Category Archives: Crowdfunding Opinions

Equity crowdfunding is 1 year old today, Wefunder is top platform

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VentureBeat | | May 16, 2017

Since Regulation Crowdfunding began on May 16 last year, 335 companies have filed offering documents with the Securities and Exchange Commission (SEC) to fundraise on securities-based crowdfunding platforms. Of those companies, 43 percent were funded, 30 percent failed, and the remainder are still open and trying to get funding.

The total capital committed to date on these platforms is in excess of $40 million, with the average successful crowdfunding campaign raising around $282,000 from about 312 investors. The most recent quarter saw the greatest number of companies file with the SEC. This signals that issuers might finally be catching on to the opportunity that Regulation Crowdfunding holds.

And what about the portals that have emerged to host these fundraises? Of the 26 portals registered with FINRA to help companies sell Regulation Crowdfunding securities, nine have already closed, gone out of business, or been shut down. Of those remaining, Wefunder (based in San Francisco and Massachusetts) is leading the pack both in the number of deals and total dollars raised. They have been in business since Regulation Crowdfunding went into effect and have helped 63 companies pull in almost $18 million. Start Engine (in Los Angeles) ranks second with 27 campaigns funded, and Microventures (Austin), NextSeed (Houston), SeedInvest (New York), and Republic (New York) rank third through sixth. Interestingly, the location of these platforms also matches the states that have raised the most capital.

Several platforms (both old and new) have only funded a handful of campaigns. This may signal that brand awareness and marketing by the larger incumbents is driving both companies seeking capital and investors looking for deal flow.

See:  Are Overseas Portals the Next Big Thing in US Equity Crowdfunding?

However, If you dig a little deeper and look at the capital raised during the last three quarters, you will see in that while Wefunder is leading in overall dollars, both Microventures and Start Engine are not far behind in terms of quarterly commitments (see Orange bar to compare Q1, 17 results).

"I expect to see Indiegogo put more time and energy into converting its most successful rewards campaigns into equity campaigns on Microventures."

Microventures, the offshoot of rewards-based crowdfunding platform Indiegogo only launched at the end of last year and is already showing strong results, with 100 percent campaign success. While the platform hasn’t run many campaigns, the campaigns it has run have raised slightly more success than those on Wefunder.

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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support, and networking opportunities to over 1500+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at www.ncfacanada.org.

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A British firm plans a secondary market for crowd-funded shares

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The Economist | May 17, 2017

Everyone would like a piece of the next Google or Facebook. But the big venture-capital (VC) firms do not usually raise money from small investors. And some entrepreneurs complain that it is hard to get noticed by the hotshots in the VC industry. Hence the enthusiasm for crowd-funding, where small investors can buy a stake in startup companies.

Seedrs, a British crowd-funding firm, was set up in 2012, and has backed 500 firms so far, raising a total of £210m ($271m) from more than 200,000 users. But there are two big problems with crowdfunding. First, it is risky: most startups fail. Second, investments tend to be illiquid—shareholders have to wait for a takeover or a stockmarket flotation to recoup their investment.

See:  Seers Announces First-ever Portfolio Results With Overall 14.44% IRR (Annualized Rate of Return)

Seedrs is trying to solve the illiquidity problem by setting up a secondary market, where buyers and sellers can exchange shares. The new market will start operating this summer, and will allow trading for a week every month, starting on the first Tuesday. The price at which investors can deal will be set by Seedrs itself, based on a valuation mechanism in line with industry guidelines. But there are some restrictions: only current investors in a firm will be allowed to buy shares. And, to the extent that investors make a profit, Seedrs takes a 7.5% cut of the gains.

"An obstacle to crowdfunding is that investors have to wait so long to sell their shares"

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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support, and networking opportunities to over 1500+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at www.ncfacanada.org.

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As countries develop strategies, we need a fintech champion

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The Globe And Mail | By Michael King | May 14, 2017

Most commentators agree that Canada has many of the elements required to support a vibrant financial technology sector, notably a stable and secure financial system, a high concentration of financial institutions, access to a large pool of talented employees and expertise in the underlying ABCDs: artificial intelligence, blockchain, cryptography and data science.

But a key shortcoming is the absence of a clearly defined fintech strategy championed by the federal government.

“The Government has an opportunity – and a responsibility – to lead the way when it comes to digital innovation.”

Britain, Australia and Hong Kong have published national strategies for this key sector over the past 18 months, seeking to create jobs domestically and exports globally. But Canada has no national strategy. Instead, we are witnessing regional fragmentation, with separate reports commissioned by Toronto, Montreal, and Vancouver arguing each should be the centre of fintech in Canada. Sound familiar? We only have to look at Canada’s system of provincial securities regulations to see where this is heading.

While each of Canada’s regions has clear strengths, doesn’t this approach miss the point? Why are we competing internally, rather than co-ordinating nationally and competing globally to dominate the emerging fintech industry? The answer is a lack of federal leadership.

See:  The Age of Artificial Intelligence in Fintech

In Britain, Australia and Hong Kong, the equivalent of the finance minister has taken charge, creating a fintech advisory council with private-sector expertise, consulting with key stakeholders, co-ordinating different levels of government and publishing a national strategy. As Australia’s Treasurer stated in the 2016 report Backing Australian FinTech: “I want to help create an environment for Australia’s FinTech sector where it can be both internationally competitive and play a central role in aiding the positive transformation of our economy.” Recall that Australia has the same federal system as Canada, with a smaller population and a financial sector dominated by a few large incumbents.

In a 2014 speech, then British Chancellor of the Exchequer George Osborne said: “Key to the government’s long-term economic plan is cementing Britain’s position as the centre of global finance. It’s only by harnessing innovations in finance … that we’ll ensure Britain’s financial sector continues to meet the diverse needs of businesses and consumers here and around the globe, and create the jobs and growth we all want to see in the future.” Following the Brexit vote, Britain is highly aware of the risk of losing its dominant financial sector. In a recent speech, Bank of England Governor Mark Carney threw his voice behind fintech, noting that it will democratize financial services and contribute to a more resilient financial system.

See:  2017 Annual Alternative Finance Crowdfunding in Canada Survey - Share Your Opinion

While Canada often looks south for inspiration, in this case the United States is showing us what not to do. The U.S. fintech sector is being held back by regional competition between Silicon Valley and New York, and regulatory uncertainty. A 2016 report by KPMG ranked California and New York as distinct fintech regions alongside Australia, Germany, Hong Kong, Singapore and Britain (Canada did not make the list). A key shortcoming: Fintechs are subject to supervision at the state level and separately by the Department of Business Oversight in California and the Department of Financial Services in New York. Regional competition and regulatory uncertainty may have contributed to last year’s 50-per-cent drop in fintech investment, with KPMG reporting only $12.8-billion (U.S.) invested in 2016 versus $27.0-billion in 2015. While Canada bucked this trend with a record $138-million (Canadian) of fintech investments last year, Canada’s investments are measured in millions, not billions.

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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support, and networking opportunities to over 1500+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at www.ncfacanada.org.

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What you need to know about launching a Kickstarter project in Montreal

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CBC | By Jaela Bernstien, Roberto Rocha | April 27, 2017

According to a CBC analysis, the majority of Kickstarter campaigns launched in Montreal are tech and video games, but the crowdfunding projects that succeed aren't necessarily what you'd expect.

CBC looked at six years of Kickstarter projects with data provided by Web Robots and HiveWire, two firms that track crowdfunding sites.

Only Kickstarter data was used since it has the largest and most representative sample of Canadian crowdfunding projects.

See: Share your opinion: 2017 Annual Alternative Finance Crowdfunding in Canada Survey

The crowdfunding data sheds light on creative trends in cities large and small, including Montreal.

As far as the total number of Kickstarter projects is concerned, Montreal is the third biggest city, after Toronto and Vancouver.

Montreal is known as a tech and video game hub, and that's reflected on Kickstarter, where most of the campaigns launched out of Montreal are in the tech and video gaming industry.

But not all Kickstarter campaigns actually succeed.

See:  What 10,000 Kickstarter projects reveal about Canada's entrepreneurs

So which projects are most likely to achieve their target fundraising goals?

In Montreal, films performed above the national average: 49 per cent of those launched here succeeded, compared to the 37 per cent success rate nationwide.

"Montreal also outperforms the country in tech projects — the toughest category according to CBC's analysis."

In Montreal, one-quarter of tech campaigns met their funding targets. In the rest of Canada, about 19 percent did.

What makes a Kickstarter campaign successful?

One key takeaway from CBC's analysis of nearly 10,000 Canadian Kickstarter projects was that crowdfunding works best on projects that already have something to show.

One of the highest fundraising goals in Canada that succeeded was for We Happy Few, a video game created by Compulsion Games.

They raised more than $300,000 through Kickstarter.

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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support, and networking opportunities to over 1500+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at www.ncfacanada.org.

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How Big Data is Transforming the World of Crowdfunding

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NCFA Member post | Jan 26, 2017

Big data

Big data refers to the mining of data that has been collected over the years from telecommunications metadata to genetic codes. Analysis of “big data” allows doctors to find otherwise buried links between medications and side effects or successful treatment of otherwise “orphan” diseases. SEO is entirely based on internet usage “big data” analysis. Analysis of the massive amounts of data on financial transactions allows businesses to better correlate spending patterns with life events. And in this vein, big data and the analysis of it provides a major opportunity to crowdfunding groups.

More Accurate Predictions of Success

Prior to the Trump election, it would have been reasonable to say that big data and its analysis allows organizations to call an election based on polling and early voting returns. Trump’s election proved that human factors like fear of disapproval if the person supported a politically incorrect candidate skews voting polls, affecting political predictions. The 2016 Presidential election will provide fodder for students in online master of information degree programs for years to come.

That type of bias in financial predictions doesn’t occur. One reason is the sheer volume of financial data, preventing the skewed results created by a few percent points in a political poll when those polled hide their true opinion. The second reason is that financial data is collected as actions occur, providing the actual results, instead of using stated intent as a prediction of the future.

See:  Data Reveals: Rewards Crowdfunding is the New Seed-Funding

Analysis of “big data” on fundraising campaigns allows crowdsourcing investors to predict the odds of success for a given campaign.

Social Media’s Role

Social media has become so important it is one of the top three signals for the ranking of content by Google’s search engine. Social media also plays an important role in the success of crowdfunding campaigns. The University of Illinois found a direct link between social media activity regarding a campaign and crowdfunding success.

That study found that Twitter and Facebook were the most important social media platforms for getting the word out. This is also a case where targeted social media campaigns and SEO improve the odds your crowdfunding campaign will get the recognition and funding it needs. And whether tailoring SEO of web content or crowdsourcing campaign videos, there are ample job opportunities for those who learn how to do either via an online MLIS program from Rutgers Online University.

Crowdfunding Dynamics

Ethan Mollick’s 2013 study on the success of crowdsourcing found that longer exposure and larger funding goals make a campaign more likely to fail. Conversely, increased social media sharing and being featured on the crowdfunding platform increased the odds of success. As more data on crowdsourcing campaigns are compiled and analyzed, crowdfunding campaigns can be tailored to maximize their odds of success just as websites and business directories are tailored to rank as high as possible in search engine results.

As we gather more information, learn how to analyze it more accurately and account for biases due to data collection and human emotions, predictions based on analysis of Big Data will become more accurate. Social media and SEO impact the success of crowdfunding campaigns as well as provide demand for MLIS graduates. As we learn more from crowdfunding platforms and specifically how to tailor crowdsourcing campaigns to maximize their odds of success, expect to see crowdsourcing campaigns seek out “crowdsourcing optimization” experts, just as they seek SMO and SEO gurus.

Source:  Member post

The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support and networking opportunities to over 1500+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at www.ncfacanada.org.

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4 Reasons The Fintech Potential Remains Untapped For 2017

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Nasdaq | | Jan 4, 2017

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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support and networking opportunities to over 1500+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at www.ncfacanada.org.

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A Personal Perspective on Title III Investment Crowdfunding

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Crowdfund Insider | | Sep 9, 2016

title-3-personal-perspecitve

“So why did you leave law to pursue crowdfunding?”

Over the past couple years, I’ve received this question more than any other.  Prior to starting NextSeed in 2014, I was a lawyer for over 7 years specializing in private equity fund formation and private investments.  I left my legal practice, and my amazingly talented colleagues left their established careers in law, finance, marketing and technology because we all believed that investment crowdfunding can fundamentally change how the private capital markets work for small businesses and small investors.

We came together to try to build our crowdfunding platform into a sustainable small business investment marketplace, where we could help connect businesses with people in their community to create opportunities for everyone.

The 28 million small businesses in the US drive the US economy, accounting for 54% of all US sales volume and creating 66% of all new US jobs since the 1970s. Despite serving as the backbone of every community and the literal grounds upon which people congregate and share their life stories, small business financing has largely been restricted to institutional or wealthy private investors.

On the flip side, 97% of all Americans are non-accredited investors who have had limited investment options to plan their future.  We believe investment crowdfunding can change this reality for the better.  In the first 90 days since Regulation Crowdfunding went live, there’s already been tremendous activity and interest across various Reg CF funding portals.  We’ve seen increasing demand on NextSeed as well – over the past year 11 businesses crowdfunded over $2 million in debt through our debt crowdfunding platforms (prior to launching our national funding portal, we had launched a Texas-only portal in 2015 pursuant to Texas intrastate crowdfunding rules), and substantial repayments have already been made back to the investors on our platforms.

During my legal career in private equity, I witnessed first-hand the immeasurable power of information and capital when PE firms were able to act upon them quickly.  The global PE industry has grown into a multi-trillion-dollar market today because it solved real problems for businesses (lack of access to capital) and investors (lack of access to sufficient investment opportunities) that weren’t being fully addressed by the public markets.

However, the PE industry was limited to Accredited Investors only and therefore the focus was on the capital needs of large or hyper growth-oriented companies that can satisfy the return expectations of large investors.  As a result, the vast majority of small businesses and small investors in the US are woefully underserved by our current financial system.

See:  SEC Approves Title III of JOBS Act, Equity Crowdfunding with Non-Accredited

So when the JOBS Act was announced in April 2012, I was genuinely blown away.  Theoretically, small businesses could now leverage technology and the internet to raise capital directly from anyone, and small investors could access many more investment options than the stock market.

My ultimate eureka moment occurred in December 2012 when I had the opportunity to visit Bangladesh to see microfinancing in action.

By any measure, Bangladesh is a developing nation. Children walked barefoot on dirt roads and rusted sheet metal mounted on wooden posts passed for roofs on family homes.  And yet, I saw with my own eyes how an innovative alternative financing structure like microfinancing was creating opportunities for local entrepreneurs and growing their local economy, supported by other members in their community and the microfinancing lender who kept account of the borrower’s success by pen and paper.  Even without a sophisticated banking system or regulatory structure, community-based microfinancing has proven to be a viable mechanism to fuel local economic growth in many developing countries.

So if this simple system works in unsophisticated markets, just what might be possible in the US if community-based financing could be structured, regulated and administered using the latest technology? The JOBS Act legally provided the framework to test these ideas for the first time in US history, and we were determined to find out.

Check out:

After carefully contemplating how the proposed JOBS Act provisions could be effectively utilized in practice, we started our platform with a focus on debt financing for Main Street small businesses (restaurants, cafes, hospitality businesses, etc.).  Many of these businesses are not typically looking to raise massive amounts of capital by selling equity, but need relatively small amounts to expand or establish their business.  For many of these small businesses, however, traditional financing has been getting more difficult to access in the aftermath of the Great Recession.

Ironically, big banks have become even bigger (the top 6 banks now control over 67% of the entire US banking industry assets). Due to increased compliance and operational costs, many big banks are focusing on more profitable capital allocation from their balance sheets than making small business loans.  A multitude of alternative lenders and merchant cash advance services have swooped in to fill the void, sometimes causing more harm than good for the small businesses that utilize these services.

In this context, debt crowdfunding allows small businesses to obtain flexible financing while showcasing their business to the public and establishing trust with their investors. Even the individuals who invest amounts as small as $100 can become loyal customers and brand ambassadors for the local businesses they invest in as they develop an emotional connection with the businesses they support.  On NextSeed, businesses are also required to make monthly payments back to their investors, thereby reducing their overall risk profile (e.g., relative to equity investments that may not pay out until a liquidity event occurs years down the line).  In turn, based on member feedback we now understand that our members are drawn to small business investing because it offers a level of transparency and simplicity unavailable in most other investment options.

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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support and networking opportunities to over 1300+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at www.ncfacanada.org.

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