Sean O’ Farrell is the managing director of Choice Loans, specialists in alternative finance options for businesses big and small.
Crowdfunding – the practice of funding a business venture by raising money online from a large number of people – has taken off in recent years. It’s now a popular method of alternative finance.
Various crowdfunding platforms have allowed small businesses the opportunity to source funding and get themselves up and running.
However, crowdfunding has also enabled some companies to realise some pretty big ideas. It’s not all about start ups offering a ‘new take on the burrito’, crowdfunding can also be a platform to launch potentially world changing concepts. A new infographic produced by Choice Loans, has taken a closer look at the world’s biggest crowdfunding projects.
It’s called ‘The 13 Biggest Crowdfunding Campaigns of 2015’, ranking them by both the amount of funds generated, as well as giving some more valuable insight into the number of backers and what the motivation was for people to invest.
Sitting top of the pile by some significant distance for 2015 is Elio Motors. Seeking funding for an ultra-high mileage, two seater, affordable car they were able to secure more than $42 million. Making it one of the biggest and most successful crowdfunding campaigns in history.
Investors backed the campaign in return for shares in Elio Motor, a company in which they could see potential for future returns. However, they also invested because the project offered an alternative to what the market currently provided.
The new Elio model promised to emit just one third of the CO2 of an average car, whilst being extremely affordable. It would also come with the highest possible safety standards.
It was this potential that appealed to more than ten thousand investors willing to part with their money.
In second place, with a promised investment of more than $12 million, with a colossal 37 thousand backers is Flow Hive. It’s a type of beehive that uses a plastic tap in the inner frame to source honey straight from the hive. This means that honey can be harvested without opening the hive, straight into the jar, cutting out costly and time consuming additional processes. It also means less disruption for the bees.
Next on the list is the BAUBAX Travel Jacket, a modern form of clothing with in built pillow, eye mask, gloves, earphone holders and various tech pockets. They raised almost $10 million with 45 thousand backers, which already shows an incredible potential market for the product.
Backers could choose between three perks as a return for their investment. One was the BAUBAX windbreaker or bomber jacket (6,200 backers), the blazer (3,559 backers) and the sweatshirt (3,100 backers). The product comes in four styles in total, for both men and women. It’s the most successful clothing campaign in the history of crowdfunding.
This top three were all US-based opportunities but there were some very successful campaigns in the UK too. Perhaps most notably, and newsworthy, was the live action experience Crystal Maze game. Based on a popular TV show from the 1990s, more than $750,000 was raised by nearly four thousand donations.
Backers were given one of a number of related gifts, including having their name inscribed on the Wall of Fame. The original host, Richard O’Brien, returns to the game in virtual form and it is already lining up to be a big hit with former viewers and fans, now in their 30s and 40s, many working in the corporate sphere.
Another of the more unusual products on the list includes a new action-adventure video game called Shenmue III. It’s a long awaited third instalment in the series, relying on fans of the previous two to back its production. This is a clever use of an established fan base, and one that worked, with a massive 69.3 thousand investors receiving digital, physical or trial versions of the game in return for their cash.
Games proved to be a popular investment in 2015, with an unusually named card game called Exploding Kittens being the fourth biggest crowdfunding opportunity of 2015. The game is based on a conventional card game but also includes exploding kittens (within the confines of the game) and laser beams (obviously the two go hand in hand). Backers received versions of the game, including some limited edition collectors deck options for larger investors.
Other products were more altruistic, including Reading Rainbow, an interactive reading library and video field trip archive to help children in the classroom. Also in the top 13 and making the list was Sondors electric bike, the world’s most affordable and versatile model to date; shopping channel offering shares; an ice cream company making low sugar products; and a brewery.
What the infographic shows above all is that when an idea is good enough it can capture the imagination of the investing public. People are willing to risk their own personal money to back an idea they think has a good chance of succeeding and making a difference.
What this means for small businesses with big ideas is that they’re no longer completely dependent on the bottom line of a bank manager’s ledger.
Alternative funding does work – the sheer number of people investing in the vast variety of products and services listed proves the case. It’s also a very convenient and cost effective way of advertising. Backers also invest some emotional capital in your company, meaning they are more likely to tell friends and boost your visibility in the market place.
However, as well as showing that companies can succeed using different forms of funding, what it also proves is that investors are looking into new ways of spending their money. It’s not all about financial returns on investment, people like to feel included and that they’re making a difference.
In other cases they simply want to fund something that they personally enjoy – in the case of the Crystal Maze and Shenmue III games.
Of course, companies considering the crowdfunding option should also be aware that for every success story, there is a failed attempt to raise funds. What you need to consider is how appealing your product is to potential investors.
You need to either be offering a part of a promising future or goods, services and products that can exert some kind of emotional response. Social causes account for about 30% of all crowdfunded projects, with existing products with strong fan bases making up a significant percentage too.
It’s also important to remember that on the growing number of crowdfunding platforms, if you don’t reach your intended target, you have to refund all the pledged money to backers. With more than half of all projects failing to reach their targets, this is a possibility you should consider.
If your idea is good enough, however, or your product exerts a broad appeal, there is no reason why your company couldn’t appear on this list in 2016.
Bitcoin slumps 10% as pullback from record continues
LONDON (Reuters) – Bitcoin slumped 10% on Thursday to a 10-day low of $31,977 as the world’s most popular cryptocurrency continued to retreat from the $42,000 record high hit on Jan. 8.
The pullback came amid growing concerns that bitcoin is one of a number of financial bubbles threatening the overall stability of global markets.
Fears that U.S. President Joe Biden’s administration could attempt to regulate cryptocurrencies have also weighed, traders said.
(Reporting by Julien Ponthus; editing by Tom Wilson)
A lot of hot air? Investors snap up hydrogen stocks in green frenzy
By Elizabeth Howcroft and Thyagaraju Adinarayan
LONDON (Reuters) – An unprecedented rally in “green” hydrogen stocks looks set to extend as investors flock to companies which promise to produce the gas without using fossil fuels, expecting the technology to scale up over the next 10 years to justify rocketing valuations.
Hydrogen is the universe’s most abundant element. It is mostly extracted from fossil fuels, emitting carbon dioxide in the process. “Green” or clean hydrogen requires using electrolysis to split water into its components of hydrogen and oxygen and doing so cheaply is often described as the holy grail of green energy transition.
Share prices of companies in the industry have soared more than 500% in the past year, driven by the rising adoption of zero-emission vehicles, a deadline set by many countries to go carbon-free by 2050 and lately U.S. President-elect Joe Biden’s support for clean energy.
Plug Power, Ceres Power and Fuelcell Energy, which make hydrogen fuel cell systems that power devices ranging from warehouse machines to cars, are leading that charge, jumping 400% to 1,600% in the last year.
“Hot money is flowing towards renewables and clean energy, and there’s been a clear re-rating of valuations in the sector,” said Emmanuel Cau, head of European equity strategy at Barclays.
While a lot of focus has been on hydrogen’s role in the automotive sector, its usage is growing far beyond that.
The European Union plans to scale up renewable hydrogen projects across polluting sectors ranging from chemicals to steel with cumulative investments in renewable hydrogen in the region seen reaching up to 470 billion euros ($570 billion) by 2050, the region’s commission said.
That has fuelled the stocks of electrolyser makers Norway’s Nel and UK’s ITM Power.
“The momentum just keeps going really with this theme,” Ashim Paun, HSBC’s global co-head of climate change and ESG research said on a webinar.
ZeroAvia, a hydrogen plane startup, last month secured $37.7 million in new cash via a funding round led by Bill Gates’ Breakthrough Energy Ventures and from the British government to support its bid to develop zero-emission aircraft.
The frenzy in hydrogen-related stocks has led to some concerns about a bubble, with companies trading at extreme prices based on expectations that their revenue will surge in future, despite worries about possible headwinds for the sector.
Widespread adoption of hydrogen as a fuel for cars is far from a given.
Toyota launched a new hydrogen fuel cell car in December, but it has largely failed to win customers over to the technology amid concerns about a lack of fuelling stations, resale values and the risk of hydrogen explosions.
The momentum behind electric vehicles may be another headwind, said Jonathan Bell, chief investment officer at Stanhope Capital.
“The problem with hydrogen is that sometimes when you have two competing systems, it’s not the better technology that wins, it’s the one that gets market share and the network effect first of all,” Bell said.
UK-based ITM Power, which manufactures the electrolysers needed to make green hydrogen, is trading at a massive seven times its 2030 sales, while rival Nel is relatively cheap at three times 2030 sales, according to HSBC’s calculations.
Some investors may avoid the sector altogether, after a similar burst of enthusiasm two decades ago proved short-lived, and much of the latest excitement around green energy is based on Biden’s policy plans, which are yet to be passed into law.
But no bank is ringing the alarm bells, yet.
JP Morgan analysts advised long-term investors in a recent note to take advantage of any pullback in prices and “take an unorthodox approach to valuation for the next several years” – in other words, not worry about a potential bubble.
Sean McLoughlin, HSBC EMEA head of industrials research, said scarcity value in the market, unprecedented fiscal stimulus, low cost of capital and debt and low yields in other asset classes mean the hydrogen market’s valuation may be justified though he cautioned it was at a “potentially fraught level.”
“There’s a lot of capital that is very ESG-focused chasing a select number of companies that offer this kind of pure play exposure to these future energy trends. So there is a risk that this may unwind.”
($1 = 0.8258 euros)
(This story corrects paragraph 2 to show hydrogen is the universe’s most abundant element, not earth’s)
(Reporting by Thyagaraju Adinarayan and Elizabeth Howcroft, additional reporting by Julien Ponthus; editing by Rachel Armstrong and Emelia Sithole-Matarise)
BlackRock to add bitcoin as eligible investment to two funds
(Reuters) – BlackRock Inc is adding bitcoin futures as an eligible investment to two funds, a company filing showed, in a move to bring the world of cryptocurrency to its clients.
The world’s largest asset manager said it could use bitcoin derivatives for its funds BlackRock Strategic Income Opportunities and BlackRock Global Allocation Fund Inc.
The funds will invest only in cash-settled bitcoin futures traded on commodity exchanges registered with the Commodity Futures Trading Commission, the company said in a filing to the Securities and Exchange Commission on Wednesday.
Chief Executive Officer Larry Fink had said at the Council of Foreign Relations in December that bitcoin is seeing big giant moves every day and could possibly evolve into a global market. (https://bit.ly/2XXFHrB)
Earlier this month, Bitcoin, the world’s most popular cryptocurrency, hit a record high of $40,000, rallying more than 900% from a low in March and having only just breached $20,000 in mid-December.
A BlackRock spokesperson declined to comment beyond the filings when contacted by Reuters.
(Reporting by Radhika Anilkumar and Bhargav Acharya in Bengaluru; Editing by Arun Koyyur)
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