DC* Updates

Vol.22 August 2013

• Crowd Funding ………..…………………...……………..……...……….…… 3

• Deal Watch………………………..……………..………………………………...13

• Global Business and Finance Scenario……………………..…………. 14

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editorial team of Dandeker Capital Consulting Pvt. Ltd.

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Contents

DC Updates Vol. 22 August 2013

What is Crowd Funding?

”Crowd Funding” is a new form of funding whereby numerous

investors commonly known as “Backers” invest in a startup idea

/ product / art project.

Crowd Funding Work Flow

Project creators use online crowd funding platforms such as Kick

Starter/We Funder/ Rocket Hub/ Peer Backers etc. to attract

backers for their project. Creators introduce their product /idea

/ theme through a video introduction or a detailed write-up.

They then put up the funding required and a time frame within

which the funding needs to be acquired.

Most crowd funded projects work on a entire funding or nothing

(i.e.) the project creator gets funded if and only if his amount

has been successfully raised. If the funding falls short, the

project creator does not get any money which implies that the

backers were not convinced of the project.

All the platforms work on the “social connection” factor to help

creators raise funds for their project.

Pharmaceuticals

DC Updates Vol. 22 August 2013

Crowd Funding

Crowd Funding Model

Backers

Online Platforms

Creators

DC Updates Vol. 22 August 2013

So Far

Origins of Crowd Funding

The origins of crowd funding could be

traced back to a 17th century model called

“praenumeration” which involved financing

for publication of books. The current crowd

funding model has taken cues from a few

independent music bands who have used

internet to fund and raise awareness about

their artistic projects. Not surprisingly, even

today, majority of the projects that seek

funding are “creative projects”.

Crowd sourcing model’s success has

resulted in a wide variety of projects being

submitted for funding. Projects vary from

Art, comics, theater, technology, games,

music, photography, publishing etc..

DC Updates Vol. 22 August 2013

Crowd Funding Space

Homegrown Foreign

Promotional Body

Kickstarter and Indiegogo also operate in India

DC Updates Vol. 22 August 2013

Indian Scenario

Waking up to Crowd Funding

Indian market is waking up to the

concept of crowd funding. 3 platforms

have started recently based on crowd

funding project in India – Rang de,

Milaap and Wishberry.in

Such crowd funding websites

extensively depend on social media to

connect with potential backers and

contributors.

India has started to experiment with

micro-credit crowd funding model

whereby small time entrepreneurs raise

small amounts of debt for kick-starting

/ expanding their business.

Upcoming platforms – Fundapeer.com

and Pik-a-venture.com

India’s 1st peer to peer online crowd funding platform (debt based)

Launched in 2008 Small farmers and cattle

herders form a majority of borrowers in this group

Requirement ranges between Rs. 1,000 – Rs.10,000

Debt based crowd funding platform

Backed by First Light Ventures, Jayesh Parekh, Jungle Ventures, Linrock Capital, Rajiv Madhok, Toivo Annus, Unitus Seed Fund, Vijay Shekhar Sharma

Requirement ranges between Rs.1,000- Rs.3,00,000

India’s 1st reward based crowd funding platform

Launched in 2010 Attracts young creative minds

who use this platform to fund their music album, theatre, photo projects, nature conservation projects etc.

Requirement ranges between Rs. 1,000 – Rs.3,00,000

DC Updates Vol. 22 August 2013

Awareness about peer to peer concept

Potential for popularity

India and other emerging markets are

already familiar with the concept of peer

to peer lending. Crowd funding being on

the same lines, this can be expected to

become a major source of funding.

Impact of Social Networks

Social connections help a lot in spreading

the word about a project/idea /concept.

Social networks which hitherto has been

an urban phenomenon has also started to

catch on in rural areas. This has effectively

increased the popularity for crowd

funding.

Regulatory Concerns

In India it is necessary to get approval from

SEBI when more than 50 investors are

involved as it is considered as an IPO.

Limitation on the number of investors is of

concern as there is a heightened risk that

the project would not be completely

funded due to limited investor

participation.

“Microfinance” is very popular in India and they have played a very vital role in developing employment opportunities

DC Updates Vol. 22 August 2013

Pros Vs. Cons and Success Rates

Pros Cons

Not delivering on commitment

Risk of IP theft and plagiarism

Donor Exhaustion

Profile and Reputation

Engagement with the target group

Feedback

Categories & Success Rates

DC Updates Vol. 22 August 2013

Challenges and Solutions

Access to Capital

• Access to capital still remains a key challenge for entrepreneurs looking to start a business in India. Bank loans ,loans from friends, family and their own money form a major part of the seed investment. In crowd funding the investment comes in from a single source but a multiple sources which reduces the risk for both investors and backers.

Focus on Financial Returns –

• The focus on financial returns and cash flows alone hampers the growth of new and unconventional products/ideas/concepts. Crowd funding is not return focused but rather product/idea/concept focused. In a reward based model backers put in their money not expecting any financial gain but other benefits such as exclusive entry for the movie/ a copy of the book they helped -published/ Credits/ a pre-release version of the product that they helped developed etc..,

Equity Dilution –

• PE,VC and Angel investments in India are growing in India over the past decade, however many of them prefer startups backed by seasoned entrepreneurs. Seed funds have been playing a very vital role in filling that gap over the past few years. Taking up equity stake is commonplace in all these ventures. Entrepreneurs who do not want to dilute their equity at such early stage of operations have to resort to their own capital or borrowed funds. Crowd funding removes this limitation and helps the entrepreneur to “eat his cake and have it too”

Market Traction –

• In a traditional setup the company analyses the market then develops a product and commercializes it. In such a conventional setup it is very easy to misread the market (especially for startups). Crowd funding platform however has a built in feedback mechanism through which the ideas/concepts/ products can be further refined and altered to suit the needs of the end users. Entrepreneurs essentially crowd source the ideas.

DC Updates Vol. 22 August 2013

Some Indian ideas in Crowd Sourcing

Art & Literature

Crowd Funding sites initially started off

to help artistes and bands fund their

music production and tours. In

continuation of that one could find

aspiring writers, filmmakers, comedians,

photographers and other artistes have

resorted to crowd funding their projects.

Social Causes

Social causes appeal to the crowd and this

has led to many NGOs, social activists and

Individuals to use crowd funding sites for

such causes. Some of the projects include

publishing comics to spread awareness

about diseases, stray animal rehabilitation

programmes etc

Games

Independent game developers have

started to look at crowd funding their

games. Game development projects have

met with significant success mainly due to

fans’ feedback and involvement in

developing the storyline.

DC Updates Vol. 22 August 2013

Some Indian ideas in Crowd Sourcing

Traditional Manufacturing

Many of the traditional manufacturing

methods have been lost due to

industrialization and changes in trends.

Such situation has however given rise to

more demand for handmade products.

Traditional manufacturing such as

weaving, organic farming and other art

forms are being revived using crowd

funding.

New Technology

Indian entrepreneurs can use this platform

to introduce new-age products. Crowd

funding platforms have been hugely

successful in raising funds for such

technology products. Spreading the risk

over many investors can help in identifying

solutions for problems ranging from day-

to-day issues to more complex issues.

App Development

With the growth of smartphones and

tablets India has seen lots of small

companies develop apps on behalf of

foreign companies. Indian entrepreneurs

can use crowd funding platforms for

developing apps and funding them.

DC Updates Vol. 22 August 2013

Final Points

Seed funding as it stands today is only a decade old, however

during last year it was able to raise close US$1.5 Bn in 2011, in

2013 it is estimated that crowd funding raised US$ 5.1Bn terms

of funding. Considering that it has been raised from individuals

has it is quite a remarkable feat.

Currently 95% of the market is dominated by North America

and Europe , however the trend is catching on worldwide.

American crowd funding biggies like Kickstarter and Indiegogo

have allowed India based creators to run their campaigns on

their website looking at India’s potential.

What is required for successful funding?

Pitch

An effective pitch that would help the target group understand

your idea/ product/ causes etc.. This can be either through a

detailed description in the fund raiser page with a video

detailing an idea/concept/cause or prototype which would

help in reaching the target audience.

Social Connection

Promoting the campaign through social networking is another

way to getting the attention of the target audience. One needs

to tread carefully on social networks for his campaign to reach

his target audience.

Striking a personal chord

Fund seekers around the globe have followed the approach of

striking a personal cord with the target audience emphasizing

on the problems that they faced and how the problem led

them to build a solution for it when one was not available in

the market.

Realistic Funding Goals

Setting a realistic funding goal is a key to successful funding.

There is always a chance that if the project is very good it

might get funded more than what was initially expected. So as

a rule of thumb it is better to set a realistic funding goal rather

than over reaching oneself and fail with the fund raising

Deal Watch

Infrastructure, Engineering and Defense

Manufacturing

IT/ Technology

DC Updates Vol. 22 August 2013

Blume Ventures invests in Infollion, NowFloats, Paletly, Voxapp Regenersis acquires stake in Digicomp from Allied Digital BMC Software buys social collaboration tool KineticGlue Social media agency - Gozoop acquires Red Digital Thomson Reuters acquires Majority Stake In Omnesys Technologies ONS Interactive acquires Revosys Corp

Media / Telecom

Japanese Firm Recruit Holding Acquires NuGrid Consulting One97 Communications Buys Plustxt

Green Infra Acquires Majority Stake In

TVS Energy

GVK to divest Stake In Airport Biz

GMR to Exit Road, Airport Assets

Streparava acquires Sansera's Stake In

Indian JV

Kalindee Rail sells stake to Texmaco

Rail.

SBI Mutual Fund buys into Elgi

Equipment

Mitsubishi-Hitachi buys Concast India

Madhucon to divest stake in Road

Projects

TASL acquires majority stake in Aurora

Integrated Systems

Jain Irrigation to exit Its Wind Power Biz DLF Sells Its Gujarat Wind Power Project to BLP Vayu Somany Acquires stake In Vicon, Amora

Hospital / Food/ FMCG

Bajaj Corp Buys Ozone Ayurvedics' Nomarks Brand Cookie Man Buys Sathyam Cinema's Eatery - Idly And Dosa VLCC Acquires Majority Stake In Singaporean Wellness Firm – Gvig Prisma Global Buys Prisma Gmbh Beckman Coulter Buys ReaMetrix's Flow Cytometry Biz VLCC Acquires Majority Stake In Singaporean Wellness Firm - GVig

Global Business and Finance Scenario

DC Updates Vol. 22 August 2013

Asia and Oceania

• Capital Controls in India

• India’s financial troubles

• India’s gems and jewlery exports fall

• China’s credit boom

• Indonesia’s Economy

• China’s economy – A small step forward

• Alibaba in talks with Hong Kong Stock exchange

Americas and Canada

• American Newspapers – Chasing paper profits

• US markets crippled by NASDAQ outage

• U.S. labor market, factory data show economy firming

• Brazil central bank launches $60 billion currency intervention

Europe

• Eurozone economy

• Britain's recovery – Squeezing the hour glass

• Time to celebrate? Government-bond markets in peripheral

countries are soaring

• Economists don't expect eurozone growth

International

• The rising dollar

• Economic Growth – a rickety rebound

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articles are owned by the respective owners.

Thank you

Vignesh Shankar Director

Hand phone : +91 94455 66386 vignesh@dandekercapital.com

K.J.Dandeker Executive Director

Phone : +91 4425220721 kjdandeker@dandekercapital.com

DC Updates Vol. 22 August 2013

Ganesh Sathyamurthy Director

Hand phone : +91 96000 01298 ganesh@dandekercapital.com