Crowd investing is about selling equity of a company (usually a start up) to a large number of investors, who will invest each a minimal amount. Crowd funding or crowd sourcing may also refer to the same concept in some contexts.
You need money for your start-up. Don't you? So get 1000 mini-angels willing to invest 100 USD each (in exchange of equity) and you will have 100.000 USD.
In the last months there have been a number of web initiatives to make this happen on the web:
The Spanish company Partizipa, about which we have already talked here in Globthink is going to launch officially on October 1st but they are already organizing talks and already have two start-ups: a real state business in Eastern Europe and a Solar Energy Business.
The Cambrian House is a page with a horrible aspect and a wonderful content, where business ideas for web 2.0 are discussed. There are currently more than 6000 ideas. One of the hot topics on this page is called Angelic Crowd, which has the same scope as Partizipa.
My football Club is not exactly start-up funding but crowd funding to buy a football team. Their goal is to get 50.000 members and raise £1.375 in total.
Not that easy, eh? The main problems are, of course, these two:
How to give trust?
Is it really legal on sell equity on the web? This is the great handicap. If you want to know it get a layer and pay him at 10.000 USD to tell you how to make it "legal"
Partizipa explain here their legal background according to Spanish legislation (only Spanish)
Here you have a great podcast by Jason Drohn about crowd investing. I really encourage you to listen.
I see two fundamental problems with companies that I call startups for startups (SFSs), i.e. startups like Cambrian House, Cofoundr, Spigit, Startup Addicts etc that exist apparently to help other startups or people with ideas for startups. Typically, these companies (usually websites) enable their members to post business ideas online and have other members comment on and rate those ideas. Others want to help you find investors or partners etc. The problems I see with them are:
Lack of Intellectual Property Protection: As much as people say that” ideas are cheap”, “it’s all about execution” and ”don’t keep your ideas to yourself”, people still do keep their really good ideas secret or reveal them only on a need to know basis. There is a big difference between revealing your business idea to one or two people who can help make it real and posting it to an online community with thousands of members, knowing that some of them have the skills to take your idea and run with it. The effect of this problem is that you seldom find really good ideas posted on these websites.
No End Product: Most people who join an SFS do so because they lack the time, technical skills, business experience or funds to turn their ideas into real businesses. What they really want is for someone to say - “hey this is a really cool idea, I’ll implement or fund it for you”. Unrealistic as this expectation may seem, it is not difficult to imagine a system that would encourage and facilitate this sort of collaboration. Cambrian House comes close to doing this with its “Turn your idea into a business” feature but I don’t think it goes far enough.
So how might an SFS go about solving these problems? Well, here’s one idea: Continue to offer a free and public ideas forum but in addition offer a premium service that invites really good ideas under non-disclosure agreements and for a fee, has them assessed by an expert panel; conducts patent searches; provides feedback and submits the really good ideas to partner angel/VC investors. A group of ”venture technologists” could also be formed from the member base to help implement good ideas that do not qualify for funding. Basically, a service similar to BoggleIt in the U.K but with a social network wrapped around it.
I am reading a very good report on Angel Investment from MIT. The only problem is that the report comes from 2000 and some statistical data may not be up to date.
Angels vs. Early Stage Venture Capitalists: The motivations and operations of experienced angel investors are typically different than those of early stage venture capitalists. First time entrepreneurs can benefit from approaching experienced angel investors, prior to meeting early stage venture capitalists, when seeking early stage funding. This study outlines the differences.
The "Network of Trust": An angel"s personal network of contacts is a key element in screening deals, conducting due diligence, negotiating terms, adding value after the investment, securing additional rounds of funding and executing the exit strategy.
"Not All Angels are Alike": It pays for entrepreneurs to understand the type of angels they need and the role that the angels will play in building their company. We have categorized angels into four groups: Guardian Angels, Operational Angels, Entrepreneur Angels and Financial Angels. We describe how these various angel types operate and how they provide different value to emerging ventures.
Systemization is on the Rise: Experienced angel investors are becoming increasingly systematic in their operation. Systematic evaluation and analysis help reduce risk, improve returns, and increase the number of deals considered.
The Need to Clarify the Angel Investing Process and Terms & Conditions: We found wide variation in the way angel investors conducted the investing process, in particular, regarding the specific terms and conditions (T&C"s) of the term sheet. We devote a chapter to understanding the angel investing process and explain some common terms and conditions.
The Rise of Angel Groups: We identify and describe the recent rise in angel groups. Angel groups are an important new development in venture creation. These groups provide the fastest way for entrepreneurs to find angels and provide a way for angels to leverage their combined skills, time, expertise and networks. We outline four types of angel groups and define a framework for growing and managing angel groups.
Becoming an Angel: Finally, we explored how wealthy individuals become successful angel investors. In our survey, we sought advice from experienced angels on this topic and summarized their thoughts.
Today I would like to post 5 graphs of this study which illustrate the current panorama. The only problem is that graphs are in French. So review your French notes... Don't be afraid: Technical french terms are quite similar to English.
Venture Capital Investments in Web2.0 Sector: Raised amounts (Million Euros) - US, Europe, Israel, China
Venture Capital Investments in Web2.0 Sector: Number of Deals - US, Europe, Israel, China
Europe: Investment per Countries: France, UK, Finland, Germany, Spain, Sweden, Estonia, Ireland
Average Valuations
Example of Acquisitions of Web 2.0 companies in 2006
I am going to reproduce most important parts. You can find the whole article here.
Global Venture Capital Investment in Web 2.0 Companies on the Rise
Nearly US$850 Million Deployed to Web 2.0 Deals in 2006, According to Ernst & Young/Dow Jones VentureOne Data Released at Annual Web Ventures Conference.
San Francisco, 21 March 2007—Venture capitalists continued to favor the innovative activity of Web 2.0 companies, deploying substantial sums in the segment throughout 2006, according to the latest data released by Ernst & Young and Dow Jones VentureOne at the Web Ventures Conference in California. The global research showed that US$844.4 million was directed into 167 deals last year, more than twice as much money and nearly twice as many deals as occurred in 2005.
The research demonstrated a continuing trend that has seen the amount of worldwide venture capital invested into Web 2.0 practically doubling in size every year since 2002. However, most of the growth remains centered in companies based in the US and Europe.
[..]
The research shows that on a global basis, Web 2.0 is still in an early stage and there remain relatively few liquidity exits for companies in this space, although there have been particularly noteworthy ones like Google's (NASDAQ: Goog) US$1.65 billion acquisition last year of YouTube.
[...]
This is just one illustration of Web 2.0 moving beyond the realm of a social networking or blogging operation and into true business applications. In fact, among the largest Web 2.0 deals that occurred in the US last year, there were many more commercial applications for Web 2.0 including client/server connection software and commercial services in areas like online real estate, travel, news, and entertainment content.
On a geographic basis in 2006:
The US dominated the Web 2.0 market, with 126 deals and US$682.7 million invested, an 83% increase in deals from 2005 and a 136% increase in capital.
On a sub-regional basis, the San Francisco Bay Area was the busiest region in the US for Web 2.0 deals and was home to more than half of all financings last year. The New York metropolitan area, Southern California and New England also saw tremendous growth in deal flow and investment over 2006.
Europe has also shown significant interest with 20 deals in 2006, up from four deals in 2005. The amount invested in Europe, US$100.5 million, is more than a 200% increase from 2005.
Within Europe, France posted the most activity with seven deals and US$39.3 million invested in 2006.
Five Web 2.0 deals were completed in the UK last year, raising US$23.4 million in investment capital.
China posted 21 Web 2.0 deals. This was the same number that occurred in China in 2005 — indicating a flattening of that market. Investment declined by 26% to US$61.3 million.
Israel had two venture-financed Web 2.0 deals in 2006 and US$22 million invested, a jump from one deal and only US$1 million invested the year before.
The most active investors in Web 2.0 on a worldwide basis are Benchmark Capital, Draper Fisher Jurvetson, Sequoia Capital, and Omidyar Network.
"Business Week discusses about the return of a trend that used to be popular not long time ago: the roll of the corporations acting as Venture Capital Investors providing seed capital for start-ups, sometimes in exchange for high-priority rights of acquisition.
This is, in fact, an R&D outsourcing approach: Corporations outsource certain R&D projects and supervise their developments.
Although the article names Google in the title, in fact it also speaks about other companies, which totally injected about 1300 million US dollars in about 390 financing agreements during first half of the 2007, an increase of 30% in comparison to 2006.
Companies like Intel, which has a long term tradition in this approach, Motorola, Novartis, Johnson & Johnson,Cisco, Qualcomm or Yahoo! are offering start-ups an alternative route to Sand Hill Road (a street with a notable concentration of VC companies). One of the reasons is avoiding to have to buy later much more expensive.
However companies as Dell or Boeing have completely stopped funding start-ups after the experience of the late nineties. Others, like IBM, Microsoft or HP have reduced their performances in this sense. "
This approach of outsourcing R&D is nothing new. It is described in many books. I read "The Valuation of technology" by Peter Boer. He describes very well this phenomenon from a historic perspective
With the help of a Chinese friend of mine, who lives in Paris. I have got a more clearer picture of the start-up funding sites in China.
I still have to make a lot of research about these 3 sites that I am listing below. They are all generalist sites which aim to finance any kind of start-up in any sector.
According to Alexa the clear winner in China is tz888. By the way did you know that Chinese associate the number 8 with fortune and wealth because their pronunciations in most Chinese dialects are quite similar? On the contrary 4 means death for the same reason.
I need to investigate much more but this is a good start.
I would like to talk about an application called Angelsoft. Angelsoft is not a Start-up marketplace as those described in my previous posts. Angelsoft (founded in 2004) is a software for angel investors
Features
Angelsoft's features are very simple:
Create a badge on your web site, where entrepreneurs can submit their applications online
Receive applications in your mail
Manage deal documents
Manage meetings (for due diligence)
To sum up, most of Angelsoft features (except the first one) can be handled with Microsoft Office
Business model
Angelsoft provides free software, angels provide anonymous data, and we aggregate that data to provide meaningful metrics about the angel industry to governments, economic development groups, and financial institutions.
Industry standard
Angelsoft is exclusive software provider for the European Business Angel Network (EBAN) and for the British Business Angel Association (BBAA), among others
Companies seeking financing pay 504 Bank a small transaction fee each time an investor downloads and reads their business plan or profile (announcing companies only pay for results)
Companies listed in 504 Bank have access to more than 7,000 registered investors, servicing more than 1,500 per day, and signing up more than 100 new investors daily.
PRICING: - 75 cents per Business Plan downloaded - 45 cents per Executive Summary read - 15 cents per Bio clicked on - You set a budget for up to how much you would like to spent
The company was created in 2002 but I have to say the design is horrible and difficult to use
Note: the name of the services is not easy to understand for the general public. It comes from the Rule 504 of Regulation D: this rule provides an exemption from the registration requirements of the federal securities laws for some companies when they offer and sell up to $1,000,000 of their securities in any 12-month period.
Potential business buyers or investors create a confidential member profile briefly describing the type of business they are interested in, location, investment size, appetite, etc. (Just like on-line dating).
Potential business sellers or businesses seeking additional capital (for whatever reason) also create a confidential member profile outlining the business opportunity they want to advertise (again – just like on- line dating).
Non-members can browse the member profiles at any time. Members who are Buyers and Investors have full access to our message center for free and can initiate and respond to Sellers or Partial Sellers for free. Only Sellers or Partial Sellers who are paid members will have access to a private message center to contact other members or respond to messages from other members.
You pay nothing as a Seller or Partial Seller unless you want to use this website to contact another member.
vFinance was created in 1995, but their internet services AngelSearch and VCsearch started much later
If you're an entrepreneur, we can help you find a VC or an Angel. You can also post your business plan for wealthy investors to see.
If you're an Investor, we can provide you with access to the business plans posted on our site. For enhanced services, open an account with vFinance Investments, Inc. and get access to a vast array of traditional brokerage and non-traditional investment opportunities.
If you're a CEO or CFO, we can also help you find a VCor an Angel. You may also qualify for an Executive Account with vFinance Investments, Inc. which provides an ultra-competitive mix of public and private equity opportunities.
In this post Mario describes "a kind of eBay for start-ups, a market of online auctions in which business initiatives (start-ups) would offer participation in shared capital to the best bidder in exchange for financing or other necessary assets, like for example, social technology, infrastructure, knowledge or networks. This approach involves decentralizing the financing process of enterprising initiatives.
This eBay for start-ups would limit itself to take care of companies on the way to constitution or of recent creation with modest necessities of financing:
Entrepreneur would create a virtual stand with a more or less complete description of its business, including an estimation of his/her financial needs necessities or another type of resources. In return the entrepreneur would offer either some resources in the agreed conditions or a participation in the property of its company. The entrepreneur should indicate what percentage is arranged to yield (in "as much as" terms ), in what conditions, the terms involved in the liquidation in the agreement, etc.
Investors would study different entrepreneur proposals. The proposal that best fits with the requirements would be the winner and would be subject of agreement to a later negotiation.
Online reputation would be essential in this system. This type of relations is only possible under trust and confidence conditions."
From my point of view there are several stages involved in this ideas:
Meeting point between entrepreneurs and investors
Negotiation
Buying Share: this last part is a real Stock Exchange market and may be difficult to implement due to regulations in most countries.
Finally I would like to add some comments: In Barcelona (Spain) a company called Euneo Systems is being currently created, This company will try to implement the idea described in this post (or similar). They are still under construction.
Fees: free for entrepreneurs, free for accredited investors
Start-up Catalogue: you can see some information without login but you need to log to see details
Approach: Entrepreneurs use video to explain their ideas
Resources for Entrepreneurs: Consultants, attorneys, accountants, and other resources are searchable by entrepreneurs by location and areas of expertise
Comments: well organized start-up information (video, executive summary, business plan...), easy navigation
Approach: Unlike PlanHeaven or GoBigNetwork it is not a web based market place. Funding Universe team internally manage which projects are presented to which investor.
Start-up Catalogue: Not publicly accessible on the web. Only for investors
Resources for Entrepreneurs: Funding Universe provides legal advice, strategical guidance...
I read a very comprehensive article from Agnus Lau's blog 852signal about Web 2.0 s in Hong Kong.
In Hong Kong, there are several options to finance a Web 2.0 start-up and most of them happen to be the Government of the HKSAR (Hong kong Special Administrative Region). At this moment Venture Capitalists are not very present in the web 2.0 panorama of Hong Kong. However here there is a very complete list of Venture Capital firms in Hong Kong.
These are three of the possibilities offered by the Government:
Youth Business Hong Kong program that provides HK$100,000 (around 10.000 €) interest free loan for small startups.
Requirements:
Being permanent Hong Kong citizens.
Have a registered business
As I already expected, financing a start-up in Asia is not easy, above all if you are not a permamente Hong kong citizen (which is my case). Furthermore the capital offered, about all by the Youth Business Hong Kong program, is not very high.
Crowd investing is about selling equity of a company (usually a start up) to a large number of investors, who will invest each a minimal amount. Crowd funding or crowd sourcing may also refer to the same concept in some contexts.
I am going to copy literarily a post from an excellent blog: 
I am reading a very good report on Angel Investment from MIT. The only problem is that the report comes from 2000 and some statistical data may not be up to date.
I have read a very interesting post in the 
I would like to talk about an application called Angelsoft. Angelsoft is not a Start-up marketplace as those described in my previous posts. Angelsoft (founded in 2004) is a software for angel investors
I have read this idea in a 
In this post, I would like to make a short state of the art about web sites all around the world where entrepreneurs and angels can get together: 
I read a very comprehensive 
