These Were Our 5 Biggest Challenges in 5 Years Of Crowdfunding A Better World
5 March 2018 it was exactly 5 years ago that the first investment was made on our crowdfunding platform. Looking back, we can honestly say it's been a hell of a ride: we experienced 5 exciting and hectic years with many challenges.
The first few years we worked from some of the cheapest possible locations in the Netherlands. For a small contribution we could use a room with Wi-Fi. The coffee was mostly free, and usually of questionable quality. In 2015 we moved into our current office in the Groothandelsgebouw; right next to Rotterdam Central Station. Drop by if you're in the neighbourhood some time.
Crowdfunding with a Mission
The bigger idea of yesteryear still stands strong: through our platform you can invest in small and medium sized companies in emerging countries like Cambodia, Colombia and India. Through these impact investments we create jobs and fight poverty. A second pillar was added in 2016: giving families in 'our' countries access to basic needs such as (clean) energy and sanitation. All our projects are directly linked to these 2 goals.
Care to invest in thee Sustainable Development Goals? Go to our available projects and get a 3-6% annual return.
The following points have cost us the most challenges since the start (not in order of priority):
1. How do we find motivated people who want to put their hearts and souls into Lendahand for a song?
To begin with, we succeeded. We found 15 like-minded people who are working for Lendahand, full-time or part-time. People with different backgrounds, but with similar beliefs in how we can make the world a better place. But we didn't get there without a struggle and it took a few years before the team was stable. But is was important to invest our time in this. The team is a great mix of experienced forty-years (who have patient partners) and young gods (no really, they are).
2. How do we build a crowdfunding platform that radiates trust and attracts a sufficient number of (new) lenders, so that we can achieve our mission?
Making a (distinctive) website is no easy task. We always try to include the wishes of lenders as much as possible in the further development. And while it's not our intention to praise our own website here, it is always fun to read in the reviews what others think of it. The website is constantly evolving. Are you missing something? Pass it on!
3. How do we ensure that we are properly regulated / which licence is required to be able to offer such investments and protect lenders?
Lendahand combines crowdfunding with the creation of a better world. We also call this combination impact investing. It turned out to be quite difficult for the regulators to place us in a box. All in all, it took us two years before we could set up the right legal structure and we were licensed as an investment firm from the Netherlands Authority for the Financial Markets (AFM). Especially the fact that your investments go to emerging countries made the search more difficult. An exemption, which most crowdfunding websites use, obviously was not an option for us. Since September 2016 we are a regulated investment company.
4. How do we ensure sufficient supply of new projects that can be financed? How do we get to parties who can structurally deliver these projects?
This was perhaps the biggest challenge. How do we close contracts with strong local financial institutions in emerging countries as a (back then) small crowdfunding platform? We found that these institutions often want to work with us, but have a strong negotiating position. Especially in our first years. We onboarded 2 or 3 parties a year. Max. But in the meantime our Investment Team has shifted in high gears, and is well known throughout the world (notorious, even). We now have 25 around contracts. And more to come! From large, established banks in Mongolia and Uganda, to smaller parties in Kenya and Colombia. These parties provide us with the projects. And that goes well: 100% of all offered projects have been fully funded to date. Bankruptcies have not yet been made and only 1 partner is in arrear (4% of the total outstanding amounts). See our entire portfolio.
5. How will we measure our results? How do people know that their money ends up doing well?
Investing in a project is step 1, but how do you know if it bears any good fruit? Measuring the impact of an investment will always be difficult, for example because some entrepreneurs do not have access to the internet. Nevertheless, we keep track of our impact as well as we can. Every entrepreneur who needs a loan is asked how many jobs he intends to create. We mention that number in every project. The same goes for our sustainable (energy) projects. We measure the number of people reached, tons of CO2 reduced, kilowatt hours generated, toilets built, solar home systems installed and biogas digesters installed. View our real time impact report.
Are we there yet? No.
Lendahand is heading to be profitable for the first time in 2019. And there's still things that need to be done to achieve that. We want to automate several processes, double the number of new lenders on a monthly basis with a view to the break-even point. And the 'roll out' in Europe (a necessity) also requires a lot of energy. In short: there's still much to be done. We won't lean back until poverty is a thing of the past.
Peter StolzeCo-founder Operations&Compliance
I find new forms of development aid very interesting. Especially the rise of financially independent companies like Lendahand which put social impact first. I strongly believe in the self-relience of people by providing fair loans.
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