From the Pebble watch to open-source Geiger counters, crowdfunding has changed the face of investment, with many startups choosing this route rather than immediately polishing a pitch deck for VC money.
A few worthy contenders have emerged in Europe to offer entrepreneurs this alternative – one of which is FundedByMe, a platform that goes so far as to describe itself as the “Kickstarter of Sweden”.
Launched in 2010, the FundedByMe team has now grown to 14 staff, working from offices in Stockholm, Helsinki, Madrid, Oslo, Copenhagen and, as of late September, Berlin. Today, it has funded hundreds of projects, raising over €3m in investments from 25,500 people. We talked to CMO Susan Sjölund about how the platform offers a more international approach to crowdfunding than its competitors and why wholesome vodka, fully adjustable baby clothes and burgers have scored big on the platform.
Hi Susan, there are a lot of crowdfunding platforms in Europe, can you tell us how FundedByMe is standing out from the competition?
What makes us different from other crowdfunding platforms is that we have a huge cross-border investor portfolio. So Swedish investors look at Spanish or Finnish campaigns and vice versa. We have this international mix-and-match thing going on, unlike other platforms that focus on the local market. We also do two types of crowdfunding – reward-based, so you offer a reward in exchange for money, and equity-based.
How do you make sure campaigns are abiding by local laws if you don’t have a presence there?
We work with Bird and Bird, a law firm in Europe, and we provide guidelines for each country that we launch into. Part of what the entrepreneurs have to be aware of is their local rules. So if you’re in Germany, you have to play by the German rules, though we have lawyers if you need guidance. The onus is on the investors and entrepreneurs to make sure they follow the rules, we try to assist and educate them on what these rules are as much as possible.
Although you emphasise your international scope, FundedByMe’s main focus is on Europe, correct?
Yes. I mean, we did launch an Australian campaign recently but our main focus is on where we have representation – that’s because we put so much time and effort into helping people make their projects grow and become successful. We’re also growing alongside these campaigns. So for us to launch something in Australia is a bit of a risk because we don’t actually have someone on the ground there to coach them and help them through the tough times.
The thing with crowdfunding is it’s a great way to gain funding if you don’t want to go down the VC or bank loan route, but it’s also a lot of work for the entrepreneurs. You have to be out there campaigning and telling people about it and driving people to your page and convincing them to invest. Our country managers play a big part in supporting entrepreneurs to achieve this and making sure they have the tools they need to properly market their campaign.
Do you provide this kind of support for all startups on the platform?
At the moment we try and do this with every startup that’s on the platform at the moment. It’s not a sustainable model in the long term. But crowdfunding is a concept that’s still so new that people don’t really understand it, they get the overarching concept, but not the nitty gritty of how you get people to come to your campaign – you can’t just put it up there and expect people to throw money at it. It takes a lot of hard work. When we first launch into a country, we put a lot of effort into making the first campaigns that go online there really strong and successful so they can serve as business examples for later campaigns.
Can you name a few of the success stories from the platform?
So, for example, the first real success story was this restaurant called Flippin’ Burgers. The founder raised just under €4,000 on our platform, which isn’t a lot of money, but he got 104 people to each buy a voucher for them and a friend fo a burger that didn’t yet exist at a restaurant that didn’t yet exist. When he finally opened the restaurant, using mostly his own money, he sent an email to the buyers inviting them to the opening night. So there was a massive line to get a burger and the press went wild and said it must be a fantastic burger place. Now, every night there’s an hour long wait to get a seat at this place. It isn’t just about raising money, it’s also about brand awareness.
Another is Virtuous Vodka, it raised around €120,000 and offers natural, additive-free vodka, and has been adopted in many bars in Sweden. Beibamboo is my favourite project, it makes clothing for premature babies in hospitals. It has received multiple design and innovation awards and attracted prominent investors.
When startups don’t reach their target amount on the platform, they don’t receive any funding – you call it “all or nothing” – why chose this route?
On some projects we have this policy, it’s mostly to protect the investors. If I’m an investor and you’re looking for 10 million Krona and you only raise 500,000, I don’t want you taking my money because what are you going to do with the money when you really need 10 million? So we say what is the minimum you need to succeed and if they don’t reach that threshold all the money is returned.
What’s the typical amount an investor puts in?
Our average investment is around €1,000 per person. But, for example for Beibamboo, the minimum investment for one share was €50 – so literally anyone could become an investor. That’s what I like about FundedByMe.
How do you fund yourselves?
We have just over 100 crowdfunding owners ourselves. We have also received VC funding and funding from the government – they see the potential that we can promote entrepreneurship.
What’s your business model?
We take six per cent of all the money raised as a success fee.
Where do you plan on expanding to next?
For now, we’re focusing on Europe, we in talks in Italy and the Netherlands. But our focus right now has been fixed on Germany, so we want to make sure we do that right first. We’re launching a redesigned platform in September alongside the German launch. So instead of having the equity crowdfunding and the reward-based crowdfunding sites separate, we’ll combine them.
Who do you consider your biggest competitors in Europe?
For related posts, check out
Crowdfunding platform Bergfürst announces first startup: Urbanara
“We want to power the cause economy”: Crowdsourcing platform Rally.org launches in Europe
The 4 golden reasons why 2013 will be the year of crowdfunding