Category Archives: Fintech Opinions

Should we let the crowd fund Canadian science if no one else will?

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CBCnews | Kelly Crowe | Jan 20, 2018

Scientific crowdfunding is springing up all over the world. It's a departure from the way science is traditionally funded, with public sector institutions awarding research money using rigorous evaluation by experts — a process known as peer review.

But those public funding sources are shrinking. A national report last April warned that Canadian research is seriously underfunded and called on Ottawa to dramatically increase support for basic science.

In the meantime, scientists, especially young researchers, are struggling to launch their careers.  And that's a gap Eric Fisher is hoping to fill, through his made-in-Canada science crowdfunding platform called Labfundr.

See: Sign of the times: Crowdfunding for scientific research

"We have these really major questions and challenges facing society and there's not always the funding available to make the incremental steps forward," said Fisher. He has a Ph.D. in biochemistry, but instead of doing his own research he's decided to support other scientists and run a business at the same time. Like other crowdfunding platforms, Labfundr takes a percentage of the funds raised in successful campaigns.

The idea of going to the crowd to fund science makes Jeremy Snyder nervous. He's a medical ethicist at Simon Fraser University and he's researching the ethics of using crowdfunding to finance medical treatments. Snyder is concerned about a lack of oversight and peer review as science crowdfunding takes off.

"The Labfundr people I'm sure are trying to do a good thing," he said, "and I think there are probably ways it can be done really well, but I think there's also a lot of danger of turning it into a popularity contest, hijacking public funding and really hyping new treatments that aren't well supported by the scientific community and providing an alternate way of funding those."

See also: Crowdfunding the Canadian Knowledge Economy

Jim Woodgett, director of research at the Lunenfeld-Tanenbaum Research Institute, applauds the initiative but is also concerned about the lack of oversight and peer review.

"How do you identify what is the most likely to be useful or most likely to be scientifically valid? Peer review does provide some quality control but it also sets a pretty high bar, whereas crowdfunding has, in essence, no bar."

Fisher said Labfundr requires researchers to be affiliated with academic institutions.

"We've launched one project to date," said Fisher. "[We've had] quite a few leads and a lot of interest but it's been a challenge to get projects launched."

Crowdfunding science made headlines recently when 1,700 online donors gave money to a campaign to study whether a dimming star is being caused by aliens. A crowdfunding campaign raised more than $100,000, which the researchers used to book time on telescopes. So far the data suggests the dimming light is being caused by space dust — not aliens.

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The National Crowdfunding & Fintech Association of Canada (NCFA Canada) is a national non-profit actively engaged with social and investment crowdfunding, alternative finance, fintech, peer-to-peer (P2P), initial coin offerings (ICO), and online investing stakeholders across the country. NCFA Canada provides education, research, industry stewardship, networking opportunities and services to thousands of community members and works closely with industry, government, academia and eco-system partners and affiliates to create a vibrant and innovative fintech and online financing industry in Canada.  For more information, please visit: www.ncfacanada.org

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Bitcoin’s gender divide could be a bad sign, experts say

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CBCnews | Anne Gaviola | Jan 1, 2018

Bitcoin, and the world of cryptocurrency, is a boys' club, say some experts, and that should be cause for concern.

Cryptocurrency is a form of digital currency traded between people or used to purchase goods outside of banks or government regulation — that's part of what makes it risky. Figuring out exactly who is putting money into this kind of asset is difficult because part of the attraction of investing in the crypto realm is the assurance of anonymity.

But survey after survey backs up what the anecdotal evidence suggests — women are underrepresented.

Google Analytics results put the divide at 96.57 percent men to 3.43 percent women.

See: How to Take Advantage of the New Trends in Blockchain, Cryptocurrency and Financial Technology

That's a huge red flag to Duncan Stewart, research director of Deloitte Canada's technology division.

"It isn't merely that the value has risen as far and as fast as it has; it's the fact that it's 97 percent men — that is, in and of itself, a potential danger sign," he says.

"There are studies out there that suggest men are predisposed towards bubbles in a way that women are not."

Stewart made his case in a recent online post on the subject. Stewart said he "cannot think of any security, currency or asset class in history that shows that extreme a gender divide and has been sustainable."

One reason is the well-documented lower risk tolerance of female investors. In other words, if women aren't getting involved, it's likely too risky, this line of thinking suggests.

The most comprehensive study on gender and the stock market shows that women who invest — whether their own money or on behalf of an organization — take a more cautious approach but tend to outperform their male peers in the long run.

'Role models are needed'

Stewart says he saw this in action during the dot-com boom and bust in the early 2000s.

Back then, he was an award-winning technology fund manager on Bay Street. Female fund managers represented about 20 percent of institutional investors at the time, but they shied away from the tech stocks the men were heavily invested in.

He recalls his female colleagues being mocked for not jumping in with as much fervor as the men — until the men began losing lots of money.

"Maybe they 'got' it better than the men did all along," Stewart said.

Iliana Oris Valiente is a rarity in the cryptocurrency world. She has emerged as a female leader in this space and was recently chosen to lead consulting firm Accenture's global blockchain innovation division (blockchain is the technology behind cryptocurrencies).

See: 

A chartered accountant by training, she began her career in the world of auditing but got hooked on bitcoin as soon as she heard of it in 2012.

Oris Valiente says when she entered the world of cryptocurrencies it was a noticeably male-dominated industry.

"In 2014, when this started to become a core component of my day job, I was regularly the only female in the room, period," she said.

She says things are changing, albeit slowly. "We're starting to see really strong females in leadership roles," she said.

For instance, of the largest initial coin offerings (or ICOs, which are fundraising mechanisms for blockchain-related projects) currently underway, about 13 percent are headed by women.

"They're acting as very powerful role models, and these role models are needed to encourage other women to potentially looking at this field," said Oris Valiente.

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The National Crowdfunding Association of Canada (NCFA Canada) is a national non-profit actively engaged with social and investment crowdfunding, alternative finance, fintech, peer-to-peer (P2P), initial coin offerings (ICO), and online investing stakeholders across the country. NCFA Canada provides education, research, industry stewardship, networking opportunities and services to thousands of community members and works closely with industry, government, academia and eco-system partners and affiliates to create a vibrant and innovative fintech and online financing industry in Canada.  For more information, please visit:  www.ncfacanada.org

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Competition Bureau weighs in on fintech: urgent action required

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TheGlobeandMail | Jeffrey Graham | Jan 3, 2018

For several decades, federal policy makers have been attempting to create more competition in our financial-services environment. Initiatives to facilitate the creation of additional domestic banks, provision of greater flexibility for foreign banks to choose forms of establishment and, more recently, allowing provincial credit unions to convert and become national co-operative banking institutions, have not really made much of a difference. Our large and highly respected major financial institutions continue to dominate.

The Canadian Competition Bureau has released its final market study report into technology-led innovation in Canada's financial-services sector. The study is a valuable addition to a growing body of analysis and evidence that we need to do more to ensure that Canada is not left behind, as fintech has the potential to make an increasingly important impact on the availability and delivery of financial services to Canadians.

In its study, the Bureau notes that since the 2007-08 global financial crisis, a new wave of financial-services firms has emerged, leveraging the latest technologies. In a number of jurisdictions, these firms are helping to reshape their domestic financial-services sectors and, in some cases, the leading firms are becoming national champions with global reach. The bureau notes that Canada lags behind its peers in fintech adoption; a number of reasons for slow adoption are suggested, including regulatory and non-regulatory barriers. The study makes a number of important recommendations to financial-sector regulators and policy makers focused on retail payments and the retail payments system, lending and equity crowdfunding, and investment dealing and advice.

Could it be that fintech could actually address the long-standing challenge of creating more competition in domestic financial services? Will the bureau recommendations, if adopted, make a positive impact in achieving that objective?

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The National Crowdfunding Association of Canada (NCFA Canada) is a national non-profit actively engaged with social and investment crowdfunding, alternative finance, fintech, peer-to-peer (P2P), initial coin offerings (ICO), and online investing stakeholders across the country. NCFA Canada provides education, research, industry stewardship, networking opportunities and services to thousands of community members and works closely with industry, government, academia and eco-system partners and affiliates to create a vibrant and innovative fintech and online financing industry in Canada.  For more information, please visit: www.ncfacanada.org

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Want to issue a red-hot ICO? Rule No. 1 is do very little work

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Financial Post | Camila Russo and Olga Kharif  | Dec 20, 2017

The man known as Bitcoin Baba is, as you might have guessed, a true believer in the power of cryptocurrencies to change the world.

Two years ago, the 30-something Kiwi ditched his job in construction and went all in on bitcoin. Now he says he’s living the dream, travelling the world and evangelizing to would-be crypto-enthusiasts wherever he goes. (He got his nickname, a term of endearment that means “wise man” in Hindi, after putting up signs outside coffee shops and banks in India offering free bitcoin advice.)

But when it comes to the recent frenzy in initial coin offerings, even Bitcoin Baba struggles to see much more than a place to make a quick buck.

“You can listen to all the technologists explain why these projects work or don’t work and then you go onto the trading channels and people are just talking about the price action and sometimes there’s just no correlation,” he said one morning during a recent jaunt to Australia.

Like so many in the world of cryptos, he’s deeply fearful of having his virtual assets stolen by hackers and declined to give his real name. “There’s a massive bubble here that’s going to pop in an ugly way. That’s why I’m not an investor in alt-coins and ICOs, and only trade them depending on what the market’s doing.”

See:  OSC approves first ICO in Ontario to TokenFunder

The data support this view. Of the 30 biggest digital tokens sold in ICOs this year, the ones without a working product backing their projects did the best in their first month of trading, data compiled by Bloomberg show. And the ICOs with actual products that could be tested? Almost two-thirds of those declined.

The disparity has come to reflect the wildly speculative, topsy-turvy world of ICOs, which in recent weeks has increasingly drawn parallels to the go-go days of the dot-com bubble. This unregulated, crowd-funding model — where backers finance cryptocurrency startups — has taken off and pushed the nascent market toward US$4 billion in value.

And the boom is showing few signs of slowing even as U.S. regulators start to crack down on fraudulent fundraising schemes. This year alone, hundreds of ICO-backed blockchain projects have been created, as the popularity of just about anything crypto-related pushes bitcoin to one high after another. This week, bitcoin futures debuted on Wall Street, the clearest sign yet cryptos are moving into the mainstream.

Yet for every promising ICO, a host of others seem to offer little more than a solution looking for a problem. (One promises to revolutionize office sharing on the blockchain, while another ICO exists solely to allow users to buy other tokens. And exactly how many blockchain-based providers of cloud storage does the world really need?)

That’s not counting the duds or the marketing ploys where celebrity endorsements from Paris Hilton and outrageous names like Wu Tang Coin grab headlines. And it’s no small irony that in a market that appeals to people who lack faith in governments and banks, the president of Venezuela (a country facing an economic collapse and hyperinflation) has pitched a cryptocurrency backed by its oil, gas, gold and diamond reserves.

See:  Most ICOs Fail: Tale of Two Worlds

Wide-eyed enthusiasts and greedy opportunists alike are jumping in, lured by the promise of groundbreaking technology or just skyrocketing prices, and making it harder than ever to tell whether this is a revolution, a bubble or both. But what’s clear is that regardless of where you are on the crypto spectrum, the hype has rarely been more divorced from reality.

It can be frustrating because “we are really big believers in, ‘Hey, you should at least have done as much work as you could have done on the project before trying to raise money,”‘ said Alex Xu, director of operations at 0x, which builds software that allows users to trade tokens on the Ethereum blockchain.

Only one in 10 digital tokens issued in ICOs is in use following their sales, according to Token Report. The rest, at least for now, are purely speculative instruments, only to be traded. CoinSchedule estimates at least two-thirds of ICO projects lack a working product or a prototype.

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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, alternative finance, fintech, P2P, ICO, and online investing stakeholders across the country. NCFA Canada provides education, research, industry stewardship, and networking opportunities to over 1600+ 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.  For more information, please visit:  www.ncfacanada.org

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10 reasons the $1 million crowdfunding cap should be $20 million

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VentureBeat | By:  | Dec 10, 2017

It’s been 18 months since the final rule of the JOBS Act went into effect, allowing equity crowdfunding. In those 18 months, everything proponents of the rule said would happen (and none of what the detractors said would happen) has become a reality. Over $82 million dollars of previously untapped capital from local investors has been committed to over 650 companies. No fraud has been perpetrated. And everyone (including investors, the Government, the Securities and Exchange Commission, and the media) has more insight into the private capital markets than has ever existed before, bringing a new level of transparency, accountability, and data analysis. This is the time to raise the maximum a company can raise from $1 million to $20 million.

Why? Entrepreneurs all across America are finally raising funds faster than they could through traditional channels. Investors now have a transparent and efficient way to support local businesses that they love and believe in by receiving information about these offerings online. Regulators have transparency into the private capital markets, an auditable trail of disclosures, and a digital footprint full of data. And our government has a jobs engine, a way to promote women- and minority-run businesses, an economic booster, and a tax engine. Not bad!

See: SEC Updates JOBS Act Amendments Including Reg CF Funding Cap

So if it’s working, why raise the cap to $20 million? Let me explain:

1. We can make it a bigger jobs engine. Data from companies that have been successful with an equity crowdfunding offering shows they hire on average 2.7 people within 90 days of a $300,000 raise. That’s about one job per every $100,000 raised. If we increase the cap to $20 million, that could equate to 200 new jobs for each issuer that raises $20 million. So raising the cap would make equity crowdfunding the Main Street jobs engine we expected it to be.

2. It will provide regulators with more transparency. Companies that raise money via equity crowdfunding file specific disclosures about their businesses, their operations, and their financial wellbeing. All of this is digitally recorded, and For the first time in 80 years, regulators can actually see where capital is flowing in the private capital markets, which can allow them to further protect investors. Increasing the limit to $20 million will attract larger firms that seek more capital down this public path. This means regulators AND investors will have real-time actionable visibility into a larger part of the private capital markets.

3. Startups can make a bigger impact. $1 million dollars is nice, but consider how much more a company can do with $20 million. Increasing the cap doesn’t mean every company would get $20 million (currently only about 50 percent of companies are successful with their campaigns and raise on average $300,000), but those that are worthy and can win over the support of the crowd can take on much greater goals.

4. Communities will get more engaged. Want to know how to engage local communities? Make them investors in the local businesses that are not just mom and pop shops but large employers and high-growth startups. They will have a vested stake in the performance of those companies, and by default these businesses will benefit from the marketing power of the community. Increasing the cap to $20 million gives local investors a greater stake in their local communities. Research shows that money invested locally circulates in the local economy rather than being sucked out.

5. We’ll see gender and minority benefits. Data my firm has been collecting proves that equity crowdfunding is democratizing access to capital among women- and minority-founded businesses. Increasing the cap to $20 million means more capital to this underserved group of founders.

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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, alternative finance, fintech, P2P, ICO, and online investing stakeholders across the country. NCFA Canada provides education, research, industry stewardship, and networking opportunities to over 1600+ 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.  For more information, please visit: www.ncfacanada.org

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How Crowdfunding Has Influenced Start-Ups

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HuffingtonPost | By Julee Morrison, Contributor | Oct. 2, 2017

You have a great idea that you would like to bring to the market. However, you have little to no capital in kick-starting product development. Furthermore, you don’t really have the business acumen and the research and development needed to make a solid business presentation to a group of investors.

So, how do you go about finding the seed funding you need to start turning your idea into a reality? Many entrepreneurs in recent years have turned to crowdfunding as a way to reach a large audience to fund product ideas and business models.

What Is Crowdfunding?

Crowdfunding is an alternative way for businesses, and especially start-ups, to source capital for a new venture from a number of people online, primarily through connecting investors and entrepreneurs on crowdfunding websites and social media.

This differs from traditional ways of collecting capital when entrepreneurs pitch a business plan to a limited number of wealthy businessmen or companies. Crowdfunding allows someone to pitch their business plan to a much larger pool of venture capitalists, instead of the traditional players.

See: A Guide to Building an Audience for Crowdfunding

How It Works

Crowdfunding websites such as Kickstarter and Indiegogo act as platforms for entrepreneurs to present their business ideas and products in front of a large audience of potential investors. These websites are then able to make a profit by taking a percentage of the funds raised for each idea.

An entrepreneur signs up to one of these websites to start a campaign, explain an idea or product, which is then spread mainly through social media platforms such as Facebook and Twitter to gain the attention of potential investors.

There is no limit to the types of products that can be presented on these crowdfunding platforms, with ideas ranging from an alternative to Apple’s smartwatch to a new potato salad recipe.

See: What 10,000 Kickstarter projects reveal about Canads entrepreneurs

Types Of Crowdfunding

There are three types of crowdfunding: donation or reward, debt, and equity. In donation or reward crowdfunding, people chose to invest in an idea or a person without an expectation to receive anything tangible in return.

What they might receive in reward crowdfunding are acknowledgements in a book, free gifts, tickets to a concert and so on. Crowdfunding websites such as Kickstart and Indigogo fall under this category.

In debt crowdfunding, also known as peer-to-peer lending, investors can recoup their money with interest as with traditional investments. The only difference is that traditional lenders such as banks are not involved. Platforms such as Prosper, Funding Circle, and Lending Club offer debt crowdfunding.

Another category of crowdfunding is equity crowdfunding in which investors receive equity in return. Equity can come in the form of shares or a stake in the company, project, or venture. Similar to other forms of equity, the value of the company fluctuates depending on how successful it is. Examples of portals offering such services are OfferBoard, CircleUp, and OurCrowd.

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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both investment and social crowdfunding, blockchain ICO, alternative finance, fintech, P2P and online investing stakeholders across the country.  NCFA Canada provides education, research, leadership, support, and networking opportunities to over 1600+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a vibrant and innovative online financing industry in Canada.  Learn more About Us or visit www.ncfacanada.org.

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Equity crowdfunding a slow burn, advisers say

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The Australian Financial Review | By Michael Bailey | Sept 17, 2017

The legalization of equity crowdfunding has met with enthusiasm from those hoping to raise money with it, but financial planners say it will be years before it is taken seriously by investors.

Leading advisers contacted by The Australian Financial Review said no clients had approached them in relation to the new crowdsourced equity funding legislation, which was introduced by Treasurer Scott Morrison on Thursday.

With Industry Minister Arthur Sinodinos set to open The Australian Financial Review Innovation Summit in Sydney on Tuesday, the government is hoping equity crowdfunding will help bring start-ups and innovation closer to the average Australian, and boost support for the "ideas boom" agenda blamed for nearly losing it the 2016 election.

See: Australia: Minister Kelly O'dwyer Details Equity Crowdfunding Laws

Once the legislation passes the Senate with opposition support as expected, all proprietary and unlisted public companies with an annual turnover or gross assets of up to $25 million will be able to advertise their business plans on licensed crowdfunding portals and raise up to $5 million a year to carry them out.

Investors can put as little as $50 and up to $10,000 a year each into an unlimited number of ideas.

However, a principal at Bravium Financial Planning, Scott Farmer, did not expect a rush.

"Equity crowdfunding is a new asset class, and diversification is usually a good thing for investors, but we saw things like exchange-traded funds and separately managed accounts take years to catch on in Australia versus the US or UK, and I think this will be no different," Mr. Farmer said.

See: Australian SMEs Are Turning To Alternative Sources Of Funding

"But there will be two sub-sectors of people in it from day one: the ones who love the companies being crowdfunded and want to be part of their innovation story, and the investors for whom excitement ranks ahead of actually making money."

There was no way most financial planners would have time to research single equity crowdfunding deals on behalf of clients, said Will Hamilton of Hamilton Wealth.

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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, alternative finance, fintech, P2P and online investing stakeholders across the country. NCFA Canada provides education, research, industry stewardship, and networking opportunities to over 1600+ 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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