International case-study award for CIIM professor
Dr Olga Kandinskaia, Assistant Professor of Finance and MSc Business Management Director at the Cyprus International Institute of Management, received the NACRA Best Case Gold Award for the business case co-authored with Belgian Professor Dr Nancy Huyghebaert.
The North American Case Research Association (NACRA), is the leading academic case research body in the world.
It holds the annual conference each October to present best newly written business cases in different management disciplines. Kandinskaia presented the finance case titled “Sizable: Crowdfunding Campaign!... Again?” co-written with her Belgian colleague, at the NACRA conference held in Tempe, Arizona. She won the Best-Case Gold Award out of 72 cases presented this year.
This is the third time in the last two years that Dr Kandinskaia won such an acclaimed award. In 2017, she won a top prize in the annual case writing competition organised by the Case Centre, with her paper about the local company Engino.
In 2018, her finance case about Zorbas Bakeries won the Johnathan Welch Award “Best Case in Accounting, Finance and Economics” at the NACRA conference held in Orlando.
Olga’s and Nancy’s winning case this year was about a crowdfunding campaign in 2017 of a Belgian start-up called Sizable, a specialist in men’s clothes made from eco-friendly bamboo, eucalyptus and organic cotton.
The main protagonist of this case is the company’s newlyappointed 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.
“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,” Kandinskaia said.
Crowdfunding is the use of small amounts of capital from a large number of individuals to finance a new business venture. The two most popular crowdfunding platforms are Indiegogo and Kickstarter.
According to statistics from crowdexpert.com , the total global crowdfunding industry had estimated fundraising volume of $34 bln in 2015, out of which peer-to-peer lending was $25 bln, reward and donation crowdfunding $5.5 bln, and equity crowdfunding $2.5 bln. In other words, from its start less than 10 years ago, crowdfunding has grown into a huge industry.
The main advantage of crowdfunding is that it 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.
Another advantage is that raising equity finance implies that the company will not have to make any extra intermediate payments, like interest payments.
Also, the company is able to attract passive investors who are willing to hold on to their shares for 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 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).
The final 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.
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
The use of crowdfunding in different countries largely depends on national legislation. At present, the UK has the most sophisticated crowdfunding market in the world, thanks to the forward-looking approach that the regulators there have engaged in the crowdfunding market.
Over time, crowdfunding became 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 startups.
Simultaneously, the Belgian federal government 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
“We were happy to have found this interesting real-life story and to write this case where the main protagonist is a woman,” said Olga.
“Women represent about 50% of undergraduate business graduates and 36% of MBA graduates, yet despite their strong presence in management education programmes, 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.”
Students’ Perspective
Alice Karlson, CIIM MSc Financial Services student and Finance Manager at 3CX, said: “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, added: “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.”