Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Category Archives: Fintech Opinions
Crowdfunding – Bridging the rural/urban economic divide
Legend Marketing | By Jeremy Bernard (Guest Post from rural Canmore, Alberta) | September 27, 2013
On Tuesday I was given the opportunity to do a one hour workshop for Canmore businesses. My theme was “Crowdfunding - A new approach to funding projects, passions and businesses”. This turned out to be a hot topic, and the event sold out quickly.
This got me thinking about what was driving the level of interest. If you are lucky enough to live in Canmore, you know that this is an energetic town with a real entrepreneurial spirit. From amazing artists and craftspeople to tech gurus, this place is full of talented, driven people. There are some great local business success stories like Buff Canada (Don’t know what a Buff is? Just buy one. Seriously.) and cool tech companies, with potential for more. However, sometimes a business needs cash to get started or to take advantage of a new opportunity. Unfortunately, it has become difficult to raise risk capital anywhere in Canada and this is particularly true in small towns and rural areas. Even though Canmore is just one hour from Calgary, entrepreneurs here don’t have the same access to private investors, angel networks, venture capitalists and business accelerators. It’s hard enough to raise capital in urban centres, much less small-town Alberta.
And that’s where crowdfunding comes in. If you have a great idea and can tell your story effectively, it doesn’t matter if you live in Toronto, Silicon Valley or Medecine Hat; you’ve got a shot at success. With crowdfunding, you don’t need to land that one big investor. You can raise a significant amount of money through small investments from a large number of supporters. Through social media networking, you can reach potential backers across the country and around the world.
We are already seeing local success stories. Check out Pub Pedals from here in Canmore, now shipping an awesome product to more than 30 countries after raising $8000 and a legion of fans via an Indiegogo campaign.
I believe that as sites like Indiegogo and Kickstarter become household brands and provinces begin allowing equity crowdfunding (the US is doing it – let’s go Canada!), we will see crowdfunding become an enabler for rural economic diversification and growth. Don’t get me wrong – geography still matters. When Pebble raised $10,000,000 on Kickstarter to build a smart watch, it probably didn’t hurt that they were based in Silicon Valley. Your personal network and local support counts, even with the global reach of crowdfunding platforms and social media channels. However, by putting together a great campaign you can grow an audience of supporters from anywhere you park your laptop. Don’t let your location be a barrier to taking on the world.
Related: Canadian Crowdfunding Directory
10 tips for crowdfunding success:
- Define your project. Be specific. People need to know what you want to do and what they are supporting.
- Make a personal connection. You’re not just selling a project or business idea, you are selling your story.
- Make a compelling video. It doesn’t have to be professional, but put some thought into it. Get across the key elements of your campaign – what, why, how much, when and why you. Talk about your rewards. If you don’t make a video, your chance of success will drop massively.
- Prime the pump. Reach out to your personal network first. Get to 20% of target ASAP.
- Get social. A strong social media presence helps you to reach beyond your personal network. Twitter and Facebook are key promotional tools in most crowdfunding platforms, and don’t forget LinkedIn.
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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.
Crowdfunding Will Flourish Regardless Of What The SEC Does
Forbes | Alan McGlade, Contributor | Sept 18, 2013
A year and a half ago congress passed the JOBS Act (Jumpstart Our BusinessStart-ups) by an overwhelming margin. It was meant to supplant laws that are nearly eight decades old that limit the ability to invest in start-ups and small businesses to banks and wealthy individuals. At the signing ceremony President Obama said, “For the first time, ordinary Americans will be able to go online and invest in the entrepreneurs that they believe in.
The wheels of the federal government turned ever so slowly and now a key provision of the JOBS Act will finally fall into place. The SEC has lifted the ban on General Solicitation which means that companies can publicly advertise their fundraising efforts to accredited (high net worth) investors. It is expected that later this year the SEC will publish rules allowing non-accredited investors to participate as well.
Fred Wilson, a New York Venture Capitalist, registered his displeasure with the new rules in a recent blog post. He said, “If the SEC’s intention, with these proposed additional rules, is to neuter General Solicitation to the point that it is legal but nobody avails themselves of it, they will succeed.” In addition to precluding non-accredited investors, the SEC imposes a 15 day filing period before a company initiates its fundraising process, a formal filing of all marketing materials as they are updated, and penalties for rules violations that Fred views as non-starters.
He has a point but here are several reasons why in the end, it won’t matter. Crowdfunding, like so many new consumer behaviors spawned by the Internet, has significant organic momentum. Over a decade ago Napster enabled music fans to engage in the large scale sharing of digital music files. The music industry had no intention of giving up their CD business and used the laws on the books to try to beat back illegal music distribution. A decade later, like it or not, music companies are all in the digital music business.
Popular ideas find a way to navigate around established barriers. Kickstarter and Indiegogo pioneered the idea of donation-based funding, soliciting money in exchange for products, or rewards rather than an ownership stake. The Lending Club, Prosper, CircleUp and others have already built substantial businesses applying SEC work-arounds; using broker dealers and limiting participation to accredited investors as an interim solution.
Some forward looking state governments have decided not to wait for federal rulemaking and opened up alternative financing options for businesses and investors that reside within their state. Kansas, the first state to enact laws requiring the registration of sales of securities to the general public 100 years ago, turned out to be the first in the U.S. to enact an “intrastate” equity crowdfunding law. It was put in place by the Securities Commissioner of Kansas and essentially exempted sales of securities from state registration to an unlimited number of non-accredited investors.
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Related:
Bloomberg Businessweek: Kansas and Georgia Beat the SEC on Crowdfunding Rules. Now Others Are Trying
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.
Startup Advice on Crowdfunding from Duncan, Director of TMT Research, Deloitte Canada
Polytude | Duncan Stewart, Director of TMT Research, Deloitte Canada | Sept 18, 2013
Duncan Stewart is a tech sage. He is the co-author of Deloitte’s renowned annual TMT Predictions, which is a forecast of trends in the technology, media and telecommunications sectors. He and his colleagues boast an 80% accuracy rate. Let’s just say, he ain’t your local weatherman. John Kenneth Galbraith famously declared, “The only function of economic forecasting is to make astrology look respectable.” I love that. But he never met Duncan Stewart. In part 1 of this 2-part series on my chat with Duncan, he shares his insights on crowdfunding in Canada. You can follow Duncan on Twitter here.
“The reason people are primarily doing crowdfunding is social good – that feeling of helping an entrepreneur build something that wouldn’t otherwise exist.”
Crowdfunding is VC kryptonite: while, “equity-based crowdfunding seems to make the most sense in earlier rounds – the seed financing rounds… having ignored traditional VCs in your earlier rounds, going back to them when you have a thousand shareholders is extremely difficult.”
Crowdfunding makes you the fat kid at the party: “Most companies stay private as long as possible because being public is extremely cumbersome… having thousands of shareholders makes for a less nimble corporate structure and nimbleness is one of the things that’s really important for early-stage companies.”
Double down of equity-based crowdfunding at your own peril: the Ontario Securities Commission has made it “relatively clear that [it] is approaching crowdfunding as you or I would approach a rattlesnake… their disposition is to be as careful with crowdfunding as possible.” Incidentally, I was at a presentation on Canadian crowdfunding regulation a few months ago, where Jim Turner, Vice-Chair of the OSC, clearly established that they believe the potential for abuse and fraud is so high that extreme caution is necessary.
The reward-based model ain’t so hot either: “84% of all reward-based crowdfunding projects run late… Because of the delay and also because of the disillusionment created by the gap between the vision of what you see on your computer screen and reality, there are very few advantages to buying a product on a crowdfunding website.” Duncan and his team are predicting a slower pace of growth in reward-based crowdfunding than other forecasters because, “the population of people who are willing and predisposed to support crowdfunding is almost certainly around 1-3%, and if those 1-3% become disillusioned and there’s no repeat business, there is no viral, geometric growth.”
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How Bluetooth LE And Crowdfunding Are Accelerating The Connected Hardware Boom
TechCrunch | By Natasha Lomas | Posted Sep 15, 2013
It’s one trend that’s been hard to miss, being mostly clipped and/or strapped in plain sight. To spell it out, hardware startups — and the devices they’re making — are having a moment, thanks in major part to crowdfunding websites providing the funding bridge between a promising prototype and the cost of manufacturing a shipping product.
Fuelled by crowdfunding, hardware startups are hard at work extending the capabilities of mobile devices – the phones and tablets that have otherwise become boringly alike – and building out the long anticipated Internet of Things in the process. In case you haven’t noticed, this network of connected objects is beginning to materialise around us, piece by Bluetooth-connected piece.
Startup accelerators are also increasingly getting in on the connected hardware action, with a number of dedicated hardware hothouses cropping up, such as recent entrant High Tech XL in the Netherlands (in the midst of accepting applications for its first cohort).
High-profile accelerators such as Y Combinator have also been taking more of an interest in the hard stuff – with the likes of Lockitron coming out of their program in recent years. Blogging about the rise of hardware last October YC’s Paul Graham suggested a confluence of factors are combining to make it easier to kick-start a hardware business:
There is no one single force driving this trend. Hardware does well on crowdfunding sites. The spread of tablets makes it possible to build new things controlled by and even incorporating them.Electric motors have improved. Wireless connectivity of various types can now be taken for granted. It’s getting more straightforward to get things manufactured. Arduinos, 3D printing, laser cutters, and more accessible CNC milling are making hardware easier to prototype. Retailers are less of a bottleneck as customers increasingly buy online.
One question I can answer is why hardware is suddenly cool. It always was cool. Physical things are great. They just haven’t been as great a way to start a rapidly growing business as software. But that rule may not be permanent. It’s not even that old; it only dates from about 1990. Maybe the advantage of software will turn out to have been temporary. Hackers love to build hardware, and customers love to buy it. So if the ease of shipping hardware even approached the ease of shipping software, we’d see a lot more hardware startups.
I would add that hardware can be much easier to conceptualise than software. Add in the tangibility of actually getting a physical thing in your hand in exchange for your hard-earned and convincing buyers to part with money isn’t such a hard sell as software can be (being still somewhat dogged by the notion that bits & bytes should be free).
The latest Silicon Valley accelerator to be bitten by the hardware bug is Tandem Capital. One out of every three to four of its intake over the next 12 to 18 months will be a hardware startup, Tandem’s Doug Renert tells TechCrunch – injecting an additional strand of physicality to its ‘muscle capital’ approach. The latter involves six to 12 months of in-house mentoring before graduates head off to raise outside capital — and hopefully keep on growing.
“Our plan is, at least for the next year, we’ll basically do one out of three to four companies in the hardware space now. That are tackling what we feel is disruptive – or have a disruptive business in a very large market,” he says.
Tandem’s new dedicated hardware arm will sit alongside its software program, although it is bringing in some additional expertise to staff out the hardware side. “We’ve brought in folks who can help on everything from the marketing, from the video to the [crowdfunding] campaign. All the way to the product design and the development, when it comes to the embedded software and the [connected] devices and so forth,” says Renert. “Six months ago we didn’t really have the capabilities.”
Tandem typically invests $200,000 apiece in six mobile startups at a time — and will soon be ramping up to six companies per quarter. Previously that effectively boiled down to app makers – graduates of past programs include Playhaven, BitRhymes, attassa and ZumoDrive – but up to a third of each intake going forward will be making some kind of device, in addition to building an app.
Bluetooth LE is allowing a new wave of physically minded startups to build devices that can fly for long enough to become disruptors.
Why is hardware hot right now? The hype around wearables and the quantified self/health tracking movement is certainly encouraging more device makers to get busy. But on an underlying technology level, it’s the next-gen low-power flavour of Bluetooth – Bluetooth Low Energy (or BLE) – that gets the credit as the enabler of this connected device boom.
BLE is allowing a new wave of physically minded startups to build devices that can fly for long enough to become disruptors. Older generations of Bluetooth were just too thirsty on the battery for that. BLE is a very different beast – one that allows makers to build interesting devices that can keep communicating for up to a year on a single charge (in some cases). And that’s a game changer. Add in ubiquitous smartphone ownership and it’s a perfect storm.
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Donation-Based Crowdfunding Sites: Kickstarter Vs. Indiegogo
Forbes | Chance Barnett | Sept 9, 2013
As a significant participant in the movement that helped create investment crowdfunding through JOBS Act legislation, and as the CEO of Crowdfunder, I’ve heard there’s some confusion out there about what crowdfunding means these days, what the different crowdfunding sites do, and who they are for.
To clear up any confusion, here’s some simple information about two popular donation-based crowdfunding sites, and updates on the state of the new world of investment crowdfunding.
2 Types Of Crowdfunding: Donation Vs. Investing
Kickstarter and Indiegogo, considered the two most popular donation-based crowdfunding sites, were founded in 2009 and 2007 respectively. They give people and creative projects the opportunity to raise money via online donations or pre-purchasing of products or experiences.
To be clear, these two crowdfunding platforms only support donation-based projects. They don’t allow contributors to become an investor or a shareholder, and do not qualify contributors as accredited investors to participate in any financial returns. On both Kickstarter and Indiegogo, project creators retain 100% control over their products and services.
If you want a broader view of the entire crowdfunding landscape, see this recent Forbes piece listing the Top 10 Crowdfunding Sites and what each does best.
It wasn’t until recently that the JOBS Act was enacted, giving backers the ability to invest online via investment crowdfunding. And while the Rulings for the JOBS Act are being implemented gradually, Title II of the JOBS Act has just passed a vote at the SEC which will allow companies to participate in general solicitation as of September 23rd this year, although only accredited investors will be able to invest.
Expect quite of bit of noise in the investment crowdfunding/accredited investing world as of September 23rd kickoff of Title II and the lift on the long time ban on general solicitation.
Sites like CircleUp, Crowdfunder.com, and AngelList are providing opportunities for investment crowdfunding (equity, convertible notes) and will likely participate in allowing select companies to generally solicit out on the web, with investment deals linked back to their accredited-investor-only investment environments online.
Donation-Based Crowdfunding On Kickstarter Vs. Indiegogo
Since its launch, Kickstarter has become one of the top players in the crowdfunding arena and has helped fund over 46,000 successful campaigns. Kickstarter credits their success on its strict qualification policy, project curating, and all-or-nothing funding policy.
Catering specifically toward creative, project-based campaigns, all projects submitted to Kickstarter must fit within one of the following categories: Art, Comics, Dance, Design, Fashion, Film, Food, Games, Music, Photography, Publishing, Technology, or Theater. Only users from the United States, Canada, or the United Kingdom may create projects, though anyone may donate.
Campaigns for personal interests, charities, or “fund-my-life” projects are not allowed, and projects that do not meet Kickstarter’s qualifications may be rejected.
So what campaigns work best on the Kickstarter platform? Any project that meets the above criteria and results in a specific product or service – such as projects that result in a new book, album, or independent film.
Some businesses have successfully used Kickstarter to fund expansion projects, develop new apps, and purchase new equipment. Successful projects set a reasonable goal, meet that goal within the first 30 to 40 days, and deliver all promised donation perks on time.
Kickstarter Stats (see their stats)
- Average crowdfunding campaign: $5,000
- Percentage of failed campaigns: 56%
According to Kickstarter, only 10% of projects end having received no pledges, while “81% of projects that raised more than 20% of their goal were successfully funded.” Projects may run for 60 days, though Kickstarter recommends setting a deadline for 30 days or less.
In terms of fees, Kickstarter applies a 5% fee for successfully funded projects, while failed projects incur no fees but are subject to an all-or-nothing policy- which is is exactly what it sounds like; if a project fails to meet its funding goal, none of the donation commitments made are actually processed. According to Kickstarter, this policy ensures a level of security for project creators and backers.
Meanwhile, Indiegogo has much looser guidelines. They essentially allow for the crowdfunding of anything – projects, trips, charities, and personal wishes. Unlike Kickstarter, Indiegogo does not curate campaigns or place restrictions on project creators. Anyone with an idea, a financial need, and a valid bank account may create a campaign. Indiegogo also offers more choices when it comes to raising funds by offering Fixed Funding and Flexible Funding campaigns.
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Crowd-funding: Can mass appeal translate into street smarts?
Globe and Mail by Tim Shufelt | September 5, 2013
Securities regulators in Canada and the United States are considering endorsing crowd-funding, an unsettling prospect to anyone who thinks crowds are more inclined to generate popular lunacies than collective wisdom.
Crowd-funding has arisen as a possible alternative form of raising funds in Canada for companies forsaken by venture capital.
Websites such as Kickstarter that solicit online donations to meet fundraising goals for specific projects are not currently allowed to issue equity. The Ontario Securities Commission said last month it was weighing an exemption to change that in Ontario. Equity crowd-funding would give emerging companies access to a new source of capital and investors the chance to bet on small private companies and start-ups.
The rationale behind raising capital from several small supporters relies on the judgment of the masses – a project or company is legitimized by the support of many ordinary investors. “That’s the power behind these platforms,” said John Wires, an adviser to the National Crowdfunding Association of Canada (NCFA Canada).
But Mr. Wires is also cognizant of the inherent risks of equity crowd-funding. “There is a lot to be said for the argument that the crowd is not wise enough. There is large exposure to the prospect of fraud.”
Nonetheless, there exists the need for something new. “There’s a gaping hole in Canada in terms of access to capital for small and medium-sized companies,” said Darrin Hopkins, a vice-president at Macquarie Private Wealth in Calgary, who, despite his opposition to crowd-funding, acknowledges the severity of the funding gap. “Right now, the public venture capital market in Canada is completely broken.”
NCFA Canada points out that investment in Canadian start-ups by venture capitalists, which hit almost $6-billion in 2000, fell 80 per cent over the following decade. Meanwhile, the costs of tapping public markets are prohibitive in Canada, where even a boilerplate prospectus costs six figures.
The U.S. Congress was an uncharacteristic catalyst for change when, last year, it mandated the Securities and Exchange Commission to legalize the issuance of equity without a prospectus to non-accredited investors. This legislation was to usher in a new way to connect entrepreneurs and investors – a model of raising capital for the digital age, its supporters claimed.
Critics foresee only the opportunity for investors to get fleeced. As it is, issuing equity requires meeting a demanding and expensive set of disclosure requirements, giving investors access to reams of information with which to weigh a company’s investment potential. And still they get it wrong, Mr. Hopkins said. Sophisticated investors lose money all the time. Even outright fraud can escape the scrutiny of investors, analysts and auditors.
“If you move to the other extreme where you have a private company raising money on one of these portals, you’ve got an unregulated administrator, a private company with no disclosure, and you’re selling it to the least sophisticated investor there is,” Mr. Hopkins said. “It’s naive to think you’re not going to have a ton of problems.”
But the mere absence of a prospectus does not automatically increase the risk of abuse, said Anita Anand, a law professor at the University of Toronto. In fact, she cited one study of funded Kickstarter projects that found a lower incidence of fraud than among traditional IPOs. Of course, the risks can never be eliminated, she said. “But it’s not the case that all capital markets activity has to stop until we figure out what to do about fraud.”
It’s possible to mitigate the risks, Prof. Anand said, through the right regulatory regime: minimum disclosure requirements, regulation of the crowd-funding portals and at least a temporary cap on the amount a single investor is allowed to commit per year.
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The Changing Role Of Crowdfunding Platforms In The Hardware Ecosystem
Forbes | Rakesh Sharma, Contributor | Sep 4, 2013
Going by numbers alone, hardware projects should be a win-win proposition for both entrepreneurs and Crowdfunding platforms. Seven of the top ten most-funded projects on Indiegogo, a popular crowdfunding platform, are hardware projects. Cumulatively, they account for 83 percent of the total funding (a number that exceeds $2 million) garnered by such projects. Kickstarter, which is arguably the most popular crowdfunding platform today, has a similar story: hardware projects regularly rank amongst the most-funded projects across multiple categories on the site.
The funding amounts reflect enthusiasm from communities on such sites to participate in an entrepreneur’s dream. However, delays in delivery (and outright failures, in some cases) are sullying that dream. According to research conducted last year, approximately 85 percent of hardware projects funded through Kickstarter failed to deliver finished products. In other words, only 15 percent of total hardware projects are successful.
Even among projects that have successfully delivered to their backers, delays are common. Pebble and Ouya may be the most prominent examples; however, based on conversations with several hardware entrepreneurs, it seems to me that delays are the norm rather than the exception. In turn, such problems have resulted in negative publicity for crowdfunding platforms.
A Problem Of Identities And Expectations
The problems for hardware projects on crowdfunding sites are multi-layered and range from manufacturing processes to delays in delivery due to supply chain issues. Mostly, though, they are a case of misplaced expectations.
In their function, crowdfunding platforms closely correspond to the forecasting stage of a manufacturing supply chain. This is because estimates made while planning for a crowdfunding campaign define corresponding funding goals and subsequent timelines.
In their role, however, crowdfunding campaigns resemble venture capitalists. They provide capital to entrepreneurs through a community of backers. Unlike venture capitalists, however, these backers do not ask for a stake. Instead, entrepreneurs reward them with finished products or thank you notes. The ambiguous nature of a backer’s role (combined with the crowdfunding platform’s function which requires an entrepreneur to accurately forecast requirements and funding for their product) feeds into confusion over the timeline and nature of this reward.
According to several entrepreneurs, backers often confuse the crowdfunding platforms for online stores. “They (backers) expect a finished product delivery within two weeks just like Amazon,” says Michael Topolovac, two-time hardware entrepreneur. Topolovac was referring to communication with some backers from his latest crowdfunding campaign.
Do Backers Need To Reset Their Expectations?
Although they are technically not responsible for product delivery, crowdfunding platforms *are*responsible for vetting projects. By accepting commissions to host projects on their platform, such sites implicitly share responsibility for success (or, failure) of campaigns. A large number of failures, thus, negatively affects their ability to attract good projects and communities.
An employee of a popular crowdfunding platform told me that backers need to reset their expectations while funding projects on their platform. “Part of the value that backers get is access to the creative process behind these products,” he says. Their platform, according to him, is not philanthropy nor is it a store.
Associating themselves with a creative process and dissociating responsibility from the product delivery process is thoughtful (and, smart) marketing by crowdfunding platforms. However, the creation process holds value only under certain circumstances. For example, it holds value when the product is a work of art or innovative (that cannot be replicated) or related to an iconic brand (such as Apple AAPL +2.07%). In other words, the intent behind backing a hardware project is as much about altruism as about collecting unique artifacts.
Crowdfunding platforms attract communities of backers when they host a large (and successful) number of such products. For example, Kickstarter is a successful site because it has a large and dedicated community willing to fund projects and not vice versa.
