April 24th, 2017
Mar 6, 2013: Startup Canada Crowdfunding chat ‘The Art of Asking’
Starting this week, I will be writing blog posts recapping each week’s #startupchats topics. My #startupchats twitter conversation on Wednesday, March 6 was with Craig Asano, Executive Director of the National Crowdfunding Association of Canada. We discussed the ins and outs of crowdfunding.
Crowdfunding has become an increasingly popular form of funding for startups and other independent projects. According to the National Crowdfunding Association of Canada, $2.8 billion was raised through crowdfunding initiatives globally last year. The concept of crowdfunding is quite simple: a group of people pool their financial resources to fund a project. Execution, of course, is a bit more complicated.
Before you decide to launch a crowdfunding campaign, there are three essential questions you need to honestly confront about your project:
- Does my project have value to others?
- Am I able to deliver on the promises I am making to potential funders?
- Do I have the ability to publicize the campaign at a level that will gain enough attention to achieve my funding goal?
When you can answer ‘yes’ to all three of these questions, you are ready to consider crowdfunding as an option for your startup.
The first task you will face is determining your funding goal. Various factors will influence this, including the overall cost of your project and what funding you are able to obtain from other sources. It is best to be realistic about your funding goal – ask for too much and you risk appearing greedy; ask for too little and you risk not being taken seriously.
Once you have a funding goal, it is time to decide what funding model is appropriate for your project. Currently, equity and lending crowdfunding models are not legal in Canada, which means your options are donation or reward models. A donation model means funders are giving you money to execute your project without expecting any return for their investment. A reward model means funders receive a product and/or service in return for their investment in your company. In either situation, funders do not have any equity in your company, and you are not expected to pay the money back.
Promoting Your Campaign
Running a crowdfunding campaign nearly equates to a full-time job, so once you have decided to pursue crowdfunding be prepared to spend a good deal of your time promoting and managing the campaign. Publicity will be key to obtaining funding for your project. Utilize your network to push news of the campaign through social media, word of mouth, and traditional media channels.
If your project is unique and valuable to your audience, people will start talking and – in an ideal world – start making donations! Once your crowdfunding campaign has launched, don’t just sit back and wait to see what happens! It is important to maintain public interest throughout the entire campaign, and to follow-up with those who have invested.
Whether you achieve your funding goal or not, ensure that you express your appreciation to your investors, and follow-up with them on a timely basis.
For further information on crowdfunding and information on what crowdfunding platforms are available to entrepreneurs, visit the National Crowdfunding Association of Canada website at ncfacanada.org.
Join me every Wednesday and Friday at 12pm EST for #startupchats. During each #startupchats I talk with one subject matter expert on a topic of interest to Canadian entrepreneurs. Details on each week’s chat topics can be found here.