dinsdag 10 augustus 2010

Are the banks finally awake? ABN Amro is for sure!

My latest blogpost “Failing system banks, sprouting technologies and chicken-hearted governments It is Crowdfunding Time!!” covered, in my opinion, the failing approach towards Crowdfunding by governments and the lack of risk taking behavior within the large system banks due to their own governance strategies. Surprisingly ABN Amro, last week announced their involvement in the realization of a Crowdfunding platform named Seeds(NL only).

As you might know this blog is dedicated to cover all subjects related to Crowdfunding, so this development couldn’t pass by unnoticed. Firstly for a deeper understanding of ABN Amro’s move and for everybody who isn’t familiar with the ABN AAmro bank, please allow me to take you on a tour true history (provided by Wikipedia);

The bank has a long history of acquisitions and mergers that dates back to 1765. ABN AMRO was created in 1991 as a merger between Algemene Bank Nederland (ABN) and Amsterdam and Rotterdam Bank (AMRO). By 2007 ABN AMRO was the second largest bank in the Netherlands and eight largest banks in Europe by assets. At that time the magazine The Banker and Fortune Global 500 placed the bank at number 15th in the list of world’s biggest banks and it had operations in 63 countries, with over 110,000 employees.

In 2007 the bank was acquired, in what was at that time the biggest bank takeover in history, by a consortium made up of the Royal Bank of Scotland Group, Fortis bank and Banco Santander, of which the first two got into serious trouble as a result of the takeover. The large amount of debt that had been created to fund the takeover had depleted the banks reserves just at the time the Financial crisis of 2007–2010 started. As a result the Dutch government took over and nationalized the Dutch parts of the operations which had primarily been allocated to Fortis to stop it failing. The UK government took effective control over the divisions allocated to RBS due to its financial bail-out of the Scottish bank. The remaining parts of ABN AMRO held by the consortiums RFS Holdings B.V., notably the overseas businesses, were merged with RBS, Santandar, sold off or shut down.

So, in short the Dutch government paid somewhere around 30 billion euro (Tax payer’s money) to acquire ABN Amro, resulting in an average contribution of each Dutch person of 1875 euro! Making ABN Amro on itself already a Crowdfunded bank. The skeptism from professionals in the market about earning back the tax payers’money have been spread last months. Fortunately this blog does not require me to assess the chances ABN Amro will pay back this tax payers money, but to assess the motives behind ABN Amro’s initiative to start a Crowdfunding platform and more importantly does it seem attainable that ABN will succeed in setting up their Crowdfunding platform.

Why Crowdfunding?
For starters one reason could be that Crowdfunding is a new buzz word in the blogosphere. Many platforms have sprouted recently and my estimate is that the number of Crowdfunding platforms run in the dozens. Obviously not all targeted at the same niche, but the fundamentals behind Crowdfunding are used in all of them (e.g. a lot of people X a little money = a lot of money). Maybe ABN Amro wants to tap into an emerging market? However given the little short term earning potential, much money needs to be invested before Crowdfunding becomes mainstream and is able to really contribute to ABN’s bottom line.

Another reason could be that this Crowdfunding plan is part of a greater scheme to get closer to their customers. ABN Amro already tried the social road in 2009 with their Flametree network, a b2b network made in order to connect entrepreneurs. Unfortunately this attempt by ABN Amro was killed in January 2010.When Pascal Spelier (director Flametree) was asked why the project was terminated the reasons was simple;

“The last few months we searched for a potential buyer or strategic partner for the Flametree project, however despite our best attempts this approach has failed due to the economic climate.”

Simply said; the investment into Flametree had gone up in flames and there was no money left for further investments.. So it seems unlikely that Seeds is a revamped version of the Flametree project. And the fractured introduction don’t seem to support any evidence for a greater scheme to get closer to customers.
As the most relevant and legitimate motivation to start a crowdfunding platform, I do think that the Seeds platform will provide ABN Amro the opportunity to sell their services to (nascent) entrepreneurs. And if this would be the main motivation for ABN to enter the realm of Crowdfunding it will prove the Crowdfunding industry a favor by advocating and plugging Crowdfunding – making Crowdfunding mainstream and providing legitimacy for the concept as a whole.

Kind regards,

Thomas Crowd