YEREVAN, February 18. /ARKA/. Crowdfunding as a financing tool is rapidly developing in the world, but in Armenia its potential remains underutilized. Narek Vardanyan, co-founder and director of TCF Company, told ARKA News Agency in an exclusive interview about how the situation can be changed and what are the prospects of crowdfunding in Armenia.
ARKA – What is the role of crowdfunding in modern business and what trends do you see for the development of this tool in Armenia?
N. Vardanyan – Crowdfunding is quite revolutionary in international business, as it “democratizes” the availability of finance. Earlier, when looking for finance and investment, you depended on entities and their requirements, in particular, banks. Crowdfunding, on the other hand, allows you to attract funding from people like you who, believing in good projects, can finance them. Funding volumes can reach millions of dollars, which can help to create a company and its entry into international markets, as well as to achieve success without depending on t financial structures, which many do not meet at the initial stage of entering the market. Armenia can be part of this platform. TCF is the only company today that promotes the country’s involvement in these processes. The number of participants and applications from Armenia is quite small.
ARKA – In youir opinion, what are s the reasons for such low involvement?
N. Vardanyan – Innovators from Armenia lack awareness and success stories. People don’t know that they, being in Armenia and having interesting ideas, can realize them on the international level. For example, they can order prototypes in China and export them to the American market. We hope that this situation will change.
ARKA – In what areas are crowdfunding methods most effective and can the mass media become a part of this ecosystem?
N. Vardanyan – I think it can. In particular, any creative project can count on funding. We need an in-depth analysis to understand which format is more effective, but in general it is possible, given that there are several types of crowdfunding.
ARKA – Which ones?
N. Vardanyan – There are three of them. There is donation-based crowdfunding, when people make a gratuitous donation to help realize a project. There is Equity Crowdfunding, based on acquiring a stake in a company as an investment, and Reward Based Crowdfunding, based on gifts. This is the pre-order system on which TCF operates. This type is more suitable for innovative products that are convenient for use in everyday life. Projects are funded through crowdfunding and then the project creator delivers the product to the people who pre-ordered it.
ARKA – What are the opportunities and prospects of crowdfunding for Armenia?
N. Vardanyan – Today Armenia has a fairly developed crowdfunding ecosystem. i.e. there is a system that allows us to assist on the way from the idea to the final success. In fact, TCF, one of the most developed crowdfunding ecosystems in the world, is located in Armenia and does not participate in the development of the economy: we receive applications mainly from the USA or China.
ARKA – What should be done to change this balance in Armenia’s favor?
N. Vardanyan – The first thing is to motivate and interest people through information, to show them that they can also become successful figures who have created international brands or raised millions of dollars.
Besides, we need to be aware of the lifestyle outside Armenia: often the applications we are approached with are very localized. We want to encourage people to think more broadly and raise the bar in creating more viable projects for success in the international market.
The most important thing is desire, some knowledge in the field where you want to raise funds, and good product design. You can create your product, convince people of its necessity and move forward step by step.
ARKA – What modern marketing tools are the most effective for attracting financing and/or entry of Armenian companies into international markets?
N. Vardanyan – It is directly related to the nature of the company’s activity, whether it is a technological startup or an agricultural cooperative. The good news is that over the last five years these areas of financing in Armenia have shown unprecedented growth. Today, there are registered funds in the country that invest in Armenian companies. Investments are also made by funds registered outside Armenia, but founded by Armenians. If we compare it to the situation five years ago, today the infrastructures of financing availability are quite attractive.
For example, we are now placing bonds, which are an innovative means of financing. I.e. TCF, as a technology company, attracts financing through bonds – there are elements of crowdfunding in this.
ARKA – What is the volume of the bond issue? What projects will the raised funds be used for?
N. Vardanyan -TCF is one of the world leaders in crowdfunding with many years of experience in promoting brands, organizing crowdfunding campaigns, e-commerce and developing marketing strategies. It has offices in the USA, China and Armenia. In recent years, the company has started to expand, plans to enter the Korean market, Japan, and last year acquired a New York company. We need resources to be more effective in achieving success, so the purpose of issuing bonds is to further grow the company and strengthen development.
We have issued coupon bonds with a volume of AMD 400 million at a rate of 12.75%. The placement will take place from January 7 to April 7. But, in all probability, it will be completed earlier, after which we will be listed on the Armenian Stock Exchange. The nominal value of the bond is 100 thousand drams, coupon payment period is 3 months. The underwriter of the issue is Dimension Investments Company.
ARKA – Does the company plan to go for IPO?
N. Vardanyan – Theoretically it is possible, but at the moment it is not yet. Now we are considering bonds as the most convenient instrument for the next two years.
ARKA – As a summary, name three main factors in favor of choosing crowdfunding as a tool for finding financing.
N. Vardanyan – The idea of the project should be related to a physical product of consumption. If we are talking about gift-based crowdfunding, this is very important, because an idea can be wonderful, become a very good business, but by its nature it is not suitable for crowdfunding.
The second thing is that the target group of consumers of the product should not be too narrow, the product should be mass-market if possible.
And the third, most important component – the project should contain an element of innovation.
In this case, there is a very high probability that the author of the project can receive large funding, become successful, and enter international markets. And all this while living in Armenia. -0-
