Crowdfunding: money via the internet

According to a current study by Ernst & Young and the Center for Alternative Finance at the University of Cambridge, crowdfunding and other alternative methods of financing are booming in Europe. The market beyond the classic funding by banks has multiplied by a factor of six within two years and has grown to a volume of 2.96 billion euros (GB: €2.34bn,   France: €154m, Germany: €140m). Crowdfunding is becoming ever more popular and offers people founding a business an alternative source of finance. Startnext is the biggest crowdfunding platform in the German-speaking countries. In 2014, projects raised an impressive 8 million euros via this platform. Some of this money flowed into the organic and sustainability sector. Karin Heinze visited Startnext in Berlin and talked to project manager Johanna Stiller.

Picture: Startnext in numbers: in 2014, the crowdfunding company Startnext achieved a very respectable balance. Screenshot Startnext website

Startups founded with crowdfunding

More and more frequently, we’re hearing about startups that have been founded with the help of crowdfunding. In the last four years, the launch of around 2,500 projects has been facilitated by the crowdfunding organization Startnext. Via Startnext, the crowd has made the massive sum of 18 million euros available for projects and new companies. Overall, this alternative type of finance is relatively new – there have been precedents since 2003 in the music business (ArtistShare), but it was not until 2009 that the crowdfunding platform Kickstarter was founded in the USA. Kickstarter operates worldwide and, between 2009 and 2014, 22,000 projects were successfully financed. Indiegogo and RocketHub are further internet-based crowdfunding platforms domiciled in the United States. Last year in the German-speaking countries, 8.7 million euros were raised via crowdfunding platforms (plus 61 %) for 1,058 projects (2013: 922), according to the online service Für-Gründer.de. Analysis by Für-Gründer.de shows that the average amount of finance per project has increased significantly.
 
Picture: A recent project for organic food on Kickstarter. Screenshot from website

Convincing the crowd

The concept functions like this: individuals or companies present their project on the crowdfunding internet platform with the help of a brief video and try to convince people in the “crowd”– their target group – of the soundness and the purpose of their product/project. Via various social media channels fans and supporters are then sought with the prospect of making money available in a defined time-frame. Only when the funding threshold stipulated by the project initiators has been reached by the deadline does the money flow via the crowdfunding platform to the founders of the project. The money raised is tied to a particular purpose. In return, the project frequently offers its products - for example in the form of a music CD, film DVD, shopping vouchers, food or a service, or the donors of the finance participate in the business when it is up and running. Projects with Startnext in particular, are not product-bound but pursue an ecological or sustainability goal.

In Germany, Startnext is one of the first crowdfunding organizations and it is currently by far the biggest platform in the German-speaking region with a market share of 83 percent. Recently, starters from Switzerland have been able to launch their projects via Startnext. In Germany, there are now more Startnext sub-platforms, that concentrate on, for example, sport (Fairplaid) or music (musicstarter) or cover particular regions (Dresden-Durchstarter, Nordstarter in greater Hamburg). Startnext is domiciled in Dresden, with project management, communication and consulting in Berlin. The independent company employs ten people.

Picture: Startnext is the most successful German crowdfunding platform. Screenshot from the website

Crowdfunding in the green sector

Alongside the market leader Startnext, VisionBakery is the second biggest German crowdfunding financing company with, however, only a fraction of the volume of finance of Startnext. The company – with its headquarters in Leipzig – concentrates on regional, creative and social projects with a lower need for finance. In the eco sector finance for renewable energy comes for example from the Frankfurt platform Bettervest. EcoCrowd is a project run by the environmental foundation Deutsche Umweltstiftung, supported by the German Ministry for the Environment and still at the beta stage. In Switzerland there is 100.days.net, in the Netherlands OnePlanetCrowd, one of the biggest eco-social crowdfunding platforms in Europe, that is a trans-border operation.  For example, it currently has a campaign for organic silk bedding from the firm Seidentraum by Dr. Matias Langer in Leipzig.

What’s needed for crowdfunding? A convincing business idea, creative and innovative or eco and sustainable, a product that makes the world a better place, and a target group... plus a short video and some input on the social media channels. Incidentally, Startnext has nearly 48,000 friends on Facebook – that’s how  a crowdfunding campaign gets started and can lead within a few weeks to success. When the interview took place, Reisgurt was a long way off reaching its funding threshold of 17,500 euros. In the meantime, the project finished with 21,445 euros.

Pictures: Successful retail projects funded via Startnext. Screenshots from the website

Even the banks have discovered crowdfunding: the Volks- und Raiffeisenbanken under the name “Viele-schaffen-mehr” (Lots of people produce lots more) have established a platform to support local involvement and social projects. Seedmatch functions according to a different principle and claims to be the biggest crowdinvesting platform for startups. It attracts relatively large sums for businesses. Seedmatch offer little in the sustainability sector and is mainly active in the commercial sector. One example: in a fortnight, nearly 180,000 euros were raised for CineApp, a cinema ticket service for mobiles phones.

Interview with Johanna Stiller, project management at Startnext

How many projects have you funded with Startnext and what are the main sectors you have funded?

Since 2010, we have funded 2,500 projects via Startnext with around18 million euros. The main funding areas are music and film. The reason for this is no doubt that it’s easy to present these projects   and the supporters can get a relatively clear idea with by listening to extracts or seeing trailers of what the end product will be. Quite apart from that, there are very concrete returns in the form of a CD, DVD or concert tickets. Getting something attractive in return is important. People have now got experience of these categories and you no longer have to do a lot of explaining. However, sustainability has now become a focus at Startnext because it’s important in the eyes of our community to change the world and do good.
 

What’s the basic idea behind Startnext/ Crowdfunding in general?

The motto is: get lots of things done with the help of lots of people. Ideas that that inspire many people or things that people might like are what we tackle. The system makes it possible for the end user to get involved. Normally we consume   anonymously. And we don’t participate in the process of creating a product. In this respect, with crowdfunding it’s different.

Have you seen the crowd becoming more willing to finance sustainable and organic projects?

Yes, most certainly we have. We can see that from the figures – both the number of projects and the number of supporters is growing year on year.
 
Can you give a few tips regarding what’s important for starters who want to finance their ideas with crowdfunding?

If you know precisely what you want, it’s very easy to have a project page on Startnext. Before we put the page online we give individual feedback regarding what could perhaps be improved. If someone has only a rough idea, we help with the conception of the project and give advice. Anyone can get in touch with us and we’ll make an assessment. In Berlin, we run a discussion slot between 16.00 and 18.00 every Monday.  Our success quota in financing is on average 60 percent. The average volume per project is roughly 8,000 euros – having said that, our most successful project raised 220,000 euros.  

Who is behind Startnext?

In 2010, Denis Bartelt, a photographer and founder of the software agency tyclipso.net and Tino Kreßner, a film producer and entrepreneur, launched Startnext in Dresden as the first German crowdfunding platform. Both had begun at an early stage to acquire experience of how creative ideas can be supported in the digital age and finally, in 2009, they began to develop Startnext. Startnext is an independent company, completely self-financed, with 10 employees in Dresden and Berlin. “We work every day on getting creative ideas up and running and on further developing Startnext,” is what it says on their website. And it goes on to say: “All pioneers and creative people have to face the same challenges: making their idea known, recruiting people as supporters and raising capital. We launched Startnext precisely to provide them with support in this endeavour.”