Crowdfunding: Football's 12th Man!
Thu 3rd Apr 2014 | Money & Finance
If you’ve ever thrown a bit of loose change into a collection bucket, whether that be outside a football stadium or in a supermarket, then you’ve already taken part in crowdfunding.
Crowdfunding has been around for a very long time but modern crowdfunding uses the internet to get lots of people clubbing together to support things they care about, a point not lost on football clubs. Too often, club’s that have fallen on hard times have turned to the goodwill of its fans to help out, often raising huge sums of money to ensure the continued viability of the clubs they love. But this need not be the only time you ask fans to put their hands in their pockets.
Increasingly, crowdfunding has been used by clubs to raise capital for infrastructure and stadium developments. Kieran Garvey, Business Development Manager at Crowdcube who has worked with the UK Crowdfunding Association (UKCFA), explains the different types of crowdfunding and how football clubs can use them to raise vital cash for a range of projects.
THE DIFFERENT TYPES OF CROWDFUNDING.
There are four main kinds of crowdfunding.
1. Donation crowdfunding: Charities have used crowdfunding for decades, getting lots of people to chip in a bit. Now there are big online platforms that raise money from tens of thousands of people, with small contributions for charitable causes.
2. Reward crowdfunding: Is where people give money in return for a reward – a free t-shirt, signed football, free tickets, free product or merchandise.
These two above are non-repayable crowd finance because you don’t get your money back.
3. Loan-based crowdfunding: A business or individual can borrow money from lots of people and return it with some interest payment on top. Individuals can also borrow money from lots of people. This is also known as peer-to-peer lending or loanbased crowdfunding.
4. Equity-based crowdfunding: Is where people invest in a business and get a stake or share in the company’s success in return for investing. This can be for new start-ups or more established businesses.
WHAT’S BEST FOR FOOTBALL CLUBS?
Football clubs and sports clubs could use every type of crowdfunding mentioned above – or a mixture of them.
For bigger refurbishments, equity crowdfunding is an option definitely worth considering. You can raise substantial sums of up to several million asking your fans and community to support your project. Football/sports clubs can use equity crowdfunding to let their fans take a stake in the club – with a vested interest in its success. Alternatively it can be used to raise money to help them improve facilities, create new enterprise opportunities, and grow the community of shareholders and fans around them. Loanbased crowdfunding is also another option, borrowing money from the crowd in return for a given rate of interest. Reward and donation based crowdfunding could also be useful, perhaps for smaller community based projects.
THE BENEFITS OF USING CROWDFUNDING
Using crowdfunding lets people control exactly how and where their money is spent – whether through donations or investments. Giving people control over this through crowdfunding, more directly connects people to projects. It can also provide promising potential investments to people at a time when holding your money in any high street bank means depreciating value although it must be stressed, there are serious risk implications for investing and you could lose your money.
For entrepreneurs and project creators, crowdfunding offers the chance to raise the profile of the project in a very public way. Once people support your plans, you can have a large group of people who can help to bring about success. At a time when banks are refusing to provide enough finance to businesses and investment into sport, culture and welfare is being cut so drastically, crowdfunding offers a proven, valuable way to raise funds through many people working together.
THE DRAWBACKS OF USING CROWDFUNDING
In terms of the drawbacks of crowdfunding - it is not easy. It takes a lot of effort promoting and getting people to support your project – online and offline. Social media is a must and drawing on your own network is key to success.
Crowdfunding does also require some time to receive the funds – perhaps two or three months in total. Therefore a lot of planning and preparation is needed to pull it off well. You cannot sit back and expect the funds to roll in once you are launched on a platform. There is also serious risk involved if the project’s creators cannot deliver what they set out to do.
Crowdfunding already has its share of successful stories in football. In Spain, Real Oviedo raised £3.2m to save the club from extinction. The club elected to raise money by selling shares in its franchise; first to club members and subsequently to the public at large. So strong was the support for the campaign that 13,000 supporters from across the globe committed £1.5m in just a few weeks. The campaign received further publicity when Telecom billionaire and the second richest person in the world, Carlos Slim doubled the money.
Another great example of crowdfunding has come from Germany where FC Union Berlin raised £4m to improve their stadium. The project was partially funded by the sale of shares in the stadium’s naming rights. A new arrival to the crowdfunding scene this year has been Tifosy – the first crowdfunding platform designed specifically to help football clubs raise financing for club-related projects. In addition to their dedication to helping football clubs globally, what differentiates Tifosy is their commitment to managing each crowdfunding campaign on behalf of every club; including producing content and organising the logistics behind each campaign.
Tifosy will start their first club campaigns in the second quarter of this year, with clubs across Europe. Some of the projects range from stadium improvement to youth academy development and charity projects. In the meantime and in keeping with their core ethos of “empowerment”, Tifosy will be launching its first crowdfunding campaign with an altruistic goal at its heart. The “From Favela to Maracanã” campaign will enable children from some of the most underprivileged areas of Brazil to attend a World Cup match.
GrowthFunders is an online equity crowdfunding and co-investment platform, whose main aim is to facilitate growth in start-up, early stage, and established businesses. It does this through matching ambitious entrepreneurs with forward-thinking investors who want to build diverse investment portfolios.
Currently listed on GrowthFunders is The Soccer Factory. Looking to raise £500,000 to open the first in a series of facilities, each of which will house a minimum of seven state-of-the-art indoor 5-a-side football pitches and a cafe/bar.
The factory’s founding father is Dan Lewis, who prior to becoming MD of The Soccer Factory, spent 10 years as Deputy Director of Sport at Durham University. Dan believes that raising finance on GrowthFunders gives him the opportunity to reach out to a wider selection of potential investors, making his “funding target much more achievable.” He goes on to say that The Soccer Factory will be a “real community facility, so it’s great to have a lot of advocates actually based in target communities.”
Posted by: Kev Howland
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