Young entrepreneurs often lack funding to realise their innovative ideas, but for those with a bit of spare cash, that’s about to change
Crowdfunding is changing the investing game and offers young cash strapped start-ups the chance to realise their business idea. Jens-Uwe Sauer, CEO of Seedmatch, is at the head of the game, giving individuals the opportunity to invest in innovative businesses.
“It is very difficult for business founders to find start-up financing,” he says. “Germany and many other European countries miss a so-called business angel culture, which exists in the US,” Sauer explains.
A business angel or angel investor is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity. According to Sauer, the predominant paradox in Europe is that there is sufficient capital in the market and many private investors would be keen to invest in start-ups, but the ‘matching’ of interests does not work.
On the German market, this missing link is satisfied by Seedmatch. The website-based service allows individuals with capital, but no access to start-ups to find innovative business models in which they can invest small amounts. By way of crowdfunding - or the co-operation by a network of people who pool their money and other resources together, often via the internet, to support efforts initiated by other people or organisations - Sauer believes that individuals get the chance to influence the market and to benefit from it.
“Crowdfunding not only offers new tools for start-up financing but it could also democratise the venture-capital market”
The idea for Seedmatch was born when Sauer worked as an executive consultant, where he was in constant contact with innovative business models but also learned how difficult project realisation is. Combined with his personal motivation of having liked to invest in various young companies in the past himself, he created Seedmatch with the intention of eliminating the belief that investment “was only possible if you have large amounts of capital, never below five-figure amounts.”
Although Sauer admits that he did not re-event the wheel when launching Seedmatch as crowdfunding already existed, the initial pre-launch phase offered its own challenges.
“The toughest challenge was to create a participatory construct, with fair conditions for both the founder and the investor. At the same time is had to be in sync with taxation law and the rules of capital markets. Also the system needed to enable the purchase of online shares,” Sauer said.
This concept was new in Germany and the task of first-mover was enormous as there was no perfect solution that was ready to go. “We had to compromise in certain areas and ended up reworking the entire model close to market launch”
When asked what he would do differently if ever taking on such a venture again, he emphasised the importance of teamwork.
“I would focus much more on setting up a complementary team, especially when there are so many different challenges.”
After having learned a few lessons and tackling some obstacles, Sauer believes that given their pioneering role in the area of equity crowdfunding they have done many things right, advising other young business founders to hold on to their visions, especially when times get tough.
“There will be times when doubts and challenges will outweigh the potential advantages of setting up a business,” he says. “It is important to continue optimising the business model until it has matured.”
Sauer adds that apart from the development of a good product, it is crucial to know the market and customers to allow for quick and targeted project realisation. Yet to achieve real success, it should also be fun to take on new challenges.
"A good team spirit is vital, where ideally everybody does what they like doing most. This way everybody can grow with their tasks and responsibilities"
A good balance between making demands and promoting team members can lead to great success – the success that is vital in a new and fast paced market niche such as crowdfunding.
“Crowdfunding is becoming more diverse with an ever crowing number of new platforms. Some will stay and some won’t last, but the possibilities of crowd-funding are far from being exhausted. Being a part of it is very exciting.”