NCFA Canada | Craig Asano | Oct 26, 2016

Oct 25, 2016, NCFA Canada delivered an hour Crowdfunding 101+ workshop at the 2016 Small Business Forum at the Metro Toronto Convention Center. This is an annual trade show hosted by Enterprise Toronto that attracts thousands of small businesses each year looking for funding, mentorship, tools, products and services to help them launch and grow. The presentation provides an overview of Crowdfunding markets, both regulated and non-regulated, case studies, deal characteristics to help startups and scaleups understand if Crowdfinance is right for their business. The deck also provides some insight into practical keys to success with planning, executing and following up on a crowdfunding campaign or investment round.

2016 small business forum crowdfunding 101 workshop

1. CROWDFUNDING COMPREHENSIVE INTRODUCTION 101+ Date: Oct 25, 2016 Prepared for: 2016 Small Business Forum, Enterprise Toronto Prepared by: National Crowdfunding Association of Canada

2. OUR AGENDA 2016 Small Business Forum: Enterprise Toronto PART 1: CROWDFUNDING OVERVIEW • What is Crowdfunding and why is it a game changer? • Crowdfunding examples and market growth • Is Crowdfunding right for me? Pros/cons for SMEs PART 2: PRACTICAL KEYS TO SUCCESS • Pre-Planning and Strategy • Executing a Campaign • Post-Campaign • Common mistakes PART 3: Q&A (15mins)

3. NCFA @2016 Small Business Forum National Crowdfunding Association of Canada 1500 Subscribers 3200+ Followers 1300+ Members 90+ Platforms 20+ Providers 45 Portals 2016 2015 2014 2013 Oct 2012

4. NCFA @2016 Small Business Forum Part 1: CROWDFUNDING OVERVIEW 1. Seeking Capital • Online marketplaces that connect companies to investors • Consultants (social media, marketing, advisory services) 2. Funding Portal & Enablers 3. Investors Retail or Accredited Individuals or organizations seeking funding Definition Raising capital online to fund all sorts of projects and ventures such as startups and scaleups (using the internet, social media and technology)

5. NCFA @2016 Small Business Forum Crowdfunding Part of the Capital Stack Crowdfunding isn’t a stand alone funding source. Crowdfinance includes retail, angels and VC participation too One big difference…Crowdfunding platforms are evolving & can scale – Chance Barnett, CEO of Crowdfunder

6. NCFA @2016 Small Business Forum Crowdfunding Case Studies Source: Kickstarter Campaign page 1. Innovation and Economic Growth Pebble Smart Watch (Great Canadian success) • Goal was $100K; Viral success preselling 69,000 watches raising over $10 million on US portal Kickstarter • Owner and Waterloo Engineering student, Eric Migicovsky, started company in U.S. Oculus Rift – Potential for Equity • Raised $2.4 million (goal was $250K) • Crowdfunding as an economic generator and on-boarding ramp to follow-on investment • March 25th news report Oculus was just bought by Facebook for $2 billion

7. NCFA @2016 Small Business Forum Crowdfunding Case Studies 2. Community Development in Canada Invest YYC, Calgary, Alberta • Platform: InvestYYC (www.investyyc.com) • Launched Jan 2013 • Funds raised $650,000 across 47 projects • Average raise $13,892 3. New Product Development & Marketing “Coolest Cooler”, Portland, Oregon • Platform: Kickstarter • Launched Jan 2014 • Goal was $50K; raised over $13 million from over 62,000 backers

8. NCFA @2016 Small Business Forum Global Growth in 2014 ($13.2 billion) Past Prediction

9. NCFA @2016 Small Business Forum $36 Billion USD Source: Cambridge University and Nesta UK • World Bank Forecasts worldwide $96 billion annually by 2025

10. NCFA @2016 Small Business Forum • Growing market but small compared to the US • Impact of Canadian banking oligopoly $200 Million USD Source: Cambridge University and Nesta UK

11. NCFA @2016 Small Business Forum NCFA Canadian Crowdfunding Directory Reward/Donation: Equity-based via Dealer: • Steady growth in portals • Equity and Debt emerging • Fintech is all the rage • Real estate crowdfunding emerging Consumer and Small Business Loans:

12. NCFA @2016 Small Business Forum Basic Crowdfunding Models < $10K $10 - $250K < $100 - $350K+ < $250K - $3M+

13. NCFA @2016 Small Business Forum Rewards Sample:

14. NCFA @2016 Small Business Forum Equity Sample:

15. NCFA @2016 Small Business Forum Lending Sample:

16. NCFA @2016 Small Business Forum Regulated vs. Unregulated Markets < $10K $10 - $250K < $100 - $350K+ < $250K - $3M+ RegulatedUnregulated • Not issuing a security • Portals, transactions and participation is global • DIY approach to raising capital from an online community • Early seed stage type funding or community capital • Platform fees range from 0% - 9% • Regulated by provincial securities commission and other regulatory bodies • Many financing ‘exemptions’ or tools can be used, some have caps • Work with licensed Dealer-brokers (gatekeepers) • Fees are higher than unregulated (success fee, listing, carried interest management fee)

17. NCFA @2016 Small Business Forum • Wide distribution over the internet • Low cost, efficient, transparent capital • The `great equalizer` • Media/PR, awareness • Increase customer engagement and • Evangelize backers into investors (customer acquisition) • Reduce risk by getting feedback on new launches (product or ventures) • Market research Access to Capital Marketing Platform Validation • Raising funds via crowdfunding markets is a very public and transparent • Protect your IP and speak to a lawyer • Crowdfunding takes a lot of effort and commitment • The majority of Ideas fail to reach their funding goal • How will this affect your companies brand? Expose your Idea Resourcing Failure Crowdfunding Pros/Cons Benefits Risks For Companies

18. NCFA @2016 Small Business Forum Seedrs Portfolio Analysis (253 deals mid 2012 - 2015) Most popular category (of total 15): • Food & Beverage (11%) • Finance & Payments (11%) • Travel, Leisure & Sport (10%) Investors Returns • Platform Investors IRR 14.44% (Tax relief adj 41.87%) • Investors with 20+ investments outperformed overall market Is Crowdfunding Right for Our Business? 40% Digital Business 40% Hybrid20% Non-digital 60% B2C Businesses 10%20% B2B

19. NCFA @2016 Small Business Forum Trends in Crowdfinance & FinTech • Crowd is Growing more Liquidity: Syndication of investment opportunities (retail, accredited, angels, VCs, institutions) • FinTech Innovation: Improving transparency and removing information barriers that exist in private markets, data driven. Blockchain, ICOs, smart contracts • Regulations are opening up (OSC LaunchPad – Innovation Sandbox) • Companies are staying private longer (rather than going public)

20. PART 2: PRACTICAL KEYS TO SUCCESS “The harder I work, the luckier I get” Samuel Goldwyn

21. NCFA @2016 Small Business Forum Crowdfunding Lifecycle Planning & Strategy • The greater your planning efforts, the greater your chance of achieving your funding goal • Do not launch a crowdfunding campaign if you are not ready. (3 months) (40 days – 90 days) (Ongoing) Post-campaign • Your campaign is done but now you have to deliver on your promise • Fulfillment • Ongoing customer engagement Campaign Execution • Daily execution of tasks outlined in the campaign plan • Control, monitor and adapt Feedback Loop

22. NCFA @2016 Small Business Forum Success Factors SUCCESS 2. Network Strength • Sizeable online network and social media presence? • Will media/PR and influential bloggers cover your story? 1. Quality Idea & Pitch • Unique, enterprising and clear value proposition (conveyed online in a simple manner) • Get others excited about your story? • Clear funding target and specific goals? 4. Key Docs and Content • Compliant and necessary for investor review 3. Strong Committed Team • Is your team credible, committed and willing to deploy the resources and time to execute effectively? • Time management HARD WORK! 5. Marketing Campaign & Incentives • Planning and strategy with ability to execute through launch to post campaign

23. NCFA @2016 Small Business Forum • Build your crowd before you launch • Recommend content generation and social media workshops • Develop an online strategy for your business • Start with internal networks • PR Push: Build rapport with media folks, journalists and bloggers • Attend industry networking and community building events to grow your crowd • Evaluate your internal networks social reach to forecast a realistic ‘Funding Target’ based on conversion rates (i.e., 2%) • Prime your network before you launch (reach out, engage) • 20-30% of your campaign funding will come from your internal ‘friends and family’ network • Understand the difference between ‘Keep what you Raise’ vs ‘All or Nothing’ funding types Low Mid High Planning & Strategy Assess the Strength of Your Network and Establish Realistic Funding Target

24. Funding Lead Strategy, resourcing, fulfillment Build Your Funding Team Team Strength? Content & Media Manager Key message, content distribution, channel selection, engagement Compelling Spokesperson Spokesperson, media engagements NCFA @Money Forum • Is your Team 100% Committed and credible? • Do you have family and friends that can support? • Outsource? Legal, Accounting and Compliance Documents, resumes, valuations, trademarks/patents, incorporation etc.

25. NCFA @2016 Small Business Forum Equity Planning & Strategy • Key Milestones that impact business valuations • Minimum capital required to reach each stone? • What securities will you offer in which jurisdictions? • Funding platform you want to work with? Solid Capital Raising Plan • Business plan, portal compliance, financial statements • Investor term sheet, subscription agreement, pitch deck • Video, prepared PR releases, email responses etc. Prepare Key Documents (offline / online) • Identify potential investors, prime the pump, range investor potential to commit • Network, keep all doors and opportunities, road show, leverage PR/media, do not just rely on portal • Treat everyone you deal with, with respect Prepare for Outreach Campaign • Have them review to ensure compliance and credibility • All documents, offline and online and remediate where necessary Contact Legal and Other Professionals Getting Ready for an Equity Crowdfunding Raise

26. Planning & Strategy Not everyone needs a reward Altruism, especially for donation-based Reward Considerations Budget and timing Rewards cost money (shipping fees!) Bundle rewards Group rewards together Special – Scarce, Creative, VIP Limited quantity, unique experience Leverage in-kind from partners Use good will from donated contributions Types of Rewards Product Social Experiences Financial » Services VIP Access Add/update New Rewards Test market and iterate!

27. Targeting your networks Marketing campaign Engaging with your networks and prospects Reaching out to media and bloggers Asking networks to: 1. Learn about the project 2. Share 3. Invest 4. Champion / help promote 5. Support / volunteer Constantly monitor with analytics Are contributions happening? Make changes Daily Task List Online & Offline Feedback Loop Campaign Execution NCFA @Money Forum

28. NCFA @2016 Small Business Forum Post Campaign Thank You Messages Thank you team and backers/investors Positive Reinforcement Contributed to success of project Fulfillment Deliver on your promise Start to fulfil rewards right away Manage expectations Transparency Equity Considerations Shareholder Register Company Minutes Annual reporting requirements to shareholders Nurture New Relationships Ongoing communications and engagement Foster sense of community Develop integration plan Digital experience that moves people

29. Common Mistakes • We underestimated the time commitment involved • We didn’t test our campaign sufficiently • We launched before we were ready • We didn’t develop an accurate budget • We didn’t consult legal counsel or professional providers • We didn’t account for taxes • We tried to do everything on a shoestring • We didn’t realize how important the video was • We didn’t understand liability exposure (eg. misrepresentation) and intellectual property • We had little to no traction so we gave up • We blamed it on the portal

30. PART 3: QUESTIONS AND ANSWERS

31. PART 3: QUESTIONS AND ANSWERS Booth #135Booth #135

32. Join Us Education & Research Market Access Crowdfunding Infrastructure Capital Raising Prep Services Support and Leadership Advocacy GET IT IN TOUCH Canadian Crowdfunding Industry ncfacanada.org crowdfundingsummit.ca

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 ncfacanada.org.