Crowdfunding can help startup businesses get to market faster

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CTV News  |  LuAnn LaSalle, The Canadian Press |  Published Sept 22, 2013

Pebble watchMONTREAL -- Entrepreneur Paul Chipperton aims to raise $129,000 by the end of October for marketing a technology that can suspend the arrival of distracting emails, text messages and phone calls to handheld and other devices. But he's leaving this fundraising to online, not to the banks or venture capital. In a growing movement called crowdfunding, entrepreneurs make video pitches to consumers to help get their projects to market. It all comes down to whether the amount of donations meet the startup company's funding target and deadline.Chipperton is putting his MyFocus Solution product on the U.S.-based crowdfunding platform Kickstarter, which launched in Canada earlier this month.

"If you don't make that threshold number, the project doesn't get funded and you go about your business," said Chipperton, CEO of CanFocus Technologies Inc. in Toronto. Chipperton described his product as a "little force field of solitude" to help people get their work done without electronic distractions.In essence, MyFocus uses software to put messages and calls in a "holding pattern" on cellphones, laptops and tablets for up to two hours with no ringing or buzzing or alerts, he said. Consumers can download the app for their smartphones and tablets or plug a small device into their computers.By pledging $5 to $8,000, donors can receive various rewards -- including T-shirts, the product, or becoming an observer at meetings of the company's board of directors for a year -- for their cash on Kickstarter."It's a transaction. You put money down and you get something back.

"Even with Kickstarter taking a five per cent fee for successfully funded projects, Chipperton said it's still better terms and conditions than he would get from a bank, investment firm or private equity funding.Consumers are charged a processing fee of three per cent for pledges of $10 or more and five per cent for pledges less than $10. There are no fees for projects that aren't successfully funded and pledges are cancelled. Kickstarter says proposed projects must be "creative" and have an concrete end result, like a film or product, and not be used for raising money for causes or to pay bills.Kickstarter, launched in 2009, and says 4.9 million people have since made pledges totalling $790 million, funding 48,000 projects around the world. One of its best-known projects was the Pebble smartwatch that connects to smartphones for access to email. It raised more than $10 million within a month in 2012, well beyond it's quest for $100,000.

Ottawa-based tech startup Black Sumac so far has raised more than $153,000 on rival crowdfunding platform, Indiegogo, for its home security monitoring device called Piper, which is controlled remotely by smartphones and tablets.

"Basically, it's like a marketing launch," said CEO Russell Ure. "You're proving to people in the investment community that there's actually buyers there for that product."

Black Sumac is taking pledges up to $1,500. For a pledge of $209, consumers get a Piper, which is expected to retail for about $250.

Ure said venture capital firms watch crowdfunding and successful campaigns help establish credibility for potential investment.

E-commerce professor Tim Richardson said small companies don't need to ask for a lot of money.

"It's not the amount. It's the speed," said Richardson, who teaches at the University of Toronto and Seneca College. "It takes their product from conceptualization to be able to actually launch and have people start using it. The early adopters, because of social media, can create a big impact."

The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada crowdfunding hub providing education, advocacy and networking opportunities in the rapidly evolving crowdfunding industry.  NCFA Canada is a community-based, membership-driven entity that was formed at the grass roots level to fill a national need in the market place.   Join our growing network of industry stakeholders, fundraisers and investors.  Increase your organization’s profile and gain access to a dynamic group of industry front runners.  Learn more eBrochure | Prezi or contact us at casano@ncfacanada.org.

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