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Crowdfunding, a financing tool at the disposal of entrepreneurs

BUSINESS & FINANCE

Crowdfunding

Last year, the local press reported on a participatory financing operation carried out by the Grasse-based company ECCITY MOTOCYCLES to finance the launch of a 3-wheeled electric scooter in category 125 and strengthen its commercial structure. This small company with 12 employees managed to raise €455,000.

Participatory financing is rarely used in the Maritime Alps, particularly because of a lack of knowledge of its mechanism. The example of ECCITY is an opportunity to focus on crowdfunding, an ideal alternative financing method to finance the key stages of business life: creation, takeover, development and even transfer.

Crowfunding, or participatory financing, is generally used as a complement to traditional financing tools. It is also a way to build a supportive community around you. Crowdfunding, literally "crowdfunding", consists of raising funds from a group of contributors, private or institutional, via a specialized Internet platform.

Crowdfunding can take 3 forms:

-Reward crowdfunding, ideal for testing the market and public acceptance of a product or service;

-Crowdlending, which generally finances expenses not taken into account by banks (research and development, extension or renovation of old buildings, recruitment, stocks, external growth, digitalisation); the participating loan is not accompanied by any personal guarantee from the manager or security for the loan.

-Crowdequity, the acquisition of a stake in the company's capital, used to finance an innovative project or one that is not very popular with traditional investors (real estate development, establishment abroad) or to complete a round table.

Crowdlending has only been allowed in France since the beginning of 2015 following an amendment to the Macron law ending the banking monopoly on intercompany credit. More than 70 SME lending platforms are listed in France. The most important is OCTOBER (former name: LENDIX), its offer is aimed at all SMEs, ranging from the very small business of 3 people to the ETI of 1800 people and even listed companies. The only key criteria are that companies must have a turnover of more than €250k, be profitable and have sufficient repayment capacity. OCTOBER allows you to borrow from 30,000 to 5 million euros.

The European platform Look&Fin is also very present, with attractive interest rates thanks to a partnership with one of the world leaders in credit insurance. At Look&Fin, the eligibility criteria are 3 fiscal years filed, a minimum turnover of 600 thousand euros and an EBITDA in excess of 50 thousand euros.

The WiSEED platform that led the ECCITY operation operates in the health, environment, digital, industrial and service sectors, according to a three-pronged approach of three key words: sustainability, responsibility, performance. The company carrying out the project must be at least 8 years old to be able to raise funds.

Before embarking on a participatory financing operation, you will need to ask yourself a series of questions:

- What are your deep motivations?

- Is this the right timing for your company (degree of maturity of your project)?

- Do you want to publicize your project?

- Is crowdfunding adapted to your company's situation?

- What are your investor targets?

- What are your communication skills?

- What is your mastery of social networks?

Then, as with a loan application, you will need to establish a Strategic / Marketing / Financial Plan:

Picture by mohamed_hassan

The quality of the project presentation is essential for the understanding and analysis of the operation's issues. Actions that are not well prepared are looked at with severity by contributors and do not pass the test. Serious, professionalized actions win support and exceed objectives. The investment community mobilized in record time: 1 million euros raised at Look&Fin in less than 48 hours for a wind turbine project! Through the banking circuit, it would have taken several weeks or even several months.

Choose the right platform and examine the collection conditions:

. Local, national, European platform? Generalist or thematic? Target audience? 

. Loan amount, duration (3 to 7 years), fixed interest rate (between 4 and 10%, on average 7-8%), commissions on the amount collected (from 3 to 10% decreasing) and administrative fees?

Finally, you will need to communicate: your communication skills will be crucial to the success of the collection campaign! To capture the attention of investors and make them want to contribute to the project, you need to have an entrepreneurial story to tell, explain why and how the amount will be used, provide a visual (computer graphics, video), communicate with the press and media, be very active on social networks and feed your community with news.

For this type of operation, it is necessary to be accompanied because improvisation is not appropriate: a crowdfunding campaign requires preparation, strategy, marketing, intense team mobilization. Crowdfunding money is not easy money!

But, in return, participatory financing is a great way to increase its visibility and notoriety!

 - Sylvie Thornet