platforms for your campaign Brussels, 22 June 2017 Slide 14

Meeting Platforms (and investors) Investors relate to your needs, market and business What are you offering? What is your committment? How much are you willing to give up? Are you able to let go and listen to others? You should relate to investors by their actual positioning Geographical location of your project Development stage of your project and that of the investor Investment type required or preferred Your industry sector and specific know-how Amount you intend to raise at this stage Feedback from their experience, if and where possible Brussels, 22 June 2017 Slide 15

Due diligence of yourself Agreements/Term sheets - you need to have signed a term sheet prior to the due diligence in most cases (the term sheet sets out the terms of the contract to be entered into if the due diligence is successful). The due diligence – this will typically involve a set of basic reviews that help characterise your business. These will most certainly always involve: Evaluation of the management team Audit of the financial accounts Evaluation of the technology Analysis of the intellectual property rights Evaluating existing customers’ recommendations Brussels, 22 June 2017 Slide 16

Valuation You set your valuation, the crowdfunding platform will however influence you or may have their own method. Depending on the type of finance you are seeking (debt, bond, equity) the methodologies will vary. Crowdfunding platforms have usually a standard contract to begin with, which can help simplify things; even the best lawyer might not be able to secure your interest at all times and you can be assured that without legal advise you will most likely secure none of your interests. Brussels, 22 June 2017 Slide 17