Alternative Finance in Ukraine

EU countries fight for ICOs | How to value Alternative Lending Platforms?


We are one week before our yearly academic event on alternative finance at Utrecht University. Researchers from the US, India and all over Europe are expected to share state-of-the-art insights on alternative finance. Really looking forward to it!

This week I have asked Den Bortnikov to provide an overview on the status of alternative finance in Ukraine

Further news this week:

  • France accepts ICO Framework to become leading EU ICO Hub
  • Hidden entrepreneurs: What crowdfunding reveals about startups in metro America
  • Fintech Alternative Lending: How to value Lending Platforms?
  • Event: Crowd Dialog Europe – Alternative finance, blockchain innovation and digitalization

France accepts ICO Framework to become leading EU ICO Hub

While the European Commission is pushing for pan-European ICO regulation, national governments in Europa are working hard on creating ICO-friendly regulations in their own country. Last week an Initial Coin Offering (ICO) framework proposed by the French financial market regulators AMF (l’Autorité des marchés financiers) has been accepted in parliament in France. Even the French finance minister Bruno Le Maire tweeted about it.

ICO-visa

The ICO framework drafted back in March seeks to protect investors by introducing a voluntary “ICO visa” system.

Companies seeking to launch an ICO may apply for the visa by submitting their whitepaper to French authorities for review. The whitepaper must include specific details and guarantees for investors in order to be granted a visa, including:

  • A description of the project related to the ICO and its roadmap;
  • The rights conferred by the token;
  • The legislative court in the case of disputes;
  • The economic purpose and use of funds collected during the ICO.

Only for France ICOs

The visa excludes foreign corporations in an attempt to attract more projects to incorporate within the French nation. The new ICO visa will enable legitimate projects to more easily access services from banks and accounting firms, which to date has been difficult due to the regulatory uncertainty in the sector.

“Britain’s ‘Wild West’ crypto market should be regulated”

Meanwhile the British ICO market is still largely unregulated. The largest financial industry in Europe needs to have clearer rules, this is proposed by UK lawmakers.

The government’s current approach to the sector is vague and unsustainable, Parliament’s Treasury Committee said in a report, calling for regulation that protects consumers and prevents illicit uses such as money laundering.

Key findings of this report:

  • Regulation needed for “Wild West” crypto-asset market
  • Problems include volatile prices, hacking vulnerabilities, minimal consumer protection, and anonymity aiding money laundering
  • Blockchain is currently slow, costly and energy-intensive, but there is potential for data storage uses
  • The ambiguity of the UK Government and regulators’ position is clearly not sustainable
  • Regulation could improve customer outcomes, enable sustainable growth, and reduce certain risks
  • In deciding the regulatory approach, Government should decide if growth should be encouraged
  • Proportionate regulation could see UK as well placed to become global centre for crypto-assets

With this push for more clarity and regulation, the UK is also trying to become the European or even global centre for ICOs and crypto-assets.

Hidden entrepreneurs: What crowdfunding reveals about startups in metro America

An interesting research from the Metropolitan Policy Program of the Brookings institute on crowdfunding on Kickstarter adds an additional data source to the study of entrepreneurship and academic discussion on startup and entrepreneurial trends.

Less biases with crowdfunding – more funding for female founders

In theory, anyone can launch a Kickstarter project and anyone can fund one. As a metric, therefore, Kickstarter projects may be less subject to the same biases associated with other entrepreneurship data such as venture capital investment, which may reflect the geographic and social networks of investors as much as it does the concentration of good businesses ideas.

In this way, Kickstarter data offers a useful supplement to existing metrics on an important issue. In a nationwide analysis of Kickstarter projects from 2010 to 2017, this analysis uncovers four core findings:

  • People use Kickstarter for both one-time activities and ongoing ventures – Although 68,7% of the Kickstarter projects was raised for one time projects, 72,1% of the total funding was raised as seed capital for ongoing ventures, showing the main funding was used by startups that wanted to grow their company.
  • Kickstarter’s ongoing ventures can support creative ideas and job creation – The study shows that crowdfunding provides a viable path for commercializing innovation, in at least three ways: Capital access to support the development of the projects, a low-cost playground for creators to test and refine their ideas and demonstrate market demand, which can eventually lead to traditional funding from professional investors.
  • Metro areas with a high density of successful Kickstarter projects also concentrate high-growth companies and venture capital investment – Analysis suggests that the local conditions that yield successful Kickstarter ventures also attract venture capital investment and create high-growth companies. This does not mean that vigorous Kickstarter communities attract more venture capital and seed more high-growth companies. Rather, it indicates that the same conditions that yield creative activities on Kickstarter may also support those other outcomes.
  • But Kickstarter extends to a more diverse set of people and places than venture capital investment – While closely tracking venture capital investment, Kickstarter funding has a more diverse distribution, both by gender and geography. From a gender perspective, 35%of project leaders on Kickstarter are female, compared to 18% of VC-funded companies that have at least one female co-founder.  Also, the five largest metro recipients of venture capital accounted for 81% of the nation’s investment. By comparison, the top five metropolitan areas captured 46% of successfully pledged funding on Kickstarter—still a relatively high share but much less concentrated than venture capital.

More opportunities for women and in other regions by crowdfunding

Main conclusion of this research seems to be that crowdfunding provides more opportunities for a diverse source of entrepreneurs. Compared with VC funding, more women are able to attract seed funding (and are more successful) and funding is also more available outside traditional areas of investment.

Fintech Alternative Lending: How to value Lending Platforms?

One of the events I try to visit every year is Crowd Dialog Europe, a gathering of European experts on crowdsourcing, crowd innovation and crowdfunding. This years edition in Austria on October 18 will discuss alternative finance, blockchain innovation and digitalization.

The event is hosted by the Austrian Parliament and because last week the EU finance ministers announced their support for EU-wide ICO regulations, as part of the Austrian presidency of the EU these topics will be very interesting to discuss at this event.

Meet me in Vienna

When you are in Vienna around October 18, make sure to visit the event. When you are planning to visit, please drop me a line to meetup there.

Expert of the week : Den Bortnikov (Ukraine)

What is the current status of Alternative Finance?

Today the most known alternative financing tool in Ukraine is crowdfunding. Revolution of Dignity (2014) caused a lot of new social projects and social enterprises. Small volunteer initiatives had grown into strong NGO or educational projects. In 2013 only one crowdfunding platform, Spilnokosht, was working in Ukraine. Today Ukrainian backer can choose from five platforms. Some of them like Komubook are focused only on book publishing. Or GoFunded that works hard for better school education in Ukraine.

Also, in July 2018 a brand new platform, RazomGo will launch with an additional focus on business projects and entrepreneurs. Still, most of the projects that are funded by crowdfunding are social, cultural and educational fields. Overall, Ukrainians funded more than 230 projects on Spilnokosht and collect 16 696 067 UAH / 545 623 EUR for the last 6 years.

We can notice social entrepreneurship becoming a trend. Entrepreneurs, NGO teams, and other progressive initiatives experiment with social investing. Now we have two cafes that were open by funds collected from social investors. One more cafe (Kyiv) and one big hub (Dnipro) is currently in the process of launching and collecting money.

We don’t have any special laws for crowdfunding or social entrepreneurship yet. Laws that regulate current market are more suitable for a charity filed. So all of the contributions are fixed as a charity donation. In Ukrainian reality and for a young market it is even better because platforms don’t have to pay a lot of taxes.

Can you give us an inspiring case from your country?

As I mentioned earlier, we have some interesting social entrepreneurship cases. A cafe called Urban Space 100 based in Ivano-Frankivsk (West Ukraine). The cafe was launched by collecting funds in the amount $100.000. One hundred Ukrainians donated to launching the cafe with no expectations of ROI as in a classic model. On the other hand, the cafe is a progressive heart of the city. Urban Space 100 is a space for events and discussions. It invests 80% of revenue to small city grants. Since its launch, Urban Space 100 has financed more than 60 projects.

In autumn 2018 a new restaurant Urban Space 500 will be open in Kyiv. 500 active citizens and entrepreneurs have united here and contributed $1000 each. So we can see that the model of social investments is getting more popular and attractive for progressive Ukrainians.

What are the biggest obstacles for growth?

The biggest obstacle now is the trust of Ukrainians. After the Revolution of Dignity, not only reliable projects were launched, but also some fake volunteer and charity organizations, simply to collect money. Not to mention, most Ukrainians would still better donate to charity than into social development. I suppose it quite a big challenge for alternative culture funding as well.

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Picture of Stefan von Imhof

Stefan von Imhof

As the CEO of Alts, Stefan lives and breathes alternative asset analysis and valuations. His alternative investing newsletter has grown into Alts.co — the world's largest alt investing community, with over 200,000 investors. His favorite alternative investments are holiday rentals, cash-flowing websites, and especially his collection of 300 vinyl records. Originally from Boston and Santa Barbara, CA, he now lives with his wife in Australia.

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