SEEDMATCH | Raising Funds by Crowd and Getting Customer Feedback
Seedmatch is the biggest crowdfunding platform in Germany. The website is growing swiftly and in this article, we will look at 1) what is Seedmatch?, 2) benefits of using Seedmatch, 3) why and when to use Seedmatch, 4) options to raise funds & fees on Seedmatch, 5) how to be successful on Seedmatch, 6) Seedmatch success stories.
WHAT IS SEEDMATCH?
Seedmatch is a German crowdfunding website that was launched in 2011. The company supports young companies with innovative ideas and products by connecting them to investors. Instead of investment opportunities being available only to a small group of wealthy businesses, angel investors or venture capitalists, the platform allows anyone to invest any amount in a startup with an innovative idea.
Seedmatch is an equity based crowdfunding platform rather than a reward based one. This means that instead of a receiving a gift or an early version of the product or service in question, the investor can receive a share in the company. This makes the products on offer more interesting to serious investors as well as smaller scale ones. The startups are under no obligation to give any voting rights to any investors that makes this an attractive opportunity for them as well.
In addition, startups can use the crowd’s intelligence and opinion to test their business idea and make relevant changes to the final offer. The company has a success rate of 95 percent with over 70 rounds of successful funding. There are over 35,000 registered users on the website and total invested capital in projects is over 21 million Euro.
Though there is no restriction on the type of project that can be launched for crowdfunding on the website, there are some categories that are more popular with investors than others. These include projects that have a detailed business plan, and areas such as big data, consumer electronics, e-commerce, energy, food, health, mobility, 3D printing, mobile, and IT security.
Seedmatch is the biggest crowdfunding or crowd investing platform in Germany. The company was launched in 2011 and by 2012, collected over 100,000 Euro in financing through successfully funded startup projects. The first project to collected 1 million Euro successfully was the “Projekt AoTerra” Today, it is known as Cloud and Heat and focuses on providing heat through the operation of cloud servers. Patented technology helps the company achieve its aim, and it is now in its second phase of crowdfunding. This was in the second quarter of 2013 and November 2013; the e-Volo collected 1.2 Million Euro.
One of the biggest crowdfund generators has been a Hamburg startup by the name of Protonet. This company managed to collect 1 million Euro in just four hours on Seedmatch and then managed to collect 3 million Euro in total for their project. Though not the most money collected through a crowdfunding campaign, it is currently the record holder for the fastest million collected.
Germany has a smaller venture capital presence than the United States or the United Kingdom, and the Investors are traditionally more averse to risk. The founders had to work hard in the beginning to establish credibility with these investors. The initial two projects took time to close but since then the pace has picked up considerably. The platform aims to create transparency and present each startup in the most detailed way possible through a business plan as well as videos and provide Q&A sessions for investors.
BENEFITS OF USING SEEDMATCH
Some of the benefits of using Seedmatch for crowdfunding include:
- Market Leader: The company is the leading crowdfunding platform in Germany. This early initiation into the crowdfunding arena has ensured that the company can understand the market and leverage existing structures to make an impact for startups and investors.
- Smart Investors: The pool of investors registered on the website are an intelligent swarm and take active part in the entire process from actual funding to providing valuable feedback to the startup. This can help tweak the offering and the product to improve chances or long term success.
- Transparent Proces: The company has made it a point to provide a transparent process for both investors and the startups that list their products for funding. There are high standards for quality information that startups need to meet. Information provided to the crowd includes total amounts to be collected and already collected as well as information on yield potential and potential risks.
WHY & WHEN TO USE SEEDMATCH
The website has certain criteria in place for the kind of ideas that can be put forward for funding on Seedmatch. Though there may be many creative projects and ideas put forward by startups, they may not all be appropriate for crowdfunding or even crowdfunding through Seedmatch. In general, the idea needs to be from a young and innovative company that is not yet established but has a sustainable and scalable business model. Some of the most important criteria for a Seedmatch startup include:
- Inspiring Idea: The idea needs to be able to generate enthusiasm among potential investors and inspire these investors as well as potential customers.
- Innovation: The idea being brought forward by the startup needs to be an innovative product or service with clear points of differentiation and value addition for potential customers.
- Trends: Often, popular ideas follow a current trend or attractive categories in both business-to-consumer markets as well as business-to-business ones. Some popular categories include education, big data and IT security, consumer electronics, e-commerce, energy, food, health, mobile, and mobility.
- Facts and Proof of Concept: Empty marketing phrases and terminology are not acceptable, and startups need to prove that the idea will work and deliver as promised.
- Strong Founding Team: The team presenting the idea needs to be competent in terms of both the product development side and the sales and marketing side.
- Scalability: Any business idea presented needs to be sustainable over the long term and scalable over time.
- Strong Communication: The startup needs to be able to develop a strong and sustained channel of communication with investors during the crowdfunding campaign and beyond it. This communication should be a two sided critical exchange between the startup and its potential and final investors.
- Minimum Investment Goal: A startup looking to list its project for funding needs to have a minimum capital requirement of 100,000 Euro.
- Other Factors: Other important factors for the startup include a current website for the business, a headquarters in Germany and necessary legal documentation for the startup.
OPTIONS TO RAISE FUNDS & FEES ON SEEDMATCH
As mentioned briefly before, the startup listing its project on Seedmatch needs to have a minimum capital requirement of 100,000 Euro. The minimum amount that can be invested is 250 Euro and on average each investor puts in about 600 Euro. This minimum investment amount ensures that even an amateur investor takes the time to assess the viability of the project itself. This is also why the company needs to provide detailed information about its business model and viability backed by facts and figures and not just marketing jargon.
A commission fee is charged by Seedmatch on all successful crowdfunding rounds. This fee is between 5 and 10 percent of the total funded amount. Any transaction costs for the transfer of funds is also charged only if a round of funding was a success.
HOW TO BE SUCCESSFUL ON SEEDMATCH
Starting Crowdfunding on Seedmatch
The first step to listing a campaign on Seedmatch is to send the company introduction to the pitch desk. There are specific structures and formats to follow for this pitch. Once the pitch is sent in, it is evaluated internally first to assess whether the idea is viable for a crowdfunding platform. A response is usually received within 10 to 15 business days. If the feedback is positive and the idea deemed viable, the next step is to send in detailed documentation. This includes a business plan among other information. Once this is also approved, the startup is then invited to Seedmatch for a physical meeting where the business concept is discussed along with the details of the funding execution. The aim of the meeting is also to get to know the startup and for a startup to get to know the team at Seedmatch. When there are no further issues to clarify or work on, work is done on closing a funding agreement and the 4 to 6 week preparation process is initiated.
Setting Up the Campaign
The point of the campaign is to tell investors the story of the company. The website provides support here by providing comprehensive structures that can be used to introduce a business concept. An important aspect of this introduction is a presentation video which can help give an authentic and enthusiastic image of the startup team to the investors. Seedmatch helps startups develop these if needed.
Once a profile page of information is created, funding can begin. It is up to the startup team to create a buzz and invite people to the fund page. This can be done through friends and family networks on social media outlets. The more people that hear about the campaign, the more likely the chances of reaching funding goals.
Once the target amount is reached, or a specific period of time passed, the funding round will be concluded. Investor relations can be managed through the same account on Seedmatch for the long term. It is important to keep the investors in the loop for your achievements, success and even setbacks through regular reports. Continued advice and feedback can also be sought as different stages of the project are achieved. These investors should not be treated merely as a source of capital but as members of an extended team for the project, whose belief in a project is rewarded through involvement.
Finding Investors on Seedmatch
Investors are generally attracted to startups that are able to:
- Showcase a product or service that is unique, innovative and with a clear USP.
- Provide accurate statements and facts about the business idea, business model and potential viability of this idea.
- Provide structured information in a clear and engaging way with the right graphics, the right photos and the right videos. Differentiation is key to remaining foremost in the minds of a potential investor as they go through multiple projects on the website.
- Demonstrate the advantages of their project and business model.
Mistakes to Avoid
A few basic mistakes to avoid when using Seedmatch to fund a project include the following:
- Don’t make claims without facts – Users who donate to projects tend to question what they read and there should not be claims or marketing phrases that cannot be supported by facts.
- Don’t give unnecessary details – There is often a tendency by the project team to put too much information and long descriptions in their introduction. It is a better practice to keep the information provided brief and relevant. This can help capture and retain investor interest.
- Don’t forget to communicate with investors – More successful crowdfunded projects have usually had teams that were able to build a relationship through relevant communication with the right investors and potential customers.
- Don’t make errors in spelling and grammar – The profile presented by a project or startup is the investment offer to the outside world. This offer should be as perfect as possible and any errors in this presentation can end up separating the successes from the failures.
SEEDMATCH SUCCESS STORIES
Some of the most successful campaigns on Seedmatch include:
- The Product. Protonet is a small server and private cloud. The product is targeted towards individual consumers and small businesses. Both a hardware and software solution, the product aims to help make the setup of a home network and server easier. According to the company, Protonet is a ‘one button social infrastructure and private cloud.’ The company has placed a lot of emphasis on design and usability of their product.
- The Campaign. The project was listed on Seedmatch for crowdfunding. It managed to generate a record amount of 1 Million Euro in just 4 hours, unbeaten as of now on any crowdfunding platform. The total amount generated for the product was 3 Million Euro.
- Current Situation. The company managed to raise money beyond expectations during its crowdfunding campaign. This means that there is more chance of a quicker product development and international expansion. The company had planned to push beyond German speaking countries in the middle of 2015, but are now in the financial position to do so much sooner. More on the Protonet success can be found here.
- The Product. The product is described as the world’s first roast-brew-grind coffee machine. The product claims to turn green, unroasted beans into freshly brewed coffee in under 14 minutes. Unroasted beans stay fresh longer than pre roasted ones. Therefore, the company is basing its business proposition on this enhanced flavor. When it launched officially, the company also aims to serve as an online marketplace for raw beans, connecting farmers to the end user.
- The Campaign. The company is running several crowdfunding campaigns across various platforms. Their campaign on Seedmatch is ongoing, with over 1.2 Million Euro already collected.
- Current Situation. The company has preorders worldwide through its other reward based crowdfunding campaigns. With capital still being raised, progress has yet to be seen. There has been some recent unhappiness from backers because of post campaign redesign of the product. Details can be found here.
- The Product. The product aims to provide heating and hot water using wasted heat from running servers. The end result is a powerful, decentralized, green solution. The project is now known as Cloud and Heat. The company identified two sources of revenue for itself: the sale of the heating equipment for free heat output and cloud services.
- The Campaign. The campaign raised 1 million Euro in 2013. This was the first project to raise a million Euro for Seedmatch.
- Current Situation. The company is now on its second round of funding via Seedmatch to further grow the business. The details of this campaign can be found here.
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