Sramana Mitra: What are the core benefits that your community offers to the investors?
Korstiaan Zandvliet: There are several motivations for investors to invest, so the benefits differ accordingly. What the community offers to all investors is engagement and information/updates about the plan. The entrepreneur provides the latter by answering questions, sending out emails, or placing status updates about the progress of the idea. Other than that, part of the community is mainly involved with the idea and doesn’t participate much in discussions. Other investors enjoy posing questions or information in relation to the idea they came across or answering questions that are aimed at the entrepreneur in general if they know the answer.
Finally, the experience of investing, reaching a target “together” and experiencing a certain idea are all fueled by participating in the community and are the main reasons why investors check out and participate in community activities. These can also take place offline in the shape of “pizza meetings,” “success parties,” and other events that entrepreneurs organize when meeting a successful milestone.
SM: What are the core benefits to entrepreneurs?
KZ: The community offers funding, marketing and co-development possibilities to entrepreneurs. Although financial support is the main reason most entrepreneurs visit Symbid, we know of entrepreneurs who visit primarily for marketing goals as they’ve already acquired their goal capital. As reaching one’s goal capital requires quite some marketing effort, crowdfunding is also known for offering market insights and product development advice. This not only happens on the platform but also in offline settings. The largest investors in the idea mostly fuel co-development on the platform. The larger the investment, the more likely the investors are to offer advice, information, and feedback on both the product development and the general business plan and project.
SM: What is the typical amount an entrepreneur can expect to raise through your community?
KZ: The average campaign in the last year raised €58,800, over twice as much as the average Dutch crowdfunding campaign, which raised €32,000 on average.
SM: We see a gap in the traditional angel/VC funding industry: they do not accept the dividend model. The bulk of the early stage equity financing industry is based on exit-based ROI. Do your investors accept dividends as an ROI model?
KZ: Yes, they do. Either because the dividends are not the main motivation to invest or because they are convinced they company will perform satisfactorily. For small angels (€1,000-€10,000), this method is attractive because they can function as an angel without the obligatory participation in an angel group or investment club. Second, they experience the benefit of being in control of their own investments as they can retract their shares before the target goal has been reached and reinvest in another idea. Symbid is currently preparing an environment that explicitly services this target audience
SM: Today’s angel investors have a pretty high bar. Entrepreneurs need validated businesses to raise a seed round. As a result, a pre-seed gap has opened up, with angels moving downstream. How much risk are your investors willing to take?
KZ: Amongst the smaller investors, risk-taking is less obvious. Whether they actively avoid taking risks, whether they don’t have the capital invest, or they simply don’t want to invest is hard to determine. The average investment is plus or minus €200, excluding angel investments. Though the risk of start-ups is high, investor have the opportunity to extract their shares from an idea when it seems the idea won’t reach its goal capital. In the early stages of creating seed funding, the risk is quite low because if the target is not reached, an investor can get back his or her shares and reinvest or request a refund on the platform. Once the goal capital is reached, the risk of losing money is increased, as it cannot be retracted any more. If a start-up fails after reaching its goal capital, the investor actually loses his or her money permanently. Because the average investment is plus or minus €200 (excluding angel investments), the losses are acceptable.
Larger investors (more than €1,000) are often included to participate in in-depth feedback, promotion, support, development, and advice related to the idea. The investment amount determines to a great extent the involvement in the idea. Whether this is a risk-reducing strategy or pure engagement (or both) is unclear.