Crowdfunding has changed, but these three things you should know to succeed haven’t

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Financial Post | Erin Bury | Mar 5, 2015
Chris Charlesworth Hivewire

For entrepreneurs looking to finance their company, crowdfunding using platforms such as Kickstarter, Indiegogo, or Tilt has become one of the easiest ways to measure consumer demand and raise funds without turning to outside investors. The landscape has changed drastically since Kickstarter launched in the U.S. in 2009 (in Canada, 2013), so here’s what you need to know if you’re considering launching a crowdfunding campaign in 2015.

Where do great business ideas come from? Increasingly, from crowdfunding.

When entrepreneurs turn to Kickstarter, Indiegogo or similar platforms to crowd-source their new products and startups, they are counting on old-fashioned democracy to support these projects. Friends, aficionados, hobbyists and other early adopters vote with their wallets, signing up for new products or other “perks” that help these companies get off the ground without the traditional aid of angel investors or second mortgages.

The first big change is just how common it has become for companies to turn to crowdfunding. More than 275,000 campaigns have been launched on Indiegogo since its debut in 2008, and more than 7,000 active campaigns at any given time. In 2014 alone, 3.3 million people contributed more than $500 million to projects on Kickstarter’s platform.

“Public awareness has grown in tandem with a strong domestic crowdfunding industry, and there is now a recognition by the traditional providers of capital that crowdfunding adds value by demonstrating clear market validation,” said Christopher Charlesworth, co-founder of HiveWire, a crowdfunding agency that builds custom crowdfunding platforms, and conducts industry research and consulting.

There has also been a big regulatory change in the crowdfunding landscape. Last week, the first Canadian Crowdfunding Summit was held in Toronto, organized by the National Crowdfunding Association of Canada. One item on the agenda was the upcoming changes to equity crowdfunding rules, which would allow companies to offer equity in exchange for financial backing. Saskatchewan already has a crowdfunding exemption that allows businesses to offer equity in exchange for financial support on crowdfunding platforms, and in March 2014 several regulatory bodies including the Ontario Securities Commission (OSC) introduced plans to add a similar exemption for other provinces.

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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 950+ 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 About Us or visit www.ncfacanada.org.

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