Guest Post from Matti van der Gronde – Oneplanetcrowd (@Matti_vd_Gronde)

Crowdfunding on par with venture capital?
The size of the global crowdfunding market is already on par with the traditional venture capital market and may surpass it this year. In The Netherlands the crowdfunding market doubled from €63 million in 2014 to €128 million in 2015, and the trend continues in 2016 according to consultancy Douw&Koren (see graph below). Moreover, the size of individual crowdfunding campaigns is growing: SnappCar (€1,2m in two campaigns), Oneplanetcrowd (€1m), Peerby (€2m) and senz (€1m ; still in progress).

What does this mean for the venture capital market?
First thing to realise is that the impact of crowfunding on the VC sector is not yet as large as the overall numbers may suggest because a large part of crowdfunding is done in the form of presales or loans. Only a minority of crowdfunding campaigns focus on emission of equity (via convertible loans or direct equity). Nevertheless, the larger equity crowdfunding campaigns in the range of €1-2 million, such as Peerby and senz, do illustrate that crowfunding is no longer confined to early stage startups and constitutes a possible collaboration option for seed/series A VC funds.
How can VCs and crowdfunding platforms collaborate?
VCs provide finance and strategic guidance to startups. Whereas crowdfunding platforms provide finance, a public visibility and an ‘army of ambassadors’. By sharing the investment ticket, VCs and crowdfunding platforms can utilize each other’s strengths. Speaking from a personal point of view, I always regard startups with a VC on board more favourably in my due diligence process because I know they’ll steer the company in the right direction on behalf of themselves and thereby also the crowdfunders. Vice versa, I’ve collaborated with VCs who wanted to give their portfolio company a marketing boost and limit their dilution by sharing the second round ticket with us with a convertible loan construction. Picture

I see three distinct possible cooperation moments in the lifetime of a portfolio company:

  1. Co-investment of VC fund and crowdfunding platform in the first round
  2. Pre-series A round via a convertible loan at a crowdfunding platform of €1 to 2,5 million, this postpones the series A round and thereby gives the company the chance to grow more in value before a next VC enters and dilutes the current VC’s share.
  3. Ticket sharing of a second investment round in case the company does not yet grow as fast as expected

In conclusion, even though crowdfunding overall is growing rapidly, equity based crowdfunding is still considerably smaller than overall the VC sector. Oneplanetcrowd focuses on increasing collaboration with other VC funds and invites all interested parties to get in touch.