Brother, can you spare a million?
Visionary Thinking 28.12.2017
Crowdfunding is the online equivalent of: a private-equity deal, an insider sale, a raffle or an outstretched hand. In Switzerland it’s coining over CHF 100 million a year, with a particular boom in property.
With hoodie on, ears budded and eyes on the smartphone, Antonio Djakovic seems a normal teenager in Switzerland – when he’s on land, that is. In the water, he enters a completely different league. At only 15-years-old, the Frauenfeld native with Serbian roots medalled twice in 2017’s European Junior Olympics, showing his clear potential to qualify for Tokyo’s 2020 Olympic Games. As a stepping-stone to that ultimate event, his intermediate goal is to win gold at the 2018 Youth Olympics in Buenos Aires.
With a little help from the crowd
Which leaves just that matter of: how to pay for it? With family funds and sporting subsidies maxed out, Antonio and his trainer Arpad Petrov turned to a website called IBelieveInYou.ch. There in early November they posted a ‘Road to Buenos Aires’ campaign: it profiles the swimmer in a video and a short text, and in return for donations promises fan articles such a signed swim cap (CHF 100) or club T-shirt (CHF 200) or even a personal learn-to-swim-better session (CHF 600) with the budding champ. Within about 3 weeks – boom! – donors already had pledged CHF 1,400 more than the target of CHF 5,000.
Bake sales and charity auctions, move over, make room for crowdfunding. As of December 2017, about 30 companies (see table) were operating actively in Switzerland.
Table: Switzerland’s geniuses of crowds
|100-days, Cause direct, Fengarion, fundeego, Funders, GivenGain, I believe in you, I care for you, ideenkicker, Indiegogo, International Create Challenge, Kickstarter, KissKissBankBank, letshelp, Lions Funding Val Müstair, Lokalhelden, Masspurse, moBOo, Progettiamo, Projaction, ProjektStarter, Startnext, Veolis, wemakeit|
|Business crowdinvesting||c-crowd, investiere, Raizers|
|Real estate crowdinvesting||Crowdhouse, Crowdli, Foxstone, immoyou, stoneclub, Swiss-Crowd|
Source: Institute of Financial Services Zug (IFZ) and the Lucerne School of Business, ‘Crowdfunding Monitoring Switzerland 2017’ and research by the author
Starving artists and startups
Fundraising like this is booming. In 2016, according to a study by the Institute of Financial Services Zug (IFZ) and the Lucerne School of Business, some 1,400 Swiss campaigns captured CHF 17 million in pledges. Judging from history, 2017 funding is likely to hit CHF 20-25 million.
These mostly aren’t charities in the classic sense. Crowddonation – as it is more precisely called – funnels only 15% of its funds to social, environmental and educational causes. Almost the same fraction flows to athletes like Antonio. The lion’s share, receiving about one-third of the crowddonations each, goes to starving artists and startups.
The former includes those making music, literature, painting, dance, film, theatre and fashion. For instance, a pair of directors collaborating with a comic-book artist recently raised CHF 9,000 to finance a film called ‘Heidi vs Zombies’, which presumably wasn’t going to be greenlighted in Hollywood. A Stradivari-playing Trio Oreade are more than halfway to stringing up CHF 16,500 to record and distribute a CD of chamber music. Startups are mostly in IT and Internet ventures, along with a smattering of bars, restaurants and hotels. Some of the more exotic fund-seekers are creators of an app for bicyclists in Zurich, developers of an electric skateboard and inventors of a wallet-sized microscope.
Beg, borrow or crowdfund
A final group in crowddonating, not included in the IFZ-Lucerne statistics but still relevant, are companies that use it as an insider sales-channel. Exhibit A is the Bergbahnen Saas-Fee. In 2016 the lift- and resort-operator offered ski passes with a catch: if 99,999 orders were received by 27 November, massive discounts would be granted, but if not, regular prices would prevail. Ultimately the discount-trigger was lowered to 75,000 orders, and the widely-advertised campaign netted CHF 20 million.
The other side of crowdfunding is much like private equity but with smaller sums. Crowdinvesting, as it’s called, sells shares in a company – or more likely in property – directly over an online platform. In 2016, says IFZ-Lucern, CHF 7 million was raised by 13 companies including a watchmaker, a health food retailer and licensor of waste-water treatment technology.
Crowdfunded real estate is set to grow
Much livelier was the parallel market for crowdfunded real estate: according to IFZ-Lucern in 2016 it topped CHF 32 million – and that off a 2015 volume of almost nothing. These websites are basically real-estate management companies that have gone online to find finance. They differ from real-estate investment funds or trusts in that funders buy specific properties for which they personally become landlords, rather than purchasing shares of an entire portfolio. The sector has rapidly shot to the top of the Swiss charts: two newcomers have recently joined the four incumbents, and if international trends reflect themselves here, 2017 could easily see investment climb by another CHF 50 million.
Julius Baer and FinTech
Will robots ever take over the jobs of relationship managers in the private banking industry? Only time will tell. At least for a bank like Julius Baer, where the human factor is a key element of its service model, the prospect is rather unlikely. But this doesn’t mean that technology is insignificant. On the contrary: without cutting-edge IT, a bank like Julius Baer couldn’t cater to the very complex needs of its clients. In order to push the technical boundaries even more, the Bank joined the F10 FinTech Incubator and Accelerator Association in October 2016, supporting promising start-ups from across the globe on their way to innovate the financial industry. In our ‘Insights’ section, we will cover the progress of this initiative regularly and talk to movers and shakers of the FinTech scene.