CROWDFUNDING INDUSTRY REPORT - National Crowdfunding & Fintech .

1. INTRODUCTION AND METHODOLOGY THE INDUSTRY WEBSITE TM BASED, AND DONATION-BASED reward-based and donation-based models are characterized by Reward-based crowdfunding allows funders to gain a Non-monetary rewards often take the form of a token of appreciation or the pre-purchasing of products or services. arrangements. Donation-based crowdfunding provides funders with a way to donate to causes that they want to support, with no expected compensation (i.e., philanthropic or sponsorship based incentive). We classify lending-based as a crowdfunding model in which repayment of the original principal investment. LENDING-BASED (Includes revenue and sharing models) REWARD-BASED (P2P lending, P2B lending and social lending) For non-monetary rewards m.4.2.014 2012 Crowdsourcing, LLC research@crowdsourcing.org DONATION-BASED For philanthropy or sponsorship PAGE 15

1. INTRODUCTION AND METHODOLOGY THE INDUSTRY WEBSITE TM CFPs THAT PARTICIPATED IN THIS RESEARCH COMPOSITION OF PARTICIPATING CFPs REPRESENT ALL KEY REGIONS AND ALL Percentage of the 135 total participating CFPs CATEGORIES OF THE CROWDFUNDING MARKET Composition by category DONATIONBASED 27% EQUITYBASED 15% 11% North American platforms. While this over represents European platforms when compared to the overall composition of the crowdfunding marketplace from a regional perspective, the size of our sample is still statistically relevant. LENDINGBASED 47% REWARD-BASED Composition by region OTHER REGIONS 14% EUROPE 56% Note: When we refer to Other Regions our research does not include a data set from CFPs in Asia (e.g., China) were nonEnglish language versions of platforms prohibited us from analyzing this market. m.4.2.014 2012 Crowdsourcing, LLC NORTH AMERICA 30% Source: Massolution research@crowdsourcing.org PAGE 16

1. INTRODUCTION AND METHODOLOGY THE INDUSTRY WEBSITE TM CFPs THAT DIRECTLY PARTICIPATED IN THIS COMPOSITION OF FUNDS RAISED BY RESEARCH ACCOUNT FOR A SIGNIFICANT PARTICIPATING CFPs PORTION OF THE MARKET IN TERMS OF TOTAL FUNDS RAISED Composition by category EQUITYBASED 18% DONATIONBASED 49% 22% LENDINGBASED Although our survey data is, in its own right, statistically 11% REWARD-BASED Composition by region enabled massolution to present the most complete view, to date, of the total crowdfunding market. OTHER REGIONS 8% EUROPE 10% NORTH AMERICA 82% Source: Massolution m.4.2.014 2012 Crowdsourcing, LLC research@crowdsourcing.org PAGE 17

2. MARKET GROWTH AND COMPOSITION THE INDUSTRY WEBSITE TM MARKET GROWTH AND COMPOSITION 1. INTRODUCTION AND METHODOLOGY 3. CROWDFUNDING 2. MARKET GROWTH AND COMPOSITION Almost 1.5 billion was raised by CFPs world-wide in 2011. North America was the largest market for fundraising MODELS 4. CFPs VALUE PROPOSITION, FUNCTIONALITY & APPROACH As of April 2012, 452 CFPs were operating globally. Market composition in each category funds raised globally. primarily driven by donation-based and lending-based platforms. Reward-based platforms are growing at a rate platforms are higher in numbers in Europe than in North America). 2009). Reward-based is the largest category in terms of overall number of CFPs, while While the CFPs formed some years ago are still growing in terms of funds raised, new market entrants are securing a larger relative percentage of new funds raised, consistent with a high growth, early stage industry. Funds pledged to funds paid-out in aggregate has declined slightly over time; donation-based CFPs pay-out a much higher percentage of funds pledged. m.4.2.014 2012 Crowdsourcing, LLC category by net year-on-year growth. North America leads other regions in terms of the total number of crowdfunding platforms; however Europe, based on a higher rate of regional growth, is gaining percentage share within the market in aggregate. research@crowdsourcing.org More than 1 million successful campaigns were run by CFPs in 2011. The majority of these campaigns were in the donation-based category totaling 1067 based campaigns were, on average, much larger in size in terms of funds raised. PAGE 18

2. MARKET GROWTH AND COMPOSITION THE INDUSTRY WEBSITE TM AMERICA TOTAL FUNDS RAISED Millions of US dollars, 2011 837.2M 583.9M NORTH AMERICA EUROPE 48.8M OTHER REGIONS 1,469.9M WORLDWIDE Source: Massolution m.4.2.014 2012 Crowdsourcing, LLC research@crowdsourcing.org PAGE 19

2. MARKET GROWTH AND COMPOSITION THE INDUSTRY WEBSITE TM GROWTH IN FUNDS RAISED BY CATEGORY Millions of dollars, based on a sample of 92 CFPs which PRIMARILY DRIVEN BY THE DONATIONBASED AND LENDING-BASED CATEGORIES Donation-based platforms are responsible for the largest source of funds raised through crowdfunding, but they are also the slowest-growing category. % CA G R 1,401 63 but from a very low base of close to 1.6m in 2009. primarily in Europe. 675.7 43% CAGR DONATIONBASED 854 524% CAGR 530 460.4 328.9 15.7 1.6 316.5 61.5 552.0 175.1 24.6 61.5 112.6 2009 2010 2011 REWARDBASED 78% CAGR LENDING-BASED 114% CAGR EQUITY-BASED Source: Massolution m.4.2.014 2012 Crowdsourcing, LLC research@crowdsourcing.org PAGE 20

2. MARKET GROWTH AND COMPOSITION THE INDUSTRY WEBSITE TM TOTAL FUNDING VOLUME IS EXPECTED GROWTH IN WORLDWIDE FUNDING VOLUME TO DOUBLE IN 2012, DRIVEN BY ABOVE- (millions of dollars) Research based estimate REWARD-BASED CROWDFUNDING 2,806 Estimated total funding volume for 2011. primary and secondary research. Additional 68 million estimated on the basis of our crowdfunding site database. Estimated total funding volume for 2012. Our 1,063 based and rewardbased crowdfunding 1,470 1,013 854 based 258 DONATIONBASED REWARDBASED LENDING-BASED 530 donation-based crowdfunding. 472 2009 GROWTH 2010 2011 2012 (Est.) 61% 72% 91% EQUITY-BASED Source: Massolution m.4.2.014 2012 Crowdsourcing, LLC research@crowdsourcing.org PAGE 21

2. MARKET GROWTH AND COMPOSITION THE INDUSTRY WEBSITE TM NORTH AMERICA IS THE REGION THAT GROWTH IN FUNDS RAISED BY REGION RAISED THE LARGEST AMOUNT OF FUNDS Millions of dollars, based on a sample of 92 CFPs which AND CONTINUES TO SHOW THE FASTEST GROWTH 1,401 46.8 53% CAGR OTHER REGIONS 571.5 in 2010. 40% CAGR EUROPE American counterparts, are growing in terms of funds 854 30.7 530 401.1 783.5 90% CAGR 19.9 292.2 NORTH AMERICA 422.3 218.1 2009 2010 2011 Source: Massolution m.4.2.014 2012 Crowdsourcing, LLC research@crowdsourcing.org PAGE 22

2. MARKET GROWTH AND COMPOSITION THE INDUSTRY WEBSITE TM TOTAL FUNDS RAISED BY CFP MATURITY Millions of dollars, based on a sample of 92 CFPs, 2011 MARKET SHARE Newer-entrants (between two and four years old) now STARTUPS 0.2% two years old) contribute a very limited amount of the NEWER ENTRANTS 22.7% MATURE 77.2% Source: Massolution m.4.2.014 2012 Crowdsourcing, LLC research@crowdsourcing.org PAGE 23

2. MARKET GROWTH AND COMPOSITION THE INDUSTRY WEBSITE TM THE TOP TEN PLATFORMS GLOBALLY BY CONCENTRATION OF FUNDS RAISED ON CFPs Percentage, based on the total market of 452 CFPs THE TOTAL FUNDS RAISED TOP 5 CFPs TOP 10 CFPs 67% 83% OVERALL The concentration of funds raised by the leading CFPs OTHER REGIONS top ten platforms. EUROPE The overall market concentration is considerably lower in This can be accounted for by the fact that the larger CFPs are very region centric. NORTH AMERICA 73% 96% 96% 95% 97% 89% Source: Massolution m.4.2.014 2012 Crowdsourcing, LLC research@crowdsourcing.org PAGE 24

2. MARKET GROWTH AND COMPOSITION THE INDUSTRY WEBSITE TM FUNDS PLEDGED TO FUNDS PAID OUT DECLINED OVER TIME; DONATION-BASED CFPs HAVE THE HIGHEST PLEDGED TO PAID OUT RATIO based platforms show the lowest. North American investments Lending-based platforms show the highest funds pledged to funds paid out ratio out of all the categories, while reward- FUNDS PLEDGED AND PAID OUT PLEDGED Millions of dollars, sample of 92 CFPs % PAID OUT 89% 83% 79% 1,767 TOTAL FUNDS 75% 88% 50% FUNDS BY CATEGORY 79% 854 676 784 552 1,015 77% 75% FUNDS BY REGION 961 1,402 629 82% PAID OUT 744 572 854 593 530 162 2009 m.4.2.014 2010 2011 123 113 EQUITYBASED LENDINGBASED 2012 Crowdsourcing, LLC 61 REWARDBASED 62 DONATIONBASED research@crowdsourcing.org NORTH AMERICA EUROPE 47 OTHER REGIONS PAGE 25

2. MARKET GROWTH AND COMPOSITION THE INDUSTRY WEBSITE TM MORE THAN 450 CFPs ARE ACTIVE WORLDWIDE; THE MAJORITY BASED IN NORTH AMERICA AND EUROPE S N NUMBER OF CFPs, 2012 F D 6 BELGIUM I C 44 UNITED KINGDOM 191 UNITED STATES L 4 POLAND A H 5 SWITZERLAND 17 CANADA 29 NETHERLANDS 6 ITALY 6 PORTUGAL 2 RUSSIA 28 FRANCE E R R 3 SWEDEN D 3 DENMARK I 3 IRELAND F 3 FINLAND C 2 CZECH REP. 4 CHINA 20 GERMANY A 1 AUSTRIA E 1 ESTONIA L 1 LATVIA 1 ISRAEL N 1 NORWAY 18 SPAIN R 1 ROMANIA H 1 HUNGARY 6 INDIA 2 MEXICO 1 HONG KONG 3 JAPAN 1 HAITI 3 SOUTH AFRICA 1 PHILLIPINES 12 AUSTRALIA 2 ARGENTINA 1 ZAMBIA 1 CHILE 21 BRAZIL 6 NEW ZEALAND Source: Based on Crowdsourcing.org Directory of Sites as of April 2012 m.4.2.014 2012 Crowdsourcing, LLC research@crowdsourcing.org PAGE 26

2. MARKET GROWTH AND COMPOSITION THE INDUSTRY WEBSITE TM IN TERMS OF NUMBER OF CFPs, EUROPE GROWTH IN NUMBER OF CFPs WORLDWIDE GREW AT APPROXIMATELY TWICE THE Based on a sample of 348 CFPs COMPOUND ANNUAL GROWTH RATE OF 348 51 26% CAGR OTHER REGIONS 139 226 59% CAGR EUROPE 28 Other regions (primarily Latin America and Australia) showed much slower compounded annual growth over 154 84 22 106 77 18 14 45 2007 18 25 50 158 29% CAGR 114 NORTH AMERICA 82 63 2008 2009 2010 2011 Note: This research was conducted during the active debate in the US Congress over the JOBS Act, which contained a provision for a crowdfunding exemption. The passing of this exemption will likely have a profound effect on growth of CFPs in the Source: Crowdsourcing.org Directory of Sites m.4.2.014 2012 Crowdsourcing, LLC research@crowdsourcing.org PAGE 27

2. MARKET GROWTH AND COMPOSITION THE INDUSTRY WEBSITE TM REWARD-BASED IS THE LARGEST GROWTH IN NUMBER OF CFPs BY CATEGORY Based on a sample of 143 CFPs BASED IS THE FASTEST GROWING 143 40 The lending-based category is the smallest in terms of the number of platforms. 41% CAGR DONATIONBASED Donation-based and lending-based crowdfunding are 88 the reward-based category. 62 79% CAGR 30 53 European platforms. 36 25 20 21 17 10 10 6 4 1 7 9 3 10 10 2008 2009 2007 Note: This research was conducted during the active debate in the US Congress over the JOBS Act, which contained a provision for a crowdfunding exemption. The passing of this exemption will likely have a profound effect on growth of CFPs in the 23 REWARDBASED 15 2010 50% CAGR LENDING-BASED 18 21 114% CAGR EQUITY-BASED 2011 Source: Massolution m.4.2.014 2012 Crowdsourcing, LLC research@crowdsourcing.org PAGE 28

2. MARKET GROWTH AND COMPOSITION THE INDUSTRY WEBSITE TM MARKET COMPOSITION, BY NUMBER OF PERCENTAGE BREAKDOWN OF CFPs BY REGION AND CATEGORY CFPs, VARIES SIGNIFICANTLY BY CATEGORY Based on a sample of 143 CFPs, 2011 ACROSS REGIONS North America, predictably, has a very low proportion 22% regulations. The largest number of North American CFPs (almost half) are in the donation-based category. 11% DONATIONBASED 68% REWARDBASED 16% LENDING-BASED 5% EQUITY-BASED 46% 47% larger than the second and third categories combined with 27% 9% based platforms, with approximately two-thirds of all CFPs in that category. 12% 22% 6% NORTH AMERICA EUROPE OTHER REGIONS Note: Participants in our survey included North American CFPs Source: Massolution m.4.2.014 2012 Crowdsourcing, LLC research@crowdsourcing.org PAGE 29

2. MARKET GROWTH AND COMPOSITION THE INDUSTRY WEBSITE TM MORE THAN 1 MILLION SUCCESSFUL FUND-RAISING CAMPAIGNS WERE RUN BY CFPs IN 2011 TOTAL NUMBER OF CAMPAIGNS, 2011 532K 654K NORTH AMERICA EUROPE 1K OTHER REGIONS 1,187K WORLDWIDE Source: Massolution m.4.2.014 2012 Crowdsourcing, LLC research@crowdsourcing.org PAGE 30

2. MARKET GROWTH AND COMPOSITION THE INDUSTRY WEBSITE TM THE MAJORITY OF CAMPAIGNS ARE IN THE NUMBER OF CAMPAIGNS BY CATEGORY Millions of campaigns, based on a sample of 92 CFPs BASED CAMPAIGNS RAISE MUCH LARGER AMOUNTS 50 % CA G R 1,187 47% CAGR 754 campaign. The reward-based category shows the fastest growth in terms of the number of campaigns, albeit off a low base. DONATIONBASED 527 82% CAGR campaigns in relative terms, but with a much higher average amount of funds raised per campaign. LENDING-BASED 539% CAGR REWARDBASED 2009 2010 2011 84,597 119% CAGR EQUITY-BASED AVERAGE CAMPAIGN SIZE US dollars 664 DONATIONSBASED 4,076 REWARDBASED 5,587 LENDINGBASED EQUITYBASED Source: Massolution m.4.2.014 2012 Crowdsourcing, LLC research@crowdsourcing.org PAGE 31

3. CROWDFUNDING MODELS THE INDUSTRY WEBSITE TM CROWDFUNDING MODELS 1. INTRODUCTION AND 2. MARKET GROWTH 3. CROWDFUNDING METHODOLOGY AND COMPOSITION MODELS 4. CFPs VALUE PROPOSITION, FUNCTIONALITY & APPROACH (e.g., environment, community, faith) and passions perform best. Donation-based and reward-based crowdfunding for art and performing arts projects drive less funding volume than the mainstream media suggests. The campaigns in these categories are much smaller, with two-thirds of them generating less than 5,000. based and lending-based crowdfunding) is most effective for digital goods such as applications or computer games, category raise above 25,000. Donation-based and reward-based crowdfunding for causebased campaigns that appeal to funders’ personal beliefs m.4.2.014 2012 Crowdsourcing, LLC research@crowdsourcing.org PAGE 32

3. CROWDFUNDING MODELS THE INDUSTRY WEBSITE TM CROWDFUNDING FOR FINANCIAL RETURN ALLOCATION OF CAPITAL IS PRIMARILY DIRECTED TOWARD PROJECTS Percentage, based on a sample of 19 CFPs, 2011 THAT CAN BE EASILY DESCRIBED ON THE INTERNET SOFTWARE, INTERNET 43% COMPUTERS, TELECOM 14% media. We believe this is the case because: Digital projects present well on crowdfunding platforms; MEDIA 7% ENVIRONMENT 6% CONSUMER PRODUCTS 5% They appeal to Internet savvy investors that are drawn to the online social experience of crowdfunding; Investors can easily associate with the content, products and services being funded. OTHER 24% Source: Massolution m.4.2.014 2012 Crowdsourcing, LLC research@crowdsourcing.org PAGE 33

3. CROWDFUNDING MODELS THE INDUSTRY WEBSITE TM FUNDS PAID OUT PER EQUITY-BASED PROJECT Percentage, based on sample of 10 CFPs, 2011 LARGEST AMOUNT OF FUNDS PER PROJECT platforms were raised for projects that drew less than 10,000 6% 250,001 that drew 250,000 or more in funding. 10,001- 25,000 21% 10% platforms; crowdfunding shows to be a viable alternative for raising capital to fund small businesses and start-ups. 25,001 50,000 16% 100,001 250,000 21% 26% 50,001- 100,000 Source: Massolution m.4.2.014 2012 Crowdsourcing, LLC research@crowdsourcing.org PAGE 34

3. CROWDFUNDING MODELS THE INDUSTRY WEBSITE TM DONATION-BASED AND REWARD-BASED ALLOCATION OF CAPITAL CROWDFUNDING PERFORM WELL FOR Percentage, based on sample of 33 CFPs, 2011 AND PASSIONS While funding for the arts and performing arts receives more attention from the media, these sectors drive less volume. Funding for artists, etc., have raised a lower amount in terms of total dollars than crowdfunding directed towards causes that help people in need, the environment, health, or faith based causes. HEALTH, ENVIRONMENT 30% RELIGION 16% FILMS, MUSIC, ETC 9% COMMUNITY 8% EDUCATION 7% OTHER 30% Source: Massolution m.4.2.014 2012 Crowdsourcing, LLC research@crowdsourcing.org PAGE 35

3. CROWDFUNDING MODELS THE INDUSTRY WEBSITE TM DONATION-BASED AND REWARD-BASED FUNDS PAID OUT PER PROJECT FOR DONATIONBASED AND REWARD-BASED PROJECTS CROWDFUNDING DRAW LOWER LEVELS OF Percentage, based on a sample of 25 CFPs, 2011 FUNDING PER PROJECT THAN LENDING- 10,001 10% Of the funds raised on donation-based and reward-based 7,501 10,000 to projects that draw more than 10,000 in funding. The 2,500 35% 9% reward-based crowdfunding platforms are paid out to projects that raise between 5,000 and 10,000. 5,001 7,500 18% 28% 2,501- 5,000 Source: Massolution m.4.2.014 2012 Crowdsourcing, LLC research@crowdsourcing.org PAGE 36

4. CFPs VALUE PROPOSITION, FUNCTIONALITY AND APPROACH THE INDUSTRY WEBSITE TM 4. CFPs VALUE PROPOSITION, FUNCTIONALITY AND APPROACH 1. INTRODUCTION AND 2. MARKET GROWTH 3. CROWDFUNDING METHODOLOGY AND COMPOSITION MODELS 4. CFPs VALUE PROPOSITION, FUNCTIONALITY & APPROACH of the funding goal and 3.18 weeks on average to raise the donation-based campaigns. Commissions are generally lower in North America compared of competition. method. Platform reliability (i.e., up-time) is a differentiating factor of a number of platforms generate additional income by offering and maintenance fee. m.4.2.014 funds from countries, other than the home country of the CFPs is an important differentiating factor for donation-based and reward-based CFPs. 2012 Crowdsourcing, LLC research@crowdsourcing.org PAGE 37

4. CFPs VALUE PROPOSITION, FUNCTIONALITY AND APPROACH THE INDUSTRY WEBSITE TM COMMISSIONS EARNED BY CFPs Percentage, based on a sample of 60 CFPs FEE BASED ON A PERCENTAGE COMMISSION OF FUNDS PAID OUT Based on funds raised Commissions are generally lower in North America and competition in North America and Europe compared with other countries. We did not observe notable differences between different types of platforms, or between recently founded and older platforms. ALL 42% 58% NORTH AMERICA 60% 40% EUROPE 36% 64% OTHER REGIONS 33% 67% Based on a fully-funded goal ALL 63% 37% NORTH AMERICA 47% 53% EUROPE 67% 33% OTHER REGIONS 78% 22% the region of 15 (median), per campaign. for each geographic area, as CFPs were able to present their approach to both partially-funded and fully-funded campaigns. For instance, a number of platforms charge higher commissions for partially-funded campaigns, but still pay-out funds raised to fundraisers even if a funding goal is not reached. m.4.2.014 2012 Crowdsourcing, LLC YES NO Source: Massolution research@crowdsourcing.org PAGE 38

4. CFPs VALUE PROPOSITION, FUNCTIONALITY AND APPROACH THE INDUSTRY WEBSITE TM WHI

crowdfunding volumes, operations and key constituents (e.g., Funders and Fundraisers) for the calendar years 2009, 2010 and 2011. Our analyses of this rich data set has resulted in this research report on the crowdfunding industry. 1. An overview of massolution's methodology for data gathering and analysis. 2.