Crowdfunding in a University Setting A Guide to Getting Started and Best Practices

Vermont Technology Council

This paper draws upon the success of UVM Start, a crowdfunding platform at the University of Vermont, to develop a practical guide for replicating such a tool at universities and organizations. Vermont Center for Emerging Technologies vermonttechnologies.com

Crowdfunding in a University Setting

Crowdfunding in a University Setting A Guide to Getting Started and Best Practices TABLE OF CONTENTS

Executive Summary....................................................................................................2

Where Does Crowdfunding Work?........................................................................4

Are All The Pieces in Place?.....................................................................................5

Ready to Launch!.........................................................................................................9

Capturing Value.........................................................................................................11

Conclusion..................................................................................................................13

UVM Start Process Guide.......................................................................................14

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EXECUTIVE SUMMARY Crowdfunding is a burgeoning field in startup finance that allows early stage entrepreneurs to source capital from friends, family, and social networks. In its truest form, crowdfunding allocates capital as a pure market should — where it is needed and to those who most deserve it. It allows the crowd to discover entrepreneurs that need funding, funders to make connections more easily, and perhaps most importantly, it gives startup companies quick capital. Crowdfunding is not the best fit for all entrepreneurs, but for those who fit the model, it has become a total game-changer. One area of interest in crowdfunding has centered around younger entrepreneur who is cash-strapped yet resourceful and have plenty of non-financial resources at his or her fingertips. For many of these creative minds, college is a place where they first exercise their entrepreneurial muscles. However, their personal networks are minimal. Colleges and Universities on the other hand, struggle to be entrepreneurial because of their size, but have enormous networks of alumni supporters. By showcasing the most entrepreneurial students to these vast networks, small amounts of concept-capital (capital that funds a company based on a concept alone) can be allocated effectively to student startup companies, creating tremendous value. To connect student entrepreneurs with alumni donors, the Vermont Center for Emerging Technologies along with the UVM Foundation and the Vermont Technology Council developed an online crowdfunding platform, built specifically for the UVM community. This guide describes the lessons learned from the successes, and stumbling blocks of UVM Start. These lessons are then used to propose a template and set of best practices to be replicated at other universities and organizations. This paper is divided into the following four sections: 1. Where does crowdfunding work? Examines where these practices work best, how

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institutional structure affects the outcome of a crowdfunding program, and what the ideal situation is. 2. Are all the pieces in place? Highlights key components necessary to make a crowdfunding platform a success, who needs to work together, and student involvement. 3. Ready to launch! Offers best practices and necessary partners for planning, seeding, and launching a platform & program. 4. Capturing the Value. Shows the steps necessary after crowdfunding to ensure value is fully captured by students and donors to create a virtuous cycle.

From an ecological perspective, crowdfunding is rapidly becoming a mainstay on the capital spectrum. This guide is not meant to be prescriptive in format or strategy, rather we hope this guide will be used by institutions as a litmus test for whether crowdfunding will work in a particular institution, and a guide for following through on such an implementation. We hope that everyone can take away a thought, or even an entire crowdfunding crash course from this paper. Should you want to follow up with the founders of UVM Start, we are happy to answer questions or give further guidance as needed. Please feel free to connect with us at the addresses below. And of course, if you are so moved, please donate to UVM Start at www.uvmstart.org! Andrew Stickney

[email protected]

Tucker Severson

[email protected]

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WHERE DOES CROWDFUNDING WORK? Crowdfunding at its core is about the ability of a group of people to pool money for greater impact. While the practice has been prevalent for as long as there have been currency and community, only recently has it begun to receive increased focus. This is due mainly to the success of disaster relief campaigns, and the success of sites like Kickstarter and IndieGogo. UVM Start was an effort to focus this powerful force on the entrepreneurial students at a large institution, and help these students connect with a crowd of people who have an affinity for the students and the overall community. In order to bring crowdfunding to the University of Vermont we needed to think like entrepreneurs. There were several contextual elements that made crowdfunding at a University possible, and successful. This includes creating an innovative team to champion the effort, a pool of driven, ernest, and bright student entrepreneurs, and an inclusive administrative structure that is comfortable with entrepreneurship.

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1. INNOVATIVE TEAM For any new program or platform to be successful, there must be a team that can catalyze and corral entrepreneurs and administrators. The UVM Start team consisted of undergraduates, graduates, alumni, and a strong advisory board comprised of community professionals. 2. STUDENT ENTREPRENEURS At its core, a crowdfunding platform is a marketplace between entrepreneurs and donors. Universities that will be successful are those that have a pool of innovative, motivated, and supported students. It is better to think of a crowdfunding platform as a tool to assist entrepreneurial students, rather than a program that creates them. 3. ADMINISTRATIVE STRUCTURE Absolutely critical to success is an inclusive administrative structure that partners with all necessary functions at the University. Since there is both value added as well as subtracted by institutional partners, leveraging the current resources (such as business courses/students, tech transfer offices, university business offices and alumni giving) can significantly reduce the cost and administrative burden of the platform.

The culture of entrepreneurship at a university it a critically important ingredient to building a successful crowdfunding platform. It is conceivable that all the necessary components are in place, while a rigid administrative culture denies the flexibility required to operate a crowdfunding platform. UVM Start was fortunate to have the leadership of high-level university professionals and administrators. In several instances, they assisted in persuading the views of other administrators to align with the goals and mission of UVM Start, and enormous credit is due to them for creating that value. Questions: 1) Are there student entrepreneurs with individual projects they would like to pursue? 2) Is the administration of the organization comfortable with entrepreneurship? 3) Would you be able to focus the platform narrowly for a single group to start (ie. for profit ventures)? 4) Is there a team in place to champion the crowdfunding effort? 5) Is there an interest in crowdfunding among prospective donors?

ARE ALL THE PIECES IN PLACE? There are several departments within an institution that need to work together to make a successful

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crowdfunding platform. While lack of participation from any one department will not completely derail a crowdfunding platform, inter-departmental cooperation will have tremendous benefit for the platform as a whole. A team should do its best to form a strong connection across all departments. This will help the platform to leverage existing resources, reducing cost, and increasing speed of implementation. At the outset of UVM Start, there were three primary decisions that we made: 1. To build a strong team; 2. To buy the technology rather than build it; 3. To seed the first round with entrepreneurs & donors. We also decided to be laser-focused on helping one type of student: those building for-profit companies. By narrowing our focus, we were able to make connections and partnerships more meaningfully and efficiently than if we had tried to serve all students equally. Crowdfunding could be used to fund a wide variety of programs including clubs, the arts, scholarships, and many more. By focusing on for-profit businesses, we were able to amplify our impact on one area — with the mindset that additional areas could be added in future iterations. BUILDING THE TEAM We were lucky to have an exceptional team from the beginning. We found that the more intrinsically motivated the student or team member, the more impactful they were. The students we found to bring UVM Start forward were not interested in being paid, but rather they were interested in making an impact on the campus. One of the overarching tenets of our team-building process was to be inclusive. Broad based participation on the team, meant that we couldn’t be too narrow in choosing those that we helped, or too insular in our thinking. Additionally the inclusion of students is key. Undergraduate and graduate students add a level of credibility that administrators cannot add. They also have a great deal of insight into student culture. For any program moving forward, finding team members who are representative of those being served and have an eye toward inclusion ensures a high level of alignment between the entrepreneurs and the platform. BUILDING THE TECHNOLOGY Initially we received a quote from a private technology shop on what the cost of building a crowdfunding platform would be. Fortunately for us, the tech shop suggested that we would save significant money by using Launcht.com as our platform instead. Launcht.com is a white label crowdfunding platform with a standardised back end, and lightly customizeable front end. This

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allowed us to have the site up for 1/10th of the cost of building it ourselves. For the sake of speed, agility, and leanness it is crucial to leverage the resources that currently exist - using a white label platform allowed us to do exactly that. SEEDING ENTREPRENEURS “If they are real entrepreneurs, they’ll find YOU” - Ty Danco A major concern while creating UVM Start was whether there would be enough student entrepreneurs, or deal-flow, to keep the site interesting. Since we work with student entrepreneurs in our day job (at VCET), our hunch was that there were plenty of student entrepreneurs, but that it may take a long time for them to hear about the platform. We decided to reach out to faculty members and meet the students who were far enough along in their projects to showcase them. The exciting piece for us was hearing about all the projects that we didn’t know of, and in some cases, that the faculty didn’t even know of. Well before the platform launched, we found the initial round of projects that we would end up posting. This allowed us to seed one side of the market, and to begin helping these teams shape their campaigns earlier in the process. As alluded to earlier, crowdfunding in any type of institutional environment has its pros and cons. On the benefit side is the built-in networks of the institution and the many infrastructure pieces that can be leveraged to streamline the crowdfunding operation. The biggest drawback is determining the best way to motivate those resources and get them all to work seamlessly together. UVM Start found that for the University of Vermont, we needed the structure to look as shown below.

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With the entire system synced and psyched, we were ready to launch the first round of student entrepreneur campaigns. Questions: 1) Can you build a team representative of those that will use the platform? 2) Can you build a team motivated based on impact to the organization? 3) Are there enough student entrepreneurs to seed the platform? What is the ongoing source? 4) Is there a way to use existing technology that will serve your needs? 5) Are there leading donors to seed donor participation? 6) Map the process for your organization with interdepartmental participation. Is there a more simple way to achieve the same benefits?

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READY TO LAUNCH! This section offers best practices and necessary partners for planning, seeding, and launching a platform & program. As shown above, partnerships with key organizations on campus helped us to leverage community resources. While the University of Vermont is a unique institution, the key takeaway is to leverage what you have, especially if it makes getting started faster, simpler, and less costly. To successfully execute we needed to partner with several groups, including but not limited to the Business College, the Office of Technology Transfer, the UVM Foundation (Alumni Giving), and the Business Office. Two of the founders of UVM Start work at the Vermont Center for Emerging Technologies, an affiliated (but independent) business incubator. Participation extended beyond the aforementioned groups to include university and local newspapers, the university’s communications office, and the university President’s office. While the latter media outlets spread awareness, the core functions were done by the first five groups. While we worked with each university office individually to establish a working process flow, we communicated with our advisory board on a semi weekly basis. This simple act achieved two distinct goals. First it kept our advisory board actively engaged, which in turn assisted us in spreading the word when it came time to launch the platform and raise money. Second, maintaining an open line of communication with the board allowed us to ask for help with specific tasks. Sometimes we needed user feedback on the look and feel of the website, and others instances called for recommendations for student team members. In both cases, managing our board of advisors helped leverage our resources, and ostensibly helped our team have a greater impact. PLANNING Planning for the platform meant aligning board interests with a commitment to help students. The goal for our planning stage was to establish a process that ensured entrepreneur friendliness as well as student success. Acknowledging that each institution is quite different, our recommendation is to engage with each group to ensure buy-in, and navigate the best path for processes from there. SEEDING

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One of the most important elements that makes a successful platform is the act of seeding activity for donors and entrepreneurs. Imagine for a moment that eBay has just launched, but no one is using it. The first person to arrive has one of the worst web experiences in history — they’ve got nothing to buy (if they are a buyer) and there’s no one to sell to (if they’re a seller). Quickly, they leave the site. The same principles apply to crowdfunding. The donors and entrepreneurs have very specific and different needs that must be met. The students starting a campaign need funding, and the donors that find their way to the site need to see activity and interesting projects. At the earliest point in this stage we visited the school of business looking for students with nascent business ideas who could benefit from the platform by submitting a new campaign. We then notified local media, the university communications office, the university newspaper, and the university foundation to ensure their participation to help bring donors to the site. We set a launch date, and planned our communications strategy accordingly. Furthermore to ensure that the first donors would see funding activity, we secured a small donation that allowed us to give to each project prior to launch. By design this meant no one had to be the “first user” of the site. LAUNCHING The specific launch date was set to work with the student calendar of the University of Vermont. Our goal was for students to crowdfund during the second half of the semester, and begin working on their startups during the winter break. Planning for a 45 day campaign (which was later extended by 10 days) meant we had to launch in mid October. Choosing an off the shelf technology like Launcht proved to be a wise decision. Instead of focusing on developing the website, we were able to focus our energy on improving the student startups. Our team worked with each student startup to think through their business models, teams, and needs to achieve success. We then had the students prepare applications and videos that would become their UVM Start campaigns. These requirements, were of course, due several days prior to launch. During this same time we had the University newspaper run teaser articles — first on the concept of UVM Start, and then on the individual student teams. During this time, communication with our advisory board remained robust and engaged. By our designated launch date, we were able to make the campaigns public for anyone to view, and we soon begin directing interested parties to donate on the site. Questions:

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1) Have you spoken with key persons from each department? Are they supportive? 2) Has a core group of seed entrepreneurs been identified? Are they interested? 3) Have you 4) Is the timeline for launching achievable? Does it fit well within the organization’s calendar? 5) Have you planned to publicize the platform adequately? Do you have the resources to reach prospective donors?

CAPTURING VALUE This section describes the necessary steps to increase connection and communication between students and donors. A strong connection maximizes the value gained by both parties. Upon launching the site we pushed through a few payments to make sure the donation process was working correctly. Once the glitches were smoothed out, we encouraged the students to spread the word via their own social networks, friends and family. We found a direct correlation between students that engaged early-on and promoted their projects through their social networks, and success. Students who engaged their peers raised approximately 2x more funding than those who sat on the heels. Over the course of the campaign, we pursued several strategies to engage donors. First, we asked our advisory board to promote the opportunity to donate to student entrepreneurship. Again, having cultivated the relationships early on in this process resulted in advisors who were engaged and happy to make the community aware of project. We quickly followed this with an article in the local newspaper (Burlington Free Press), and targeted mass emails to UVM Alumni (during the campaign we had 3 separate emails to UVM Alumni).

SPECIFIC METRICS 13%

Click-through Rate

$67

Average Donation

For emails coming from the UVM Foundation, the overall open rate was 34%, with a click

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through rate (to UVM Start) of 13%. Both of these metrics outperformed the Foundation’s average email campaigns. Another interesting metric we found was that we were able to garner $1.86 in donation for each visitor to the site, with an average donation of $67 from alumni who chose to support a campaign. The email blasts generated considerably greater donations than press or other forms of engagement, often within two days of the email itself. Lastly, we tried two types of email blasts, one promoted the site and program as a whole, and the other promoted each project individually. The former performed 10% better.

Following the campaign the students were able to begin working on their projects. All the teams fell short of their goal, so we had to answer the questions, “What constitutes a credible amount of money that will allow teams to accomplish something?” As a group (our team and advisory board) decided that the students could determine what they could achieve with the money, and how it would be spent. Following the campaign we wanted to ensure that each team was supported as needed. The Vermont Center For Emerging Technologies, and the entire UVM Start team fulfilled this role, by mentoring the students, connecting them with alumni that had reached out as a part of the campaigns, and giving space to the teams to work together. During the following semester, the UVM Start team has not only continued to work with each student team, but has also tracked their progress. The greatest value added for the program has been having someone to follow up and assist as needed. Frequently, student entrepreneurs become busy and/or overwhelmed, but VCET’s followup acts as a proactive resource that helps keep them pushing forward. The UVM Start team realized early on, that once the crowdfunding campaign ended, the behind the scenes work with the participating teams would begin. To create a virtuous cycle of entrepreneurship, the teams that participate must get the support and individual mentoring after their funding round ends if they want to be successful. Questions: 1) What metrics are important to your organization? Are you able to capture those?

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2) Can the crowdfunding team facilitate learning after the campaigns? 3) What does success for the platform mean for your team? For the organization? 4) What resources exist to support entrepreneurs after the campaign has ended? 5) When does the crowdfunding platform end its relationship with the entrepreneur?

CONCLUSION Crowdfunding within an institution has many factors that differ from traditional programs. Furthermore, the benefits for the institution, participants, and ecosystem are tremendous. The key tenets for the program that made it successful were inclusion, participation, and focus. Determining how each of these items can be achieved within the institution is critical to success. The follow up portion, while largely behind the scenes and something for which an institution receives no credit, is the very element that drives a virtuous cycle of entrepreneurship and innovation. A crowdfunding site that simply raises money and forgets its participants needs to reinvent the platform each year — while a site that raises money and supports its entrepreneurs brings perpetual awareness and interest.

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UVM START PROCESS GUIDE

The following are steps taken from before a campaign is launched, through the completion of a given student’s project. PRE-FUNDING

1. Student entrepreneur (SE) with an idea, project, or business is referred in or solicits assistance from UVM Start, by starting an application on uvmstart.org, or emailing one of the student associates of the team. In the case of the former, a student associate (SA) will proactively reach out to the student entrepreneur. 2. The SE is asked to meet with the SAs of UVM Start. During the meeting there are several checkpoints that the SA is looking for:

●

Project feasibility

●

Student coachability

●

Thoughtfulness of student

●

Project acceptability within the standards of the University handbook and faculty guidance

1. The SA confers with other SAs to determine if the SE could benefit from UVM Start and the interaction with the UVM Start team. The SE is assigned to a specific SA for the remainder of the program. 2. If the student is accepted to the UVM Start program, the SA will notify them of their

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acceptance, and ask them to make sure their application is complete on UVM Start.org as well as ask for a preliminary “use of funds” outline. 3. The SA team will approve the use of funds and assist in shaping the campaign for public view. The SA team will also begin to connect the SE with local resources for business guidance and advice, ahead of fundraising. 4. By the set date for either the fall or spring campaigns respectively, the SE must submit all of the requested materials, a promotional video, a list of proposed “Perks” and a preliminary plan for how to fundraise during the following campaign period - between 45-60 days. Additionally, SE’s are allowed to offer “perks” at various levels of the campaign. They must offer perks that are readily available, and carry low to no product development risk to the donor. For example, an SE could offer a “perk” of a free t-shirt with their logo on it at the donation level of $50, however they could not offer any of the product that they are seeking to develop. In the case that the product has been developed and is already in distribution, it is regarded as a “perk” with low product development risk. 5. Campaigns go “live” at the same time, on the same day. 6. During the campaign, SE’s are expected to proactively reach out to friends, family, blogs, etc. to promote their project. They will also be expected to provide updates on a frequent basis for their current & prospective donors to follow. 7. SA team will craft emails highlighting all projects. Once approved by the UVM Foundation, the UVM Foundation will send the emails to all alumni. Each campaign will target a minimum of three mass emails. FUNDING

1. The website will shut off after the predetermined length of time for the campaigns, funds will be locked in, and sent from the website payment manager (WePay) to the UVM Foundation. 2. The UVM Foundation will send funds to the Office of Technology Transfer for distribution, with direction as to how much funding will go to each team. 3. The SA’s are then required to obtain written verification of acceptance of funds by SE’s, anticipated budgets, and 1 page summaries of how the budget will be executed from each SE team. This is to be accomplished within 1 month of the campaign closing. Any unclaimed funds will be redistributed to teams on an as needed basis. A snapshot of acceptable examples are in the appendices. 4. The SA’s are required to approve and ask for any other supporting documentation as

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necessary for the distribution of funds. 5. The SA’s are also to work with the SE’s to draft and distribute “thank you’s” to the donors of the campaign. 6. The SE’s are then given approval to spend the funds, and submit receipts in line with the University’s reimbursement guidelines in order to receive a check for funds.

POST FUNDING

1. Once students have received approval to spend funds and be reimbursed, they are expected to work with new advisors, the SA’s and members of the Vermont Center for Emerging Technologies to receive advice, guidance and mentoring during the process. 2. SE’s are expected to give semi-weekly updates to the donors of the project using the uvmstart.org platform. 3. At the end of the semester in which the funds were transferred from the Office of Technology Transfer to the student entrepreneur, a final meeting will be had to assess progress and give a final update. At this point, the involvement and formal oversight of the UVM Start team ends, however SA’s are encouraged to continue to engage with the students entrepreneurs in order to build a virtuous ecosystem of entrepreneurial talent on campus.

*Execution results are expected to vary and therefore measurement from a metrics standpoint is difficult. Progress should be measured on a case by case basis*

FAQ 1. Who is eligible to have their project, business, or idea featured on the UVM Start platform? a. Any current UVM student can have their project featured on the site once it has been reviewed by the UVM Start team for feasibility and the application has been completed. 2. What happens when a SE does not raise the total amount of funding they were seeking? a. The SE will work with their SA and the UVM Start team to determine if there is

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enough funding to accomplish some of the tasks outlined on their preliminary ‘use of funds.’ 3. Why are the projects limited to a funding period of 45-60 days? a. The UVM Start program follows the schedule of the academic semesters so that students can have their time away from school for planning and development. 4. Can SEs feature their project on the site for multiple semesters? a. Yes, SEs can feature their project on the site again after their first semester if they have shown appropriate use of funds and progress, but still need more funding to reach future milestones. 5. How many hours per week can a SA expect to work on UVM Start? a. The amount of time spent per week by SAs will vary depending on how many teams they are working with and the amount of assistance a team will need, most likely about 7-10 hours per team. 6. How many hours per week can a SE expect to work on UVM Start? a. This again depends, if there are multiple people on the SE team and tasks are able to be spread out duties. It also depends on the effort the SEs put into their campaigning for funds. Likely between 7-10 hours.

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