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International Award for CIIM Professor
CIIM – Cyprus International Institute of Management is proud to announce that Dr Olga Kandinskaia, a full-time resident faculty at CIIM, has received a prestigious award by NACRA – Best Case Gold Award – for the business case written in joint authorship with Belgian Professor Dr Nancy Huyghebaert.
NACRA, the North American Case Research Association, is the top global academic case research body. It holds the annual conference each October as the forum to present best newly written business cases in different management disciplines. Dr Kandinskaia presented the finance case titled “Sizable: Crowdfunding Campaign!… Again?”, written in joint authorship with Belgian colleague Dr Nancy Huyghebaert, at the recent NACRA conference held October 10-12, 2019, in Tempe, Arizona, USA, and she won the Best Case Gold Award, the top award out of 72 cases presented at the NACRA conference this year.
It is all the more important as it is the third time, in the last two years, that Olga is winning such an acclaimed award. In 2017, Dr Kandinskaia won a top prize in the prestigious annual case writing competition organized by the Case Centre, with her case about the local company Engino. It was the first time that a business school or university from Cyprus was awarded a top prize in the international competition by the Case Centre. In 2018, Dr Kandinskaia’s newly-written finance case about the local company Zorbas Bakeries won the Johnathan Welch Award “Best Case in Accounting, Finance and Economics” at the NACRA conference held October 4-6, 2018, in Orlando, USA.
2019 Winning Case Topic: Crowdfunding
Olga’s and Nancy’s winning case this year is about a crowdfunding campaign in 2017 of a Belgian start-up called Sizable, a Belgian specialist in men’s clothes made from eco-friendly bamboo, eucalyptus and organic cotton. The main protagonist of this case is the company’s newly-appointed female CEO. The case presents an opportunity to introduce students to a new type of entrepreneurial finance such as equity crowdfunding, discuss its advantages as compared to other types of financing, and engage in a valuation exercise in Excel. As Olga commented: “Crowdfunding is a new hot topic in start-up financing. For a Company Valuation class, we wanted to create a valuation case which will also introduce students to this new method of funding for entrepreneurs.”
What is Crowdfunding?
“Crowdfunding is the use of small amounts of capital from a large number of individuals to finance a new business venture. Crowdfunding makes use of the easy accessibility of vast networks of people through social media and crowdfunding websites to bring investors and entrepreneurs together” (Investopedia). Thus, companies or individuals can seek funds from a large crowd, via the internet, promising in return: 1) goods or services (reward-based type of crowdfunding), 2) shares in the company (equity type of crowdfunding), 3) certain payments in cash (debt-based type of crowdfunding, or crowdlending), 4) “feeling good about yourself” or essentially nothing (donation-based type of crowdfunding). The two most popular crowdfunding platforms worldwide are Indiegogo and Kickstarter.
Rise of Crowdfunding
According to some interesting statistics from http://crowdexpert.com/crowdfunding-industry-statistics/ , the total global crowdfunding industry had the estimated fundraising volume of $34 billion in 2015, out of which: peer-to-peer lending $25 billion, reward and donation crowdfunding $5.5 billion, and equity crowdfunding $2.5 billion. In other words, from its start less than 10 years ago, crowdfunding has grown to a huge industry. This is all due to the fact that it has multiple advantages over other types of financing available to start-ups.
First, relying on crowdfunding can help create brand awareness. Investors become customers and brand ambassadors for the company, as they learn more about the intrinsic quality of the company’s products. In other words, crowdfunding is not only about providing finance, but also about inducing those investors to become ambassadors for the company. The second advantage is that raising equity finance implies that the company will not have to make any extra intermediate payments, like interest payments. Another advantage is that the company is able to attract passive investors who are willing to hold on to their shares during at least four years, as per the rules in Belgium. The stake that each of those investors can accumulate in the start-up cannot exceed 30% in Belgium, which means that no outsider can take over control of the company. Very often, it becomes possible to obtain a loan from an institutional investor, once the crowdfunding has enhanced the company’s equity base (and solvency ratio). Also, the fact that the company can once more convince other people to invest money and buy the product can create extra market validation, which can increase other investors’ faith in the viability of the company and its products. So, the crowd may provide credible evidence that there is a market for the company’s products. The last advantage is that it is a good alternative when it is hard for the company to obtain a bank loan; this is usually the case when a start-up is not making any profits yet. As for raising equity finance from institutional investors or via the stock exchange, it is often impossible for small and unprofitable start-ups.
Crowdfunding in Different Countries
It is worth noting that the use of crowdfunding in different countries is largely dependent on the country’s legislation. The best effects can be seen so far in the UK, which has the most sophisticated crowdfunding market in the world today, thanks to the forward-looking way that the regulators there have engaged in the crowdfunding market.
Over time, crowdfunding campaigns had become increasingly popular among entrepreneurs in Belgium because banks, as a result of new regulation following from the 2008–2009 financial crisis, were no longer eager to extend loans to business start-ups. Simultaneously, the Belgian federal government had tried to stimulate entrepreneurship by encouraging crowdfunding via various fiscal advantages for investors, under the so-called Tax Shelter. Since July 2015, the Tax Shelter allowed investors to reduce their amount of income taxes when investing in the equity of newly established businesses either directly or via a crowdfunding platform, while also limiting the risks of such an investment. In this way, crowdfunding had become an interesting option for both start-up companies and investors, provided that the company met certain conditions.
Women in Business Case Studies
“We were happy to have found this interesting real-life story and to write this case where the main protagonist is a woman,” commented Olga. “As recent research showed, women represent about 50% of undergraduate business graduates and 36% of MBA graduates, yet despite their strong presence in management education programs, women are noticeably absent from business case studies. While case studies inform students about business processes, decision making, strategy, and leadership and management challenges, they also promote unintentional learning about gender.”
Olga continued: “I would like to use the opportunity of this publication to express sincere thanks to my Belgian co-author Dr Nancy Huyghebaert for a very interesting international collaboration, and to my CIIM MSc Financial Services students in spring 2019 who were enthusiastic to try out a new case as part of their Company Valuation course.”
Students’ Perspective
Alice Karlson, CIIM MSc Financial Services student and Finance Manager at 3CX, said: “I found the Company valuation course at CIIM very interesting, useful and practical. Being part of financial industry, it is extremely important to understand the techniques behind company valuation, but more importantly use those techniques in practice. It was great to work on a start-up case like Sizable. I found it easy to relate to and very relevant to today’s business environment.”
Rafaella Hadjikyriacou, CIIM MSc Financial Services student and Advocate – Senior at Prountzos & Prountzos LLC/EY Law Cyprus, said: “Having a more theoretical background, the course proved to be really valuable as I gained practical knowledge of the different valuation methods. By using an existing company such as Sizable as real case example, we applied in practice what we have learned through the course, while acquiring deeper understanding of each valuation method characteristics, main objectives, advantages and disadvantages. Furthermore, the course helped me improve my skills in utilizing Microsoft Excel.”
Dr Olga Kandinskaia is Assistant Professor of Finance and MSc Business Management Director at the Cyprus International Institute of Management CIIM: [email protected].