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ЭКОНОМИЧЕСКИЕ НАУКИ
CROWD FUNDING AS A NEW MODEL OF VENTURE FINANCING
Chechelashvili Maia,
Doctor of Economics (PhD), Professor of the Georgian Technical University, Tbilisi
Abstract
The paper discusses the modernization of the Georgian economy and states that there is a need for additional financial resources for the development of high-tech industries and innovation projects. The paper deals with traditional and new sources of funding for risky investments. The author evaluates the potential for developing alternative tools of venture capital financing on the basic of crowd funding. It concluded that it is necessary to support small businesses in order to create an innovation economy in Georgia. Crowd funding considered as one of the most common alternative forms of financing high-risk new projects in developed countries due to its ability to attract funding from a large number of people. A retrospective analysis of the development of the crowd funding system and its focus on supporting new investment projects is given. Comparative characteristics of the world and Georgian experience and the legal aspects of the issue are considered. Development trends of crowd funding presented. The study systematizes the issues that restrict the introduction of new models of venture capital financing in Georgia and discusses the prospects for its development.
Keywords: innovation, venture capital, venture capital fund, crowd funding.
Venture capital as an alternative source of private business funding arose in the US in the mid-1950s. XX century. In the Silicon Valley (USA, California) - the cradle of modern information technology and telecommunications. Venture business, formed as an industry of entrepreneurship, gave a powerful impetus to the successful development of microelectronics and computer technologies. Thanks to venture investments, such companies as Microsoft, Intel, Apple Computers, Compaq have emerged and become world leaders in the early stages. Venture business is practically the only source of financial support for small innovative enterprises in the earliest stages of their existence due to high-risk investments.
The effectiveness of modern business, as well as the efficiency of the country's economy, primarily depends on innovation. Until recently, there were only two ways to finance innovation. First, companies invested their own (or borrowed) funds in their research and development (R&D). Second: investments in R&D made not by companies themselves, but by venture investors; they invested their venture capital in venture capital projects of companies, getting a share in the capital of these companies for this.
In the venture financing system, two groups of investors distinguished: corporate (collective) and individual venture investors.
One of the newest funding instruments for individual venture capital investment is crowd funding - people's funding as a collective cooperation of people who voluntarily pool their money or other resources, usually via the Internet, to support the efforts of other people or organizations. At the same time, the breadth of targets for such projects noted: charity (assistance to victims of natural disasters, support from fans), political companies, financing start-up companies and small businesses, support for IT technologies and free software.
The model of work for all services is approximately the same. The authors of the projects publish information on their undertakings on a free basis, expose
the necessary amount and the period for which it must be collected. Donors contribute any amount for the implementation of the project, for which they will in the future receive some bonuses: a sample of the product, a unique model that will not be sold on open access, a percentage of profits, shares or nothing at all, except that the name of the sponsor as a participant in the project Will be mentioned. If the amount is not collected for the indicated period, the money is returned to all sponsors, the project is closed. Currently, the amount that can collected through crowding is significantly increased.
At first, crowdfunding used for non-commercial projects as the fundraising of a few network characters trying to save money for treatment or study. Now crowdfunding has established itself as a full-fledged financial instrument - a source of venture capital investments and a method of micro crediting. For the first time crowdfunding model of venture financing used by software developers. The most successful projects of crowd venture financing model are the popular Mozilla Firefox browser and the Abi Word processor. Such a model is justified and successful at the very initial stage of financial support for a new idea, later on, when the project is already entering a high profit rate and risks are substantially lower, large investors are joining the financing. The main infusions into the already well-known project of Mozilla Firefox for ten years amounted to: 317 million dollars - by large investors and only about 0.01% of this amount - by private individuals (namely at the stage of introduction of idea into life). In the West, the most famous crowdfunding project is Cambrian House, which raised nearly $ 8 million in investments, whose participants are posting their ideas for public viewing; those, who wish can become direct participants in their implementation, or simply give money to it.
There are various projects for crowdfunding in the World: Crowdrise (fund raising for charity), Kickstarter and IndieGoGo (support for creative projects),
OpenIDEO (development of ideas, concepts), 33 needs (search for investments in social entrepreneur-ship), ioby (creation, financing and participation in Environmental projects in the US), StartSomeGood (social orientation), Microplace (collection of donations to combat global poverty), Sparked (social network of volunteers), Ushahidi (development of free open source software for obtaining information and visual causes (using Facebook integration, helps NGOs implement their projects), AdvertActivist (production of advertising and media companies of NGOs), Mosaic start-up has conducted another round of financing for roofs with solar cells developed by him.
Necessary companies 300 thousand dollars of investments collected in less than a day: people bought "shares" of the company (the cost of one such "share" -$ 25). The exact name of such crowd funding is Equity Crowd funding (crowd funding of the company's share capital). The main features of it are:
1) The form of making financial investments;
2) Return form - a full return on investment in case of success of the company's business (plus, most likely, additional benefits - financial and non-financial);
3) The motivation of giving money is a combination of personal motivation (like the company), social motivation (the company needs a business for the company) and financial motivation.
Crowd funding is able to change the rules of the game in the field of financing innovation and thus in the competitive struggle that exists in each of the sectors and among the developed countries of the world. "Game Changer" is what President Obama, who signed the new law (Jumpstart Our Business Startups Act, or JOBS Act), called crowd funding, allows companies to raise up to $ 1 million through crowd funding [4]. The new law (JOBS Act), which allows individuals to invest up to 5% of their income through Equity Crowd-funding, is able to multiply the amount of investment in innovation.
In Georgia, the first Crowdfunding projects began to appear in 2013, but they are developing slowly and hard. Note that the creation of the model of c crowd funding involves the creation of at least two resources: on the first - you can collect the necessary amount for the project, on the second - to spend the collected funds under the control of investors and with a strict report. The main reason for the success of the site for such activities is the mechanism of real control over depositors for the use of funds, which additionally attracts investors; In addition, based on this service it is technically impossible to build a financial pyramid.
The algorithm of project implementation includes five stages:
1. The author offers the Venture Factory an idea and a business plan for its implementation,
2. The proposed project is evaluated by the company's experts,
3. The approved project posted on the Venture Factory website to attract investment,
4. After the formation of the project amount, the implementation of the project begins,
5. Upon completion of the project, the participants receive their share either in the form of securities or in
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the form of profit received, as a financial result of the sale of the project.
It is necessary to distinguish the following trends and factors of development of crowdfunding, including as a tool for venture financing:
1) Technological achievements and social media. The current level of technology development allows Internet users to join online communities of interest in order to exchange ideas and solve pressing problems,
2) Refusal of mediation. Direct communication of buyers with sellers, creators - with investors and projects - with communities provided. Traditional business models are too complex and require a lot of time and money,
3) Small business has difficulties with attracting initial capital (up to $ 1 million),
4) Crowdfunding effect "paradigm shift." Entrepreneurs are beginning to develop a crowd-funding method of financing, through which they receive not only the necessary start-up capital, but also additional advertising through social networks and invaluable feedback from consumers. Many investors realize that they can participate in the implementation of projects from beginning to end, monitoring the development process and helping them as much as possible,
5) Introduction of joint stock crowding, including through its legalization.
In many respects, the development of the crowds -funding model of venture financing in Georgia hindered by the general economic and organizational problems of investment entrepreneurship:
• Low quality of infrastructure for the development of small and medium innovative organizations in the innovation sphere as potential venture financing facilities,
• The underdevelopment of the infrastructure that is capable of ensuring effective cooperation between the subjects of the venture industry and small innovative firms, the emergence of new and development of existing small and medium-sized innovative enterprises,
• Minimal participation of Georgian capital in the venture business using predominantly foreign venture capital,
• Low liquidity of venture investments, largely due to the insufficient development of the stock market, which is an important tool for the free exit of venture funds from the enterprises into which the investments made,
• Lack of economic incentives to attract direct investment in high-tech enterprises, which provide an acceptable risk for venture investors,
• Insufficient information support of the venture industry,
• Lack of qualified management and managers of venture funds, low level of investment culture of entrepreneurs,
• Lack of qualified management and managers of venture funds, low level of investment culture of entrepreneurs,
• Lack of incentives for the establishment of venture funds (there are practically no regulatory legal acts
that ensure the functioning of venture financing for small innovative business),
• Lack of economic incentives and flexible system of taxation of venture business to attract investments in high-tech sector organizations at an acceptable level of risk for venture investors. In Georgian corporate and tax legislation, not only are there any incentives for the participation of part of banking, pension, insurance or corporate capital, but there are direct prohibitions or impediments [6].
Thus, the priority task for the development of the Georgian economy is the creation of a venture infrastructure to attract capital and activate the venture business in order to create a synergetic effect in the development of Georgian small and medium-sized businesses and the innovative development of the Georgian economy as a whole.
References
1. Gompers P., Lerner J. "The Venture Capital Revolution", Journal of Eco- nomic Perspectives 15 (Spring 2001) pp. 145-168
2. Ernst&Young Turning the corner. Global Venture Capital Insights and Trends 2015,
http://www.ey.com/Publication/vwLUAssets/EY -Turning the corner/$FILE/EY-Turning the corner.pdf
3. Siegel R., Siegel E., MacMillan I.C. Corporate Venture Capitalists: Autonomy, obstacles, and performance. Journal of Business Venturing, v.3. Summer, pp. 233-247 (241)
4. The Australian Venture Capital Industry: development and trends, AXISS AUSTRALIA, Sydney, January 2012
5. The economic impact of venture capital in Europe, EVCA, Coopers & Ly-brand Corporate Finance
6. Venture capital policy review: United States, Giinseli Baygan, December 2003, http ://www. oecd. org/sti/working-papers
STATE INNOVATIVE POLICY OF GEORGIA
Chechelashvili Maia,
Doctor of Economics (PhD), Professor of the Georgian Technical University, Tbilisi
Abstract
The article deals with the development of innovative management, which presupposes such management of innovations, which touches upon issues of organization, strategic and current planning, as well as stimulating and controlling the implementation of innovation processes at various levels of government - state, regional, corporate, at the level of a single firm or research Organization.
In conclusion, it is noted, that Georgia has accumulated considerable experience of such management, which deserves special analysis and generalization, especially in that it refers to the high technology sector and high technologies. In addition, the author notes that innovative management was carried out in Georgia even in conditions of centralized management.
Keywords: Innovative management, Level of management, Strategic planning
State innovation policy is an integral part of socioeconomic policy, which expresses the state's attitude to innovation activity, determines the goals, directions, forms of activity of Georgian state authorities in the field of science, technology and the realization of science and technology achievements. It is represented in the Georgian government's concepts of socio-economic development of the country for the long-term perspective and the program of social and economic development of Georgia in the medium term. [1]
The purpose of the state innovation policy is:
• The development, rational allocation and effective use of the scientific and technical potential,
• The formation of its structure, the increase in the contribution of science and technology to the development of the country's economy,
• The realization of the most important social tasks, the provision of progressive structural transformations in the sphere of material production, competitiveness, strengthening the country's defense capability and the security of the individual, society and the state.
The main objectives of the state innovation policy:
• Provision of legal regulation and protection of interests of participants in innovation activities;
• Direct and indirect support of basic and improving innovations in accordance with state innovation programs;
• Assistance in the development of a competitive environment in the innovation sphere, support for small and medium-sized innovative entrepreneurship;
• Formation of modern effective innovative infrastructure;
• To promote the activation of innovation in the regions of Georgia;
• Support of joint innovative programs and projects of CIS countries, creation of joint innovative enterprises, development of international innovative cooperation taking into account Georgia's national interests.
State innovation policy is developed and implemented on the basic of:
• Innovative forecasts - foreseeing the main directions for mastering scientific and technological achievements in production in the world and in Georgia in the short, medium and long term;
