Production Pringles tube made possible by crowdfunding

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NVC Inspiration meeting
NVC Netherlands Packaging Centre Inspiration meeting

Crowdfunding is a way to raise the necessary funding for packaging innovations. This is how DG Press subsidiary MHIS in Eerbeek managed to raise € 500,000 to develop a machine for making the well-known Pringles aluminium tube pack. After its bankruptcy DG Press Holding was taken over by a number of employees in a management buy-out. Because of this, the banks could not help to finance the development of the new machine. Crowdfunding was the solution that allowed DG Press to supply the complete equipment necessary for the production of the well-known potato crisps pack, next to the printing press it already supplied for printing the label.

Loan and crowdfunding
An inspiration meeting about crowdfunding was held on Tuesday 15 March in the auditorium of the NVC Netherlands Packaging Centre. This phenomenon appears to be slowly but steadily gaining grounds in the packaging industry. Geldvoorelkaar.nl hosted the crowdfunding action for the new machine of DG Press Holding, which brought them €500,000. On behalf of this crowdfunding platform co-owner Martijn van Schelven participated in the inspiration meeting. Van Schelven told that Geldvoorelkaar.nl has also been involved in raising money for fulfilment company Active Ants, which plays a role in the current tv-commercials of Rabobank. In these commercials, the management of Active Ants visits a Norwegian web retailer in Oslo to look at an ultramodern order picking system comparable to the one they have bought. ‘In this case it was a combination of a classic loan and crowdfunding’, Van Schelven, personally involved in this project, explains. ‘The bank did not want or could not offer a loan higher than a certain – though substantial – amount. That is why the rest of the money, in this case six hundred thousand Euros, was raised through crowdfunding.’

According to Van Schelven, in cases like this crowdfunding is often the result of stricter rules banks have to comply with when giving funds. These stricter rules are the consequence of the financial crisis that started in 2008 and also brought banks on the brink of ruin. The limitations of banks through European legislation can also be seen in the case of mortgages. Before the financial crisis consumers could easily lend 125 percent of the value of their house as mortgage, but now this is limited to 100 percent. The British Richard Newton, account manager at crowdfunder Monex, explained that in Great Britain this is even limited to 70 percent. That is comparable to the liquidation value a bank can still receive when it has to sell through forced sale.

Martijn van Schelven

Martijn van Schelven addressing the benefits of crowdfunding

Get to the point
Not only appealing B2C projects, but also B2B projects can be the goal of crowdfunding. As long as it is clear what kind of project a company wants to fund and what kind of company it is. Van Schelven: ‘Someone who wants to invest money in a project should understand in five minutes what it’s all about, otherwise he loses interest. When a company presents itself through the Internet, the message should be short and clear.’ The main part of Geldvoorelkaar.nl’s business is, by the way, based on so-called Debt crowdfunding. This means that the investor lends the money to the fund and later on gets it back with interest. This structure completely differs from equity based crowdfunding in which the investor receives shares in the company. In the form of shares the investor becomes for a part owner of the company and in that way also of the intellectual property of the packaging innovation, but that is out of the question in these cases.

As it is illustrated by the examples that were discussed, crowdfunding is not only used to raise small amounts for start-ups. Van Schelven stressed, ‘The big advantage of crowdfunding is that when a project is promoted the right way, money can be raised rapidly. This is in contrast with a classic loan through a bank, for which it is often necessary to go through various procedures to reach an agreement on the funding.’

Involvement
Speaker Ranko Berich, Head of Market Analysis at Monex, found that the involvement is a lot larger in the case of crowdfunding compared to a loan. ‘People feel something for the product, which moves them to fund the project. That is a lot different than lodging your money with an investor, who will invest it in different investment funds. In that case, you have no idea what is done with your money. When you use it for crowdfunding you do.’
This vision was confirmed by Karsten Wenzlaff of the German Ikosom. ‘Crowdfunding can be compared with the ever increasing need to personalise all our consumer goods. The investor gives his money to the project he believes in.’

In this way crowdfunding can also be a very economical and efficient way of marketing. ‘When you have 300 participants in a crowdfunding project, that also means you already have 300 enthusiastic people that share their enthusiasm with their friends’, according to Van Schelven. ‘A good example is the disposable crockery launched by a company at the time of the FIFA World Cup of 2014. In return, every investor received a pack of disposables. This automatically brought the product to the attention of friends that were invited by the investor for a barbecue during a football game.’ Crowdfunding can also keep companies from making poor investments. ‘When there is not enough interest for a certain project, this can mean that there is simply not enough market for that product.’

Packaging materials
In his turn Patrick van der Meer of Brightlands Innovation Factory shares that Brightlands is going to investigate how to use crowdfunding in material science. ‘We see great challenges to get start-ups in materials funded. Crowdfunding can be a very good addition to other financing methods.’ Van der Meer explains that, because of all the approval procedures for a certain new -packaging – material, it can take up to five years before the material is approved and to make it possible to earn money with it. ‘This also means that the investors will have to wait at least five years before they see any return on investment.’

Managing Director Michael Nieuwesteeg of the NVC Netherlands Packaging Centre adds that winning entries for De Gouden Noot in the past did not come about with the help of financing methods like crowdfunding. Extra investments might be done quicker after a pack has been awarded. The most famous example is the ground-breaking easy open closure that is now used by HAK on all its glass vegetable jars. This was initially invented by an equally brilliant packaging technologist, and the patent for the production was later transferred to its mass producer Crown.

Verpakkingscentrum

Family-owned businesses
Rijk van Korlaar, independent management consultant in the packaging industry who was present in the audience, added that family-owned businesses are unlikely to use crowdfunding. ‘Family-owned businesses are traditionally organised and also organise their financing in a traditional way. Therefore they would rather go to a traditional bank for a loan, than use crowdfunding. They also suffered the least from the financial crisis.’

This Inspiration meeting was organised as part of the NVC project Crowdfunding for Packaging Innovation. To participate and for more information, please contact the NVC: [email protected] or telephone +31-182-512411. There is also more information on the NVC
website.

Text: Erik Kruisselbrink
Photo’s: Fotobureau Roel Dijkstra

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