Klaus-Martin Meyer: Lasse, you are Chairman of the Board and Co-Funder of Invesdor.com. Would you please introduce yourself and your company to the German speaking crowdfunding community?
Lasse Mäkelä: Invesdor is the first and leading open equity-based crowdfunding platform in Northern Europe. Invesdor was founded to solve a need, which we had ourselves in an earlier company. There are lot of delays and difficulties both in raising funding for startup and growth companies as well as in investing. Our aim is to bridge the gap that currently exists between growth company financing and traditional investment activity. For example, in Finland, Finnish Business Angels invested 14m euros in growth companies last year and at the same time there is about 100 billion euros of idle cash sitting on Finnish bank accounts. Our idea is to facilitate the investments in growth companies for traditional stock and mutual fund investors. Our message to them is that all responsible investors should keep 5-10% of their investment portfolios in non-listed growth company shares.
So far we have received more than 160 applications to our service, out of which 34 companies have raised or is raising funding currently. More than one million euros has been raised through our service and we have seven success stories so far.
I started my career as an investment banker at Merrill Lynch in the City of London in 1997. After 8 years in Banking at Merrill and at Icecapital Securities in Helsinki, I have worked in corporate finance, acquisitions, Finance and as a CFO in companies, like KONE Corporation, Consti Group and Corbel Holding until I co-founded Invesdor in March 2012.
Klaus-Martin Meyer: You have been in the financial business for quite a while. Can you explain us, why equity based crowdfunding is a disruptive innovation?
Lasse Mäkelä: Crowdfunding democratizes the investment process and it turns the tables around. Traditionally, growth companies go to talk to business angels, who then start to give their own terms, which in many cases can be very harsh to the entrepreneur. In crowdfunding, the entrepreneur decides the terms and presents the case to investors with an angle that these are the terms, take it or leave it. We have started to see that Invesdor is turning more into a funding platform, where Investment companies, business angels, wealthy individuals and retail investors are investing with the same terms. Currently our smallest individual investment is 20 euros and the largest is 50,000 euros.
Also, investing in non-listed shares has generally been the privilege of a very limited group of wealthy individuals and funds, whereas now anybody can participate with an easy to use tools, such as Invesdor. This means that also companies with stronger values are able to attract better investments, because it is not only the cash flow, which determines the investment.
There has been much talk on whether crowdfunding is here to replace the traditional funding sources. I do not see it that way. We are not replacing venture capital, for example, but providing an alternative source of funding, which can well work in cooperation with traditional methods.
Klaus-Martin Meyer: What kind of startups go for which reasons on your plattform?
Lasse Mäkelä: Startups that are looking for equity crowdfunding in general all seek to go big: they are looking to become growth companies. We have seen no clear division of reasoning for raising crowdfunding between startups from different industries. Instead, the most common reasons almost universally are the marketing benefits that crowdfunding inherently provides to the companies and the want to find „serious“ investors, who can contribute to the development of the company.
An important point to be made about equity crowdfunding is that B2B companies can also find funding through equity crowdfunding. For example, a B2B sales platform, Suppilo, recently had a very convincing crowdfunding round on our service. So it is not about the industry, but about the simplicity and easyness to understand the business model.
Klaus-Martin Meyer: Can you tell us a little bit about success and failure in equity based crowdfunding? What are the dos and don‘ ts every founder of a startup should have in mind before starting a pitch?
Lasse Mäkelä: What every company needs to understand is that raising crowdfunding isn’t easy. It is much more accessible than traditional financing, yes, but it still takes effort, commitment and consistent work all throughout the duration of the campaign, for example in social media. If you are not serious about it, it will show, and the investors won’t be serious about it either.
What we are also seeing is that it is very important that companies mobilise their networks prior to putting their pitch live. Basically, companies should have about 30% of the offering secured, before going live. This gives so much credibility in the eyes of the investors and basically tells them that the entrepreneur is able to raise funds on their own and has already got people to back him up.
Klaus-Martin Meyer: The nordic market seems to be quite interesting. Companies like FundedByMe from Sweden, Crowdcube from the UK and isePankur (crowdlending) are operating in Scandinavia.
Why are Scandinavians so keen on crowdfunding?
Lasse Mäkelä: Especially in Finland we have all the conditions to build a bustling startup environment due to lots of educated and talented people, some of which we have Nokia to thank of. The younger generations are also looking great on the entrepreneurship front, with willingness to take risks and desire to make their own success. Additionally, for example, Finnish jurisdiction is a reasonable and not over regulated for this purpose, which is an extremely important aspect for the smaller crowdfunding platforms.
Klaus-Martin Meyer: What are the next milestones for Invesdor?
Lasse Mäkelä: We have now proven that our model works in Finland. We are starting to plan our international expansion soon but we are also developing new services for Invesdor. Next service coming up is our Private Placement Service, which is our first step towards secondary markets. We will give the existing shareholders a possibility of selling their shares through our service in a Hidden mode. This means that for example, Business Angels could sell part of their shares and so free up capacity for new investments.
Finally, we are aiming to become The platform for the best investors and for the best growth companies in the Europe.