Crowdinvesting model in Kazakhstan reality

Авторы: Бабич Иван Михайлович, Тлеппаев Арсен Молдагалиевич

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Рубрика: Экономические науки

Страницы: 40-45

Объём: 0,45

Опубликовано в: «Наука без границ» № 4 (21), апрель 2018

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Библиографическое описание: Бабич И. М., Тлеппаев А. М. Crowdinvesting model in Kazakhstan reality // Наука без границ. 2018. № 4 (21). С. 40-45.

Аннотация: Данная статья посвящена новой для Казахстана модели инвестирования, основанной на принципе коммерческого краудфандинга. В статье обозначено, что краудинвестинг или коммерциализация crowdfunding - относительно новая концепция – смесь процесса краудфандинга и инвестирования, представляющая коллективное сотрудничество людей, которые добровольно объединяют ресурсы вместе, обычно используя интернет, для поддержки усилий других людей или организаций с одновременным извлечением дохода от своих вложений. В рамках статьи освещено, что  инвестиционная компания в Казахстане, основывающая свою деятельность по принципу коммерческого процесса crowdfunding, которая в свою очередь представлена в  виде управленческой команды. Задачи этой организации включают поиск, анализ и реализацию инвестиционных проектов. После накопления достаточной суммы денег начинается проект. Компания взимает комиссию за управление объектами и организацию финансовых потоков между новой компанией и инвесторами. Основным преимуществом будет прямой контакт, который налаживается между инвестором и молодым предпринимателем.

Crowdinvesting or commercialized crowdfunding is a relatively new concept – the mixture of crowdfunding process and investing. Crowdfunding is the collective cooperation of people (sponsors, donors) who voluntarily unite their money or other resources (make contributions, donations) Together, usually using the Internet, to support the efforts of other people or organizations (fundraisers, crowd-dividers, recipients). Fundraising can serve for various purposes – assistance to victims of natural disasters, support from fans, support for political campaigns, financing start-up companies and small businesses, creating free software, profit from joint investments and much more [1].

As a rule, crowdfunding begins with the idea that the crowd-hosting organizer places on a specialized site (crowd- platform) in text-visual form and encourages users of the site to make monetary investments in the idea, promising (or not promising) any compensation in case of successful collection of the necessary amount of funds provided for the implementation of the idea. The site acts as a temporary holder of funds that users transfer to the organizer. The organizer can receive the accumulated funds with different terms – as with the whole collection of the whole sum, and even if the purpose of the fees is not achieved. From a legal point of view, crowdfunding is a civilly legal relationship that arises between the organizer and the user. Crowd-hosting platform usually posit itself only as the owner of the web-site, which receives commission from the fundraising and not from the side of organizer [2].

Initially, the goal must be raised, the necessary amount of money for implementation is determined, the calculation of all expenses is made, and information about the fundraising should be open to all.

It is believed that the term crowdfunding appeared simultaneously with its "older brother" crowdsourcing in 2006 and its author is Jeff Howe, however the very phenomenon of public funding is much older. You can recall the construction of the Statue of Liberty in New York, the resources for which were gathered by the population. Reducing the role of intermediaries is also one of characteristics of crowdfunding in general. Now it is possible to get financing without the participation of banks, venture capitalists or stock exchanges. It is to be emphasized that the traditional mediators consider crowdfunding with some caution, because they see it as a potential threat [1]. The pace of growth crowdfunding market is rather impressive. In 2016, 6.3 billion dollars were raised, thus exceeding by 86 % the indicators of 2015. The forecast for 2017 is almost about two-fold growth to the level of 10,1 billion dollars.

Serebrjansky A. divides crowdfunding into several categories in consider of returning to the investor:

  • lack of remuneration (donations) or charity crowdfunding. Donations represent usually voluntary acts, made on the basis of altruism and without any obligations to the recipient. Mostly often, this model is used in social, political and medical projects (raising funds to help in the treatment of a disease or the activities of a charitable organization);
  • non-financial compensation (Kickstarter model) At the moment – this is the most widespread by the number of platforms among the crowdfunding models. It has perfectly proven itself as an effective tool for raising funds for any projects, from creative to sophisticated technological products;
  • financial compensation (crowdinvesting) or commercialized crowdfunding. Commercialized crowdfunding is an integral part of crowdfunding. Its main characteristic and distinctive feature from other forms is the availability of financial compensation, which the sponsor receives (in this case an investor) in exchange for its support [5].

There are three most spread forms of crowdinvesting:

  • royalties;
  • public lending;
  • joint crowdfunding [2].

The Royalty Model is a logical continuation of the non-financial reward scheme. Only in addition to non-financial bonuses and various incentives, the investor receives a share of the income or profit of the financed project [2].

Crowd's lending (public lending) – the leader in terms of the number of funds raised and the subject of close attention of specialists. As the main advantage for creditors higher rates and the very possibility of lending in a very wide range of industries are allotted. The borrower wins in lower rates and the convenience of obtaining a loan. The key characteristic of this form of commercialized crowdfunding is the availability of a clear schedule of repayment of borrowed capital to investors [6].

In the role of the market leader in sphere of crowd’s lending, the American platform Lending Club was consolidated, which from 2007 to October 2013 collected more than $ 2,7 billion and, given the current growth rate, only in 2013, revenue is expected to reach $ 1 billion and even more. Google Corp. announced the purchase of a minority stake in the Lending Club platform [7].

Joint crowdfunding is one of the most advanced forms of crowdfunding, where as a reward, the sponsor (investor) receives a part of the property, shares of the enterprise, dividends or the right to vote at general meetings of shareholders. In other words investor becomes a shareholder. But along with it is the most innovative form of crowdfunding, this approach is both the most discussed and contradictory, because it affects the organizational and legal form of the enterprise and is associated with an increased risk for investors. One such platform is EquityNet, which has existed since 2005 [6].

Crowdinvesting is carried out on the basis crowdfunding platforms (platforms) - CFP. Crowdinvesting site – a commercial or non-profit organization that carries out activities to place projects that require funding, in public access and providing an opportunity for sponsors to transfer financial and non-financial resources to support these projects. Along with social and non-commercial tasks, crowdfunding has the potential to become an alternative form of financing business project. But now it’s at an early stage. The key advantages and purposes of crowd-hosting are:

  • democratization of the process of supporting art and culture, and generating additional income for the entertainment industry;
  • support for innovative solutions and start-ups, which will also enable traditional intermediaries to find successful and talented people;
  • creation of a transparent and effective mechanism for public financing of projects.

Crowdinvesting model has a number of very important advantages:

  • the ability to assess the level of demand and reduce risks;
  • establishing contacts with the target audience and creating a consumer base.

Crowdfunding, particularly offering  the project to the crowdfunding platform, can be used not only as a method of raising funds, but also as a marketing tool in the derivation of a new product or adaptation of the product to new markets.

Commercialized Crowdfunding provides new ways of investing. It is beneficial for both sides – investors and organizers. As it dupes the amount of approaches to the investing process. From the financial point of view financial compensation Crowdfunding has the greatest potential, particularly – joint funding. All of the sub-types of this investing methods require different business model in use [2].

Royalty crowdfunding represents the same model as non-financial compensation models from the point of investing view. The only particularity is additional gains received with the products for donators [2].

Public lending model is very close to micro-credit organizations with the only drastic difference. Such organization plays the role of the burse where interact lenders and borrowers.

But the most complicated and at the same time scheme refers to joint crowd funding. In this case Crowdfunding company can act as intermediary and in financial meaning be the burse or broker for shareholders or as an investing company that runs the projects and attracts financial resources through mechanism of crowdfunding.

Crowdfunding Investment Company is a management company that takes on the task of finding and implementing investment projects, attracting funds which are transferred through Internet platforms and sites. When the sufficient amount of funds for the project is accumulated, its implementation begins. The first stage is the creation of a new legal entity, a joint-stock company, whose shares are distributed proportionally to deposits. The company makes a profit for the services of managing the facilities and arranging financial flows between the project and investors. The company also organizes the payment of income and helps to realize the shares of depositors in the over-the-counter market for profit.

The principle of commercial crowdfunding in types of royalties, public lending and joint crowdfunding can be adopted to Kazakhstan economic realities and transferred into new investing products or into new business model of Investment Company.Royalty principle is not entirely implemented in Kazakhstan. Today it exists as non-financial compensation, where financial compensation has only voluntary character or is not considered. This can be explained with the absence of legislative basement for such kind of deals for physical entities.

So in that case the implementation of public lending model must be adopted. In such model crowdfunding Company cannot act as intermediary. One of the ways is acting as investing company selling investing products to wide auditory. The agreement conditions must be unified. That leads to the limitation of projects for investments.The most possible sub-type of commercial crowdfunding that can be implemented in Kazakhstan is joint crowdfunding. In this case, crowdfunding company has two functions (see Figure 1).

Функционирование краудфандинговой компании

Figure 1. Functions of joint crowdfunding company (Note – made by author with source [2])

It is seen that crowdinvesting company includes market team that investigates market in three directions. First is founding Joint Stock Company that is funded with private investors. This company finds potential business objects (often flat and houses) that has lower than average cost. Second direction includes founding new legal entity for every single or group of objects. This company generates profit with renting it actives. Company supervises cashflow from renting to the investors. Here occurs the second source of income for investors – rise of equity price. So investors can sell their stake for the higher price and get earnings from the difference. The third team of Crowdfunding Company finds possibly promising projects that don’t exist now. The develop business plan and scheme of fundraising. To these activity refer to types: repairing of bases and stores and remaking them for special uses (upgrading the store class); building new objects (village for thematic teambuilding or parties).

Second function is organization of funds accumulation. This activity also includes reckoning with investors.

The last function is management and running the project. At this stage present two variations: when company runs the project itself or delivers these credentials to another managing company or organizer. [5]

So the whole scheme of investing model based on the principle on joint crowdfunding is reflected on the Figure 2. 

Краудфандинговое инвестирование

Figure 2. Scheme of joint crowdfunding investments (Note – made by author with sources [3], [5])

This scheme shows the process of cashflow design. It starts from finding the most appropriate project. Then this project transfers into business plan to implement. The initial interaction between project and investors is held through the usage of internet platform.

After the necessary amount of money is accumulated the new legal entity is founded with investors acting as shareholders. After getting profit from renting the commission to crowdfunding company is paid, other part of profit is delivered to investors according to size of their investments. Sometimes profit can be left at the enterprise in order to fund the future development.

Looks the process of joint crowdfunding investments that provides numerous of variations of organizing the projects. Scheme of organizing the reckoning system depends of the class of object used as investment. It is to point also that the whole process from starting the project till the end is open to see.

So it can be concluded that crowdinvesting company in Kazakhstan bases its activity on the principle of commercial crowdfunding, is represented in the form of a management team. The tasks of this organization include the search, analysis and implementation of investment projects in real estate, most often commercial. Financing of these facilities is done through the Internet sites. After the accumulation of a sufficient amount of money, the project begins. The first step is the registration of a new legal entity, a joint-stock company, whose shares are transferred to the property of depositors in proportion to the share of their investments. The company takes a commission for the management of facilities and the organization of financial flows between the new company and investors. Also, the management company organizes the payment of dividends and provides support in the sale of shares in the secondary market in order to fix profits by depositors from the increase in value.

References

  1. Athwal N. How Crowdfunding Has Permanently Changed Commercial Real Estate. Forbes Asia. 2016. March 23. Available at: http://www.forbes.com/sites/navathwal/2016/03/21/how-crowdfunding-has-permanently-changed-commercial-real-estate/#152465befe16 (accessed 06 October 2016).
  2. Serebrjanski A. 2014. Crowdfunding as mechanism of fundraising for innovative projects in Russia. Investigation of innovative potential of the society and forming of its strategic development directions. Setofscientificarticlesofthe 4-th International scientific-applied conferencing (December 25-27, 2014), ed. Gorohov А. (ex. ed.); in 2 vol., vol. 2, South-West. State University, Kursk. p. 153.
  3. Clark P. Inside the Real Estate Crowdfunding Landrush. Informational Agency Bloomberg. 2016. May 9. Available at: http://www.bloomberg.com/news/articles/2016-05-09/inside-the-real-estate-crowdfunding-land-rush (accessed 09 October 2016).
  4. Colin M. and Tiago B. The 2014 Survey of business angel investing in the UK: A Changing Market Place. University of Glasgow, Adam Smith Business School, October, 2014.
  5. Kennon J. How to invest in real estate. Forbes, October 17, 2016. Available at: https://www.thebalance.com/how-to-invest-in-real-estate-357989.
  6. Lewis M. Crowdfunding of U.S. real estate deals gains momentum. Information agency MSN Finance. 2015. October 26. Available at: http://www.msn.com/en-us/money/realestate/crowdfunding-of-us-real-estate-deals-gains-momentum/ar-BBms3VV (accessed 06 October 2016).
  7. Villeneuve-Smith F. and Chung C. The people’s business. State of Social Enterprise Survey, Social Enterprise UK, 2013.
 

Материал поступил в редакцию 20.03.2018
© Бабич И. М., Тлеппаев А. М., 2018