All posts by thomasboogert

SamenInGeld, a crowdfunding platform for mortgages.

March 10, 2017 thomasboogert Leave a comment

SamenInGeld is a Dutch platform built specifically with the goal to crowdfund buildings and homes using actual mortgages. As with most crowdfunding platforms, the focal group of projects are those that cannot find funding at the traditional places like banks and other traditional mortgage lending businesses. Among the projects funded on this SamenInGeld are entrepreneurs that cannot get a mortgage through a bank due to inconsistent income and small time project owners that want to buy and renovate a building so they can use the building as a source of income through rent payments.

The advantage of this platform is that they managed to secure a AFM license which is legally required to officially offer mortgages in The Netherlands.

Business Model

SamenInGeld charges 0.5% of the total investment when the projects start and 0.25% every year the project is active to the money borrower. This is their primary source of income to support the platform. This means that for an investment of €100.000, they will receive €500 + €250 for 14 years = €4000.

The platform charges no fees to investors over their received interest, except for a small fee of €0.25 for every withdrawal from their account. This won’t make the platform owners rich though, since money lent cannot be withdrawn for 5-15 years.

To manage the risk of their investors, SamenInGeld allow loan seekers to split up the investment in different layers of risk and return. Some investors seeking higher profits might choose to take a higher potential reward by investing in a phase that will be paid later in the event of payment failure by the loan takers.

Legal requirements

Your author for this blog post is not in the slightest an expert on AFM regulation regarding private investment in mortgages, but I will do my best to use the sources available to assess the legal requirements of the platform and whether they conform to regulations.

Among the requirements to be met is the investor test. Companies operating under an AFM license that want to receive investments from private crowdfunders for investments higher than €500 need to test their potential investors on some their knowledge on the “risks of the project, crowdfunding in general and the specific platform” (https://www.afm.nl/nl-nl/professionals/doelgroepen/crowdfundingplatformen/toezicht/vereisten)

SamenInGeld matches this requirement. The funny thing is that the AFM makes the platform responsible for the review of the test and keep the requirements of passing rather vague. There are other requirements listed by the AFM like an €80.000 cap of total investment and a warning for investors to spread their risk. SamenInGeld meets those and other requirements by listing them clearly.

Conclusion

The running costs for the platform are quite low, and the business model allows for a steady flow of income for a long period of time (5-15 years). SamenInGeld smartly does not charge the investors a lot for investing in the platform, making the investment interesting for potential investors. The platform adequately counters legal repercussions by following the AFM guidelines.

Sources

https://www.afm.nl/nl-nl/professionals/onderwerpen/crowdfunding-overig

https://www.sameningeld.nl/wp-content/uploads/2016/09/Investeerderstoets_SamenInGeld.pdf

https://investeren.sameningeld.nl/page/how-it-works

https://www.afm.nl/nl-nl/professionals/doelgroepen/crowdfundingplatformen/toezicht/vereisten

Business Case

Crowdfunding for charity on chuffed.org

March 3, 2017 thomasboogert Leave a comment

There are many crowdfunding platforms available on which companies and individuals can attempt to raise money for their cause. I would like to share my thoughts on chuffed.org, an Australian based platform that is one of only a handful of platforms available (one other example is youcaring) that charge no fees to the organisation running the campaign. I personally think their story is inspiring and hope they will be able to survive despite of their current business model. We will look at the way the platform operates from the supplier and customer sides before assessing the business model.

Supplier-side operation

For suppliers of projects, chuffed is a relatively easy to use platform to start hosting funding campaigns. Chuffed has listed a five-step plan to help charities and individuals get underway in starting their first campaign, including best-practices about perks and promoting the campaign on social media. Obviously, chuffed benefits from well-run campaigns so making this as easy to understand as possible is in their favour, and they seem to understand this very well. The biggest reason for causes to use chuffed is probably that they charge no fees on the donations made through the platform. End users must pay the credit card fees on top of the donation amount but this is paid to their PSP: stripe.

Customer-side operation

Chuffed is accessible on a responsive website. End users can browse through the different projects with relative ease. I can understand the choice to save money by not building native apps, but it is still a shame that the site is not very mobile-friendly, especially on lower internet speeds.

On a more positive note, the site attracts consumers from all over the globe. In an interesting blog post containing statistics from 2016, chuffed notes “We’ve only run campaigns in 20 countries, yet donors have come from 152.”.

Business model

Chuffed.org is a social enterprise, so survival is their prime concern. They ask end users for a small donation to sustain chuffed on top of the donation to the specific campaign.

This intuitively seems like a good option to sustain the platform, but chuffed does not disclose numbers on how many donations they receive through this channel so it is hard to assess whether they do a good job of sustaining themselves.

Another interesting survival strategy is discussed in a blog post posted by the CEO. Chuffed received their second round of funding in March 2016 through Blackbird, a venture capitalist. The CEO notes that even though they were rejected for 86 times by various VC’s and other investment parties he persisted in this strategy and that it eventually paid off.

Conclusion

I greatly admire the persistence of chuffed to charge no fees on the supplier side of the business and it appears like they have found a couple of ways to sustain their own platform.

In order to attract more funding from customers, my opinion is that they should invest more in the mobile-friendliness of the platform through native apps.

Sources

https://chuffed.org/blog/seed-funding-blackbird-investment

https://chuffed.org/blog/what-weve-learnt-from-over-100000-donations-on-chuffedorg

https://chuffed.org/how-it-works-crowdfunding/before-you-start

https://www.youcaring.com

Articles

Designing Warning Messages for Detecting Biased Online Product Recommendations: An Empirical Investigation

February 17, 2017 thomasboogert Leave a comment

Companies might be inclined to recommend products with the highest profit rating or unsellable stock using recommendation agents. This paper presents and tests countermeasures for biased product recommendation agents. The researchers conducted an experiment in which they exposed users of an e-Commerce website with warning messages about the risks of relying on recommendations provided by the website in three different styles; a warning without advice, a warning with positively framed advice and a warning with negatively framed advice.

All three of the methods led to an increased perceived bias by the users of the website in comparison to the control group, indicating that showing a warning message influences the choices a consumer makes after being warned.

The authors conclude that the best method to warn consumers about biased product recommendations is the negatively worded warning. This method led to the highest score of perceived bias by the users, and was the only method that did not increase the number of false positives reported by the users.

Strengths

The use of recommendation agents to recommend the most profitable product is a valid concern and widely discussed and proven in other research, providing a good practical example to start the research.

The authors have countered the biased recommendations using simple measures that could easily be implemented in the real world.

In the supplementary research the authors note that the number of users using the search-by-brand functionality to verify the suggestions made by the product recommendation system increased from 12.9% to 43.1%. This suggests that the users did not simple suggest bias, but actively used the tools at their disposal to verify the validity of the warning message.

Weaknesses

By using the perceived bias as the DV, the authors measured the opinion of the user whether they thought they were being tricked or not. This might have left out valuable results of people who were tricked but were not aware of it even after receiving the warning. Since the study contained relatively few choices, the authors could also have used the actual value for money rating of the selected products. This would have provided a more accurate view of whether people were influenced by the biased recommendation system.

The proposed solution of a browser extension feels a bit too extensive. How many times do you need to be reminded to be wary of bias in product recommendations? A government issued cautionary commercial (SIRE in the Netherlands) could possibly achieve the same results by triggering people to think before trusting a recommendation.