As a Dutch national (but born and raised in Hong Kong and living in the US since 1985) I thought it was particularly interesting that the Netherlands created one of the first equity crowdfunding platforms in the world – Symbid. Being ONE of the first is something, especially since the United States regulatory processes have slowed down the launch of true equity crowdfunding platforms for the masses.
While “accredited” investors may participate in private placements using many different equity portals, a true equity crowdfunding platform for all is still waiting on the SEC to finalize their approach to regulating this new world. In the Netherlands crowdfunding is already happening with Symbid. So I decided to reach out to Korstiaan Zandvliet, Co- Founder and Managing Director of this groundbreaking site, to inquire about the genesis of Symbid and an update on progress. Zandvliet is very busy these days running a start-up company. Symbid recently went through a round of raising capital themselves which should provide the resources to continue their impressive growth.
Dominque: How did the concept come about to launch an equity based crowdfunding platform?
Korstiaan: While doing my masters program in Entrepreneurship at Erasmus University it became apparent that many of my peers had good business plans for start-ups but were unable to secure the necessary funding. This had to do with the lack of access to potential investors, hesitant banks and of course the financial crisis. On the other hand we noticed that all of our fellow students were heavy social media users. We started thinking about allowing small investors to participate in equity investments in start-ups via social media. It was only later that the term ‘crowdfunding’ was applied to this process.
Dominique: How do you see crowdfunding evolving in the Netherlands? Europe?
Korstiaan: We (as an industry) have experienced impressive growth; 100% in 2011, 120% in 2012. While equity crowdfunding in Holland, and all of Europe as well, is growing – it still is not a sustainable source of funding for entrepreneurs. We are working hard on connecting different sources of funding via our platform. We want the Symbid Platform to become a one stop shop for all kinds of entrepreneurial finance. One example at Symbid is our new strategic focus on Symbid Groups where any Venture Capitalist, Private Equity company or Incubator may access entrepreneurs and communicate. Imagine how cool it would be to co-invest with the greatest VC’s in the world?
Dominique: Do you see crowdfunding supplanting or augmenting the traditional role of Angel or Venture Capitalist investors?
Korstiaan: No, but I do think traditional Angels and VC’s will adopt a process related to crowdfunding. This process will allow them to allocate investment funds more effectively and efficiently.
It is very likely that Angels / VC’s will work together with Crowdfunding platforms. We are already experiencing this with Symbid Groups.
Yes. The equity legal structure and platform will be offered within other European countries to other parties as a white label application. The donation based platform will be offered as a plug and play application outside of Europe. Beyond that we have custom legal and IT development solutions for operators who want to push new models in new geographies.
Dominique: How has your team been finding deals for the platform? How many proposals do you receive and how many do you turn down?
Marketing, Public Relations and Partnerships are the main sources for proposals. In 2012 Symbid received over 750 proposals, a little over 100 went live on the platform and 12 were funded for a grand total of €1.2 Million.
Dominique: What is your vetting process for deals so as to avoid any possible fraud?
Korstiaan: After 100% funding on the platform we perform due diligence activities with our partner BDO, thus making certain the propositions are vetted prior to acquiring shares for the crowd. Obviously getting to 100% funded is already a form of social due diligence. The levels of due diligence differ dependent upon the idea stage (existing company vs. start up) and the amount of funds raised.
Dominique: What has your success rate been for filling funding goals?
Korstiaan: A little over 10%
Korstiaan: Of course consumer products will perform better at first but as Equity Crowdfunding becomes mainstream, I think all industries could be inclined to use this exciting form of funding.
Dominique: How has Equity Crowdfunding been received in the Netherlands by regulators?
Korstiaan: Regulators have been extremely helpful in developing our models and they are continuously keeping them in sync with current legislation.
Dominique: How has Equity Crowdfunding been received by the general population?
Korstiaan: People find Crowdfunding a very interesting new take on financing so the general public is interested, however people still have some hesitancy towards investing large amounts – as they might do in the stock market. We do however feel that with the further professionalization of the industry we will attract more investors willing to invest larger amounts.
Dominique: What are your impressions of Equity Crowdfunding progress in the United States?
Korstiaan: Once Equity Crowdfunding becomes legal in the US I think the industry will become more mature in a short amount of time. For now the process seems very frustrating to me, albeit interesting as this is the first time, in the internet era, the Europeans are actually far more advanced then their US peers. It will be a big challenged to remain in front or capitalize on that position for EU equity crowdfunding operators.