René Klein

Crowdfunding – Raising the Bar for Business Angels and Venture Capitalists

Following the Fall 2011 launch of crowdfunding on the Seedmatch and Innovestment platforms, this new-fangled financing instrument also took to the stage at the CeBIT trade show this year. Topping the bill at the event were two business startups, Changers.com and carzapp, the two recipients of coveted crowdfunding services from Seedmatch at the CODE_n contest. Both young companies have already reaped the rewards of crowdfunding: carzapp successfully revved up 363 investors with its concept and attracted capital worth €250,000. As Changers.com prepared to lower the curtain on its funding drive on May 2, 2013, it had 151 small investors offering a total of €80,750. In both cases, investors within the “crowd” participate via an equity-like shareholding loan (a German “partiarisches Darlehen”). Accordingly, every investor is entitled to a share of the startup’s commercial success.

René Klein - CEO of www.fuer-gruender.de

René Klein – CEO of www.fuer-gruender.de

The usual approach taken on other platforms is based on classic “dormant equity” holdings. The German Efi think-tank (the Expert Commission on Research and Innovation) looked closely at this area for its 2013 annual expert report, concluding that, “In the opinion of the expert commission, equity-based crowdfunding could play an increasingly important role [in the future], especially during the early-stage financing of startups.”

This is also underscored by recent data from our crowdfunding monitor issued on March 31, 2013. In the first quarter of 2013, seventeen startups attracted no less than €1.8 million via crowdfunding platforms. The total value of all 67 funding rounds conducted to date in Germany is thus more than €6.5 million. There are a whole host of platforms for startups to choose from, with Seedmatch, Innovestment and Companisto topping the list of larger platforms. More…

Janina Benz

Key success factor crowdfunding – CODE_n initiates live funding at CeBIT

The bestowal of the special crowdfunding award at CeBIT was a big success. Why did we do it? Because even the best idea or the most innovative product does a startup absolutely no good if it doesn’t get out there, to the people. It takes money to get the word out. And financial means aren’t always easy to come by, especially considering the ever-increasing demands associated with implementing new technologies. In fact, preparing market-ready products eats up much more of startup budgets today than it did just a few years ago. It has been getting more and more difficult for small, young companies to get their hands on the capital needed to see their ideas take off. We wanted to introduce our finalists to a new topic, and show them yet another way to find potential investors: crowdfunding .

Crowdfunding describes the collective effort of individuals who network and pool their money, usually via the Internet, to support efforts initiated by other people or organizations. It can also refer to the funding of a company by selling small amounts of equity to several investors.

A lot of people asked us how this cooperation came about. We wanted to offer our finalists the opportunity to familiarize themselves with crowdfunding opportunities. That’s why we turned to Jens-Uwe Sauer. He was a member of the CODE_n jury in 2012, and, as Founder and CEO of the German crowdfunding platform, Seedmatch, he brought a world of expertise to the table. Just what we needed for our little endeavor.

Working together, we came up with the idea of hosting a live crowdfunding event, right at CeBIT. According to Jakob Carstens, Head of Marketing at Seedmatch, the winners were selected according to very specific criteria:

“In our selection of the startups for the special crowdfunding award, we sized up t More…

Janina Benz

PATXI ECHEVESTE: “This community will be our little treasure”

Patxi Echeveste - Founder of Wattio

Patxi Echeveste – Founder of Wattio

Patxi Echeveste, founder of Wattio, is a serial entrepreneur in the fields of green energy and energy efficiency. He believes that generating green energy is less interesting than conserving it, because the greenest energy is the one that is not used. He launched his first company, a solar company, at the age of 25, right after completing a masters in Economics Engineering. Now aged 33, his second company is aimed at turning normal houses into SmartHomes with Wattio, a powerful, flexible and cost-effective solution.

Janina Benz:What makes Wattio different than other smart home systems?

Patxi Echeveste: Wattio brings you a complete solution for saving energy and managing your home in a smarter way: we master software, firmware, and hardware to make your life greener and easier. It is extremely easy, secure, flexible, scalable, open, cost effective, and cool.

JB: What’s been your biggest challenge so far?

PE: This project has taken four years of hard R&D work in order to bring a complete solution for SmartHomes to you all. But, honestly, the big challenge now is to place it in the market, and to catch the attention of the media!

JB: You’ve just launched a fundraising campaign on Indiegogo. Why did you decide to raise money through a crowdfunding platform?

PE: We wanted to recruit a unique user base. This community will be our little treasure and we want to grow with it. We will take care of their problems and love their feedback. You know, taking care of the environment and the people we love is a big task—that’s why we need this community. Of course, supporters will get great benefits.

JB: What do you plan to do with the money that you raise?

PE: The more you support us, the more products and solutions we can offer you. Apart from the electricity and comfort system, we will offer solutions in the security and health fields as well. And of course, the platform will be continuously improving and growing.

JB: Aside from contributing, how else can people get involved?

PE: Ask folks to spread the word and make some noise about our campaign! Use the Indiegogo sharing tools, get one of our running t-shirts. We will be always grateful.

JB: Thanks, and good luck!

Editor’s Note: We’ll be featuring some of our finalists on the blog in the weeks leading up to and after CeBIT, but their participation has no bearing on the contest results

Janina Benz

Meet the CODE_n13 finalists for: Social Community & Crowdfunding

The Social Web enabled a lot of new technologies. Especially for the energy and IT sector there are many interesting solutions. It’s time to meet our finalists in our Social Community and Crowdfunding category: bettervest, FutureWatt, MilktheSun, Social energy behavioral networks and Sunnycrowd.

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Lena Gaede

P2P Lending and Crowdfunding: Viable Alternatives to Traditional Investors?

The first phase of a startup may be fueled by passion, but sooner or later (and most likely sooner), you’ll need to secure funding. Investing your own money, appealing to family and friends, and pitching to angels or venture capitalists are all time-honored approaches, but peer-to-peer lending and crowdfunding platforms are creating new ways for potential investors and startups to connect.

Peer-to-peer (p2p) lending is one option for those looking for a one-time, limited infusion of cash. (At this point in time, loan amounts are typically small, up to around $35,000). By using a platform like Zopa or Prosper, dozens or even hundreds of individual investors can pool smaller loans—sometimes as little as $10—into one loan at rates more favorable than banks can offer. While this approach has worked well for individual borrowers, some companies have preferred to use a more direct route to find investors, either by operating their own platform, partnering with an industry-specific site, or by using a white label platform.

One major restriction facing the p2p industry is geographic restrictions: currently, most p2p lenders can only operate within their country. However, in October 2012, Estonian lender isePankur became the first p2p to offer anyone in the EU a chance to invest in Estonian consumer loans. As p2p lending matures and becomes more familiar to investors and startups, reduced regulation can be expected to lead to a larger pool of investors and larger loan limits.

When loans are unfavorable or unobtainable, though, other startups have turned to crowdfunding platforms. It’s estimated that globally, there are over 300 platforms dedicated to crowdfunding, and that it could grow to be a $3 billion industry in 2013. Some platforms, like Kickstarter, can only offer rewards like t-shirts or discounts to donors, but equity crowdfunding, in which investors contribute as little as 20 euro in exchange for a percentage stake in the startup, is attracting investors’ attention.

Equity crowdfunding in Europe has already shown great promise. UK-based Crowdcube recently helped professional networking site Escape the City raise £600,000 from 394 investors in two weeks. What’s particularly notable is that this was not a last-ditch effort to raise capital; the startup had already turned down offers from two established venture capital firms. In the Netherlands, Symbid has also found a willing audience: 372 investors from around the world contributed €100,00 to help Enviu invest in other sustainable businesses.

The United States has been slow to approve equity crowdfunding—although the JOBS Act was passed in April 2012, specific rules have yet to be released—but companies are already preparing for new investors. WeFunder has solicited interest from investors, and existing sites like Kickstarter could easily expand to equity with its existing community.

Of course, peer-to-peer lending and crowdfunding have risks for startups and investors alike. Startups may find it more challenging to attract secondary funding, as crowdfunding investors may not have sufficient funds or venture capital firms seek to avoid dealing with other investors. Investors, meanwhile, may lose money on failed startups and scams.

Perhaps even more important than funding, though, is access to advice.  VC firms are accustomed to guiding founders through the building process and open doors, which individual investors may not be accustomed to. In the long-term, this may prove to be another strength, as startup founders can turn to a wider pool for input and connections. The transition to p2p lending and crowdfunding may be challenging, but the potential for both startups and investors cannot be ignored.

Janina Benz

Strong Partners: Dell and Seedmatch to Back the CODE_n13 Contest!

Through November 18, CODE_n will continue searching for the world’s most promising startups whose ideas make a valuable contribution to the transition towards sustainable energy. The contest will run under the motto: “Smart Solutions for Global Challenges.” The 50 best entries will get the opportunity to present their business concepts at CeBIT 2013 in Hanover.

In addition to founding company GFT and strategic partners Ernst & Young and Deutsche Messe, two more companies are getting involved in CODE_n13: technology corporation Dell and the crowd funding platform Seedmatch.

Dell

Dell

Dell and Seedmatch Sponsor Special Prizes

With these new partners, our participants have even more opportunities to win. Dell is awarding a prize of €10,000 to the best business application developed for Windows 8 systems. Three German startups will also have the chance to receive crowd funding services through Seedmatch. Participants who submit a complete application at www.code-n.org by November 18, 2012 will be automatically entered to win one of five Dell Latitude™ 10 tablets*.

Seedmatch

Seedmatch

CODE_n Community at CeBIT

CODE_n offers 50 startups their own exhibition space at the world’s most important event for the digital industry, CeBIT 2013 in Hanover. In line with the upcoming CeBIT theme “Shareconomy,” they will get the opportunity to share their business ideas with trade visitors, investors and potential partners in a special, artistically-designed exhibition hall from March 5-9, 2013.

CODE_n13 Contest Sets Its Sights on Startups and Emerging Businesses

In addition to free exhibition space at CeBIT, a number of other attractive incentives await CODE_n13 Contest participants. Winners of the CODE_n13 Awards in the “Startups” and “Emerging Companies” categories will be awarded €15,000 each.

All companies that have completed at least one business transaction and were founded in or after 2006 are eligible to participate.

[*Dell Latitude 10 Tablet with WIN8 & Intel® Atom™ Processor Z2760 1.8GHz with Intel® Burst Technology, 1.5GHz HFM, 600MHz LFM]

John Groetting

What do YouTube, Tumblr, Airbnb and Flickr all have in common? Each of these companies was founded by a designer.

„How do I get all of my favorite cookbooks into the nice, compact form of an iPad?“ This question inspired John Grøtting to found his own business. Caramelized is a smart cookbook for the iPad – amazingly compact and with intuitive kitchen aids integrated.

Caramelized - smart cookbook

Caramelized – smart cookbook

On Monday Caramelized, also a CODE_n12 finalist, published the news that they received a crowdfunding round on seedmatch. We were wondering about the story behind and how is the team handling the startup pressure? Caramelized CEO John was so kind to write a guest blog about his experience in this biz.

John Groetting - Founder and CEO of Caramelized

John Groetting – Founder and CEO of Caramelized

Have you ever bought a product and found yourself compelled to tell a friend about it? That company has definitely put lots of work into creating a product that has qualities that have motivated you to do advertising for them. And you gave them money for that. The better your product can excite your customer, the less you have to invest in advertising. Furthermore, the less you can spend on development, the more you need to invest in design.

Obviously, none of these companies would have worked without engineers, too. But, too often highly innovative technology teams struggle to find a problem for their solution.

What does great design bring to a startup?

1. Focus.

2. A memorable product.

I love the excitement of being in a startup. But, it is easy to drift off into a sense that you can conquer the world. That confidence that helped you take the risk of creating a startup tends to do that to you. But, if you have goals centered around consumer needs, then it becomes much easier to set priorities and to discuss them objectively.

In our team, we locked in on the notion that how we cook hasn’t innovated at the same pace that consumer electronics and computing has. So, our mission became to perfect the way that we cook. This is obviously a very lofty goal, which we very much intend on fulfilling. But, how could we avoid spending 10 years in development before releasing a product?

Think big but execute in well chosen steps!

I am a firm believer in creating big, hairy, audacious goals and then executing it tons of tiny steps. At each step, reevaluate the goals and adjust. Iterate frequently. This will also require rapid prototyping skills. When I say rapid, I mean within one hour. Most functionality can be prototyped and tested within one hour. We do tons of sketching on paper, creating storyboards in meetings. This is a great means of brainstorming. I can sketch out the flow through 5 to 6 steps of interaction in our interface within a couple of minutes. Then the team loves it, hates it or gives great ideas on how to improve it.

Reflection is a must for each feature!

Force everyone to fight for any new features. This will do three things. Firstly, it will prevent feature-bloat, which will create delays in delivering your product, which is already way beyond its completion date. It will make everyone deeply analyze each feature, making any features that come through the process much better. And, it helps you avoid having to remove that feature later, when you realize how unnecessary it was. It is so much easier to add a feature than to remove one. If you remove a feature, there will be those two or three customers who loved that feature and are being really noisy about its removal. You have enough well deserved stress. Don’t put that on your shoulders, too.

Priorize your effort

Your very first product doesn’t need to be feature rich. You want to create an MVP (“Minimum Viable Product”). Spend time defining what are the absolute fewest features that you could possible include in your product at launch. This is your MVP. You will probably have to do this two or three times. Each time reduce further. Resist the temptation to add. I know how hard it is. There is that big juicy feature that probably only adds a couple days to your effort, but will make it so much more yummy. Don’t. You want to get something out there and then gather feedback. With that feedback you can much more accurately prioritize your next steps.

Get Feedback from end-users

As part of this iterative process get as much feedback from your end-users as you can. We have a very thankful product and it was easy to get feedback. On Facebook I asked our 100+ fans if anyone wanted to join us in our test kitchen. I quickly got volunteers. I met a few people for lunch and showed them our app (sidenote: our app is a new platform for digital cookbooks. Think: iTunes for cooking) and asked them to pick out two recipes that they would like to cook. No instructions. That helped us to learn more about how people thought the app should be used. Then we set up an appointment where they would visit us and cook with our app. We brought the groceries. On the arranged date they came to our house. Again, no instructions. We were merely observers.

For my partners and I, this approach helped us be very objective about our pre-release product. We talked about how people used it, what their questions were and what seemed to be missing. It very much guided our priorities. From initial idea to product launch we took 24 months. The first 6 months I iterated on paper and built prototypes using PowerPoint. I was still working at another company, so my working time was usually 10pm to 1am. It was sufficient to get positive feedback from industry experts and to convince two amazingly talented friends to start a company with me. Then, my partner Jörn built a quick prototype on the iPad, so that we could see what it would look like on the device with real interaction. That was huge. Suddenly, it all seemed so real. For each feature that we wanted to add, I did lots of storyboards and designed the interface in Photoshop, once we settled on the interaction flow. This meant that Jörn was only adding features that had been iterated upon before programming. That saved so much time. I could do hundreds of variations in the time that it would take to program one variation.

As we built, we tested with users. Then at a certain point, we scrapped our code and started over. This iterative process is great for growing feature by feature. But, it will lead to a product that can’t be cleanly programmed. So, with this very robust “prototype”, Jörn re-architected the whole app. He knew what computing processes were slow and how we would want to scale the app. In a few weeks, we had a totally new code base. It looked exactly the same, but it was really zippy. Everything seemed to react better and it was much more stable. For Jörn, it was also easier to add new functionality.

Don’t underestimate the look and feel

The iterative process also gave me time to work out lots of little visual details that would make the overall app much more attractive. Don’t underestimate the affect of good visual design on sales. If your customers find your product attractive, then they will not only be more likely to purchase, but they will also be more likely to recommend it to others. This multiplies your customers very quickly. It taps into peoples’ emotional responses, rather than their purely rational responses.

If you have a designer on your team, they will be the advocate for the consumer, bringing in insights about their needs. This will lead to a product that will have the right features, rather than having lots of features. You can build tons of loyal fans with just one single feature that is amazingly executed. Focus. Get your customers excited. These same principals work for funding. We have decided to use the crowd funding platform Seedmatch, because we believe it is particularly well suited to a consumer-orientated product like ours.

Janina Benz

Florian Eisenbach: We’re currently at a very exciting yet tricky juncture, faced with vast technical possibilities and the need for security and privacy. Florian Eisenbach: Wir befinden uns in einem interessanten Spannungsfeld zwischen technischen Möglichkeiten und dem Bedürfnis nach Sicherheit und Privatsphäre.

Janina Benz: Hi Florian – could you briefly introduce yourself to our readers?

Florian Eisenbach: Of course. My name’s Florian Eisenbach and I’m the Webciety project manager for CeBIT.

JB: How long has CeBIT Webciety been around, and what’s the motivation behind the concept?

FE: Webciety is now entering its fourth year. In just a very short time, it’s grown into a key attraction at CeBIT. Webciety is dedicated to solutions for a digitally networked economy. The exhibition doesn’t just attract people because of its content – it also boasts an eye-catching, avant-garde booth design, and includes an expert conference on the hottest issues surrounding Internet society. All content is also streamed live online, so people can experience Webciety from anywhere in the world, as well as on site at CeBIT in Hanover.

JB: What are Webciety’s long term goals?

Florian Eisenbach

FE: Obviously we want to (and are going to) continue to expand and build on this successful concept, both in terms of the exhibition and the conference. We’re also developing new participation methods tailored to the needs of the Internet industry.

JB: You’re surrounded by startups and entrepreneurs every day. Which part of your work do you find most inspiring?

FE: The Internet industry is one of the most dynamic industries there is. Even just the speed of online innovation is breathtaking. As the manager of Webciety, I’m fortunate to be able to work with all kinds of creative minds. Lots of startups use CeBIT as a springboard to launch successful digital businesses.

JB: The Facebook generation, living and working online, managing trust – what role do you think issues like these will play in the future? Are there limits to the digital world, and if so, where do they lie in social business?

  

EF: We’re currently at a very exciting yet tricky juncture, faced with vast technical possibilities on one hand and the need for security and privacy on the other. This issue is going to become increasingly important in future, including for Webciety – as are all issues relating to social enterprises.

JB: I noticed that the CEO of Seedmatch, Jens-Uwe Sauer, who’s also on the CODE_n jury, is promoting the issue of crowd funding as part of Webciety. How suited is crowd funding to widespread use?

EF: Crowd funding is still relatively unknown in Germany and is only beginning to establish itself. But it’s a very promising financing method. We look forward to outlining the principle of crowd funding in detail at the Webciety Conference and showing how it works live on stage.

JB: Some say startups and young entrepreneurs are cut from a different cloth than the rest of us. What do you think – do you see certain characteristics more often than others in young entrepreneurs, and if so, what are they?

FE: Lots of startups have an unconventional approach, which I see reflected on many levels in the way we work together with them. Most of them know exactly what they want, and I really appreciate that. We provide participation opportunities to startups in all phases: showcasing their ideas in an entrepreneur contest as part of the Webciety Conference, offering them an 80%-funded booth as part of our Young & Innovative joint stand, or simply providing a home base for startups that have reached market maturity.

JB: Thank you very much and see you at CeBIT!

 

 Janina Benz: Hallo Florian, würdest du dich unseren Lesern bitte kurz vorstellen?

Florian Eisenbach: Gerne. Mein Name ist Florian Eisenbach und ich bin bei der CeBIT Projektleiter der Webciety.

JB: Wie lange gibt es die CeBIT Webciety schon und welche Motivation steckt hinter dem Konzept?

FE: Die Webciety geht mittlerweile ins vierte Jahr. Innerhalb kürzester Zeit hat sie sich zu einem wichtigen Publikumsmagneten auf der CeBIT entwickelt. Im Fokus stehen Lösungen für die digital vernetzte Wirtschaft. Neben der Ausstellung – die im Übrigen nicht nur inhaltlich, sondern mit ihrem ausgefallenen Standkonzept auch optisch ein echtes Highlight darstellt – erwartet die Besucher eine hochwertige Fachkonferenz zu den spannendsten Themen der Internetgesellschaft. Alle Inhalte können live im Netz mitverfolgt werden – damit ist die Webciety nicht nur vor Ort in Hannover, sondern auch für Webuser auf dem gesamten Globus erlebbar.

JB:Welche Ziele verfolgt ihr langfristig mit der Webciety?

Florian Eisenbach

FE: Selbstverständlich wollen und werden wir das erfolgreiche Konzept der Webciety weiter ausbauen. Das betrifft sowohl die Ausstellung als auch die Konferenz. Außerdem entwickeln wir neue Beteiligungsmöglichkeiten, die sich gezielt an den Bedürfnissen der Internetbranche orientieren.

JB: Du bist tagtäglich mit Start-ups und Entrepreneuren umgeben, was begeistert dich persönlich an deinem Aufgabenfeld?

FE: Die Internetbranche gehört zu den dynamischsten Industrien überhaupt. Allein die Geschwindigkeit, mit der im Netz Neues entsteht, ist beeindruckend. Als Webciety-Manager habe ich das große Glück, mit vielen kreativen Köpfen zusammenarbeiten zu dürfen. Viele Start-ups nutzen die CeBIT als „Sprungbrett“ in eine erfolgreiches digitales Business.

JB: Welche zukünftige Rolle würdest du Stichworten wie Generation Facebook, Leben und Arbeiten im Netz sowie Managing Trust geben? Gibt es digitale Grenzen und wo verlaufen diese im sogenannten Social Business?

   

FE: Wir befinden uns aktuell in einem sehr interessanten Spannungsfeld zwischen technischen Möglichkeiten auf der einen Seite und dem Bedürfnis nach Sicherheit und Privatsphäre auf der anderen Seite. Dieses Themenfeld aber auch alle Fragestellungen rund um die so genannten Social Enterprises werden in Zukunft noch stärker an Bedeutung gewinnen, auch im Rahmen der Webciety.

JB: Ich habe gesehen, dass Seedmatch CEO, Jens-Uwe Sauer, der ja ebenfalls CODE_n Jury-Mitglied ist, das Thema Crowdfunding auch im Rahmen von Webciety vorantreibt. Wie alltagstauglich ist die Finanzierung durch die Crowd?

FE: Crowdfunding ist in Deutschland noch relativ unbekannt und beginnt sich gerade erst zu etablieren. Dabei handelt es sich um eine sehr spannende Finanzierungsmethode. Wir freuen uns im Rahmen der Webciety Conference das Prinzip näher vorzustellen und live auf der Bühne mit zu erleben.

JB: Manche bezeichnen die Start-up Szene als ein spezielles Völkchen. Wie siehst du das, begegnen dir bestimmte Charakteristika häufiger als andere und wenn ja, welche sind das?

FE: Viele Start-ups sind in ihren Herangehensweisen unkonventionell, was sich in vielen Ebenen der Zusammenarbeit zeigt. Die meisten wissen sehr genau was sie wollen und das gefällt mir gut. Wir bieten für Start-ups in allen Phasen Möglichkeiten der Beteiligung: Sei es mit einer Idee bei einem Gründerwettbewerb der Webciety Conference oder mit einem bis zu 80 % geförderten Stand auf unserem Gemeinschaftsstand Jung & Innovativ bis hin zur einfachen Homebase für Start-ups, die schon ihre Marktreife erreicht haben.

JB: Vielen lieben Dank für das Interview!