Category Archives: NCFA In The News
Crowdfunding 101
Now that seven provinces (B.C., Sask., Man., Ont., Que., N.S. and N.B.) have legalized crowdfunding for businesses – which involves collecting small contributions from a large group of people – Canadian entrepreneurs have amassed between $250 million and $300 million in the last year alone to start up and scale up their businesses.
But successful crowdfunding is not just about posting a pitch on Facebook and expecting the cash to roll in. Craig Asano, founder and CEO of the National Crowdfunding Association of Canada (NCFA), offers some tips and tools for launching a winning campaign.
Choose your model
There are many types of crowdfunding, but for entrepreneurs, there are really only two models: investment/equity and donation/rewards.
Investment/equity models allow an investor to either buy shares or securities in your venture, or to receive a profit from your product. The equity option is the most successful, according to the NCFA, but tends to work better for established companies looking to expand, rather than bootstrapping startups.
The donation/rewards model, on the other hand, allows people to give money without getting anything in return – other than rewards in the form of whatever the company is selling or providing (e.g., their name on a funders plaque, a free meal at the restaurant, etc.). This model works best for raising capital for a specific product or idea.
Plan, prepare and promote
“You wouldn’t go to market without a strategic plan,” says Asano, who recommends spending up to three months preparing your crowdfunding campaign, adding that you need a good value proposition to present to your customers or investors.
Present your project clearly – have a prototype, if appropriate – so potential donors are confident your venture is on solid ground.
To reach the maximum amount of potential investors, says Asano, you should already have a following, online and off – preferably made up of people who will care about your idea. Use social media, attend networking events, and let your family and friends (and friends of friends) in on your venture. If you can attract media attention, all the better. Research other successful (and failed) campaigns to see what worked, what didn’t and why.
See: Learn all about the latest innovation finance models in venture funding: VanFUNDING Nov 28, Vancouver
And once your campaign is launched, keep your donors or investors in the loop about its progress.
Tell a story
To boost your crowdfunding campaign’s potential for success, create an emotional connection between you, your idea and your supporters. Use video, photos and narration to tell a compelling story about why you want to launch your business or product, or grow your company. Two of the most popular crowdfunding portals, Indiegogo (for entrepreneurs) and Kickstarter (for creative projects), walk you through the process and provide online support, as do other platforms, such as Canadian companies Seedlify and FrontFundr.
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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both investment and social crowdfunding, blockchain ICO, alternative finance, fintech, P2P and online investing stakeholders across the country. NCFA Canada provides education, research, leadership, support, and networking opportunities to over 1600+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a vibrant and innovative online financing industry in Canada. Learn more About Us or visit ncfacanada.org.
Five common options for financing your small business
Financial Post | Danny Bradbury | Oct 10, 2017
Which method you choose depends on your company's current situation and its goals
For most small businesses, financing can be a challenge. Whether you need bridge capital to keep the business running in tough times, or structured debt for long-term growth, it pays to have a strategy for seeking out those elusive financing dollars. Statistics Canada found that just over half (51.3 per cent) of businesses requested external financing in 2014.
Equity-based financing options like venture capital often make the headlines, but less than one per cent of small businesses requested this in 2014. Debt-based financing is far more common, as is trade credit from suppliers.
Here are five financing options to turn to, depending on the type of small business you run, and its situation.
Bootstrapping
Funding yourself is a long-established and responsible way to get a small business off the ground. Bootstrappers are risk takers but also lateral thinkers. Rather than saddling themselves with debt or giving up ownership of their small company, they will use their own savings and potentially sell some assets to help finance their business in the early days.
Bootstrappers may work a side gig until they are confident that their new business idea has the legs to stand on its own. They may pre-sell products and services to help fund early-stage development. The successful ones cleave to one overarching principle: get to revenue quickly. If you’re going to bootstrap your company, the only thing that counts is the sale.
Small business loan
A small business loan is the most traditional route for those taking a debt-based approach to small business financing. Banks are often a first port of call, although they are naturally conservative, and they understand the higher risk involved with smaller operations that may have little to no credit history or collateral. This can make bank loans difficult to secure and could drive businesses toward such alternative lenders as OnDeck. Always ensure you understand the exact terms – and your payment commitments – before agreeing to a loan.
In Canada, another option is the government’s Small Business Financing Program, which provides up to $1 million in financing for purchasing or improving land, property or equipment. There are limitations though: working capital, inventory, labour and advertising are all excluded under this initiative.
Friends and family
If conditions from a financial institution are not to your liking, you could always borrow money from the Bank of Mom & Dad. Friends and family funding is a common way for small, high-growth businesses to get started, but it comes with some baggage.
See: Subscribe to NCFA's Weekly Newsletter and Stay Informed
It’s easy for money issues to cloud personal relationships, so small business people pursuing friends and family financing must be careful not to let emotion get in the way. Set out clear expectations around loan terms, including a percentage and payback date. Just because you were raised by those doing the lending doesn’t mean you can do away with legal advice. It keeps everyone on the same page.
Angel investors
Small business owners willing to give up some equity can go in search of an angel investor. These full-or part-time investors put their own money into early-stage businesses, hoping for future return if they succeed.
You may give up part ownership of your company to these investors, but they often bring contacts and experience difficult to find elsewhere. It also means that you aren’t saddled with loan payments that can cripple your cash flow. AngelList connects investors with startups, while Canada’s National Angel Capital Organization has a directory of potential investors.
These investors suit entrepreneurs with high-growth businesses and a clear exit strategy. Would-be Mark Zuckerbergs should apply. Owners of family-run laundromats with no plans to take over the world should look elsewhere.
Crowdfunding
If your business idea is that good, why not spread it around? Crowdfunding is a growing financing model, with $133 million raised in 2015 alone, according to a report from the National Crowdfunding Association of Canada. Consumer-focused businesses with some digital element to their products or services tend to do well with this model.
See: VanFUNDING 2017 - NOV 28 Vancouver: Raise Funding for Your Business leveraging All the Latest Methods
You can crowdfund using two broad approaches: reward/donation-based models, or debt/equity funding. The former are unregulated outside of traditional consumer protection and business laws. Selling equity in the company or taking loans with some promise of payback will bring you under regulatory scrutiny, but is still possible in some regions.
The Government of Canada’s Canada Business Network says equity crowdfunding is currently an option in British Columbia, Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick and Nova Scotia. Conditions vary between provinces and depend on exactly how your crowdfunding process works.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Crowdfunding raises a roof: Tips for newbie Crowdfunders
Charity Village | Deborah Griffiths | Jun 28, 2017
How could an organization raise a roof for a beloved heritage home before the winter rains set in? A long-time nonprofit client of mine faced this question in spring of 2016.
The roof was going to cost $8,500. The organization had some funds put aside and needed $5,000. How could they gain this amount before winter? This was a modest amount to target and an excellent opportunity to explore crowdfunding and get the job done.
Crowdfunding has enormous potential for nonprofits. From a distance, it looks as though it could solve numerous challenges. But looking at it more closely, would the time and effort spent in learning this system outweigh the funds we gained?
On-the-ground fundraising requires steps, measures, reporting, acknowledgement, and transparent procedures for nonprofits. Would crowdfunding providers wrap those steps into their systems?
There are thousands of crowdfunding platforms from which to choose. How would we find the right one for this project and for future projects for the client?
Here’s how we began the search
We explored reviews from professional organizations and checked with colleagues who might already be using a platform to get their feedback. Few colleagues had tried crowdfunding.
We then checked-out crowdfunding associations: the US-based National Crowdfunding Association, the National Crowdfunding Association of Canada and the UK Crowdfunding Association. These sites discuss industry standards, best practices, and have excellent tutorials, current stat reports, and interviews.
Why go through this vetting?
Because any donor who is serious about clicking on “contribute” to invest in a project wants assurances that their information is secure. They also want to know that the organization would acknowledge the donation and use it as intended.
Our goal was to develop an enjoyable, long-term relationship with a platform that remains current, user-friendly and understands nonprofit business. The platform would have to offer solid payment privacy. Transparency, accountability and donor acknowledgement functions were necessary.
FundRazr
There are many quality platforms from which to choose. FundRazr, based in Vancouver, British Columbia, and launched in 2010 by CEO Daryl Hatton, seemed to be the right fit for the roof project.
FundRazr had established a partnership with PayPal early on and was one of the first platforms to set up a system that embeds into social media. You can link your updates and posts directly into that system and members and followers can spread the word through their communities. They have excellent information sheets, tips, and videos and a responsive support team and a Crowdfunding Success Guide. The set up was quick.
One other plus for FundRazr was their awareness of the benefits of grassroots partnering in rural communities. FundRazr’s collaboration with InvestLocalBC, started by Community Futures Stuart-Nechako, focuses on crowdfunding for community initiatives.
No matter what your location, take a look at how much the platform is putting back into the community, it might make a difference to you.
The campaign
We began the campaign on July 7 by sending out a lead-up article to newspapers about the history of the project and introducing the crowdfunding campaign.
We then edited that article down and distributed it through the society’s monthly e-newsletter with a link to the FundRazr campaign and to Facebook. Potential donors received the information and linked over to the FundRazr site.
We wrapped the tasks into daily operating and worked with the FundRazr team and site format to focus on the campaign and send out thank-yous.
By August 23, we had reached our goal and raised $5,262. The donations came from 32 contributors, all ages, with small and large contributions online and through checks and cash. The roof was up by October.
See: 10 tips for acing your crowdfunding campaign
How did we reach people? We took some advice from Daryl Hatton, CEO of FundRazr, who stressed the need for telling our story in a succinct way. Perhaps our story about the roof of a legacy heritage home needing repair evoked concern, hope, excitement and a willingness to give. Contributing to this simple project made things better and solved an urgent problem.
An interesting point in the campaign occurred when we supported another community crowdfunding effort in our e-news simultaneous to the Capes Roof project. We received positive feedback from this gesture and donations went up.
Connectivity, enjoyment, and social investment thrive in local and rural communities, perhaps because there’s latitude to make independent decisions, shape progress, and collaborate. From our experience, crowdfunding has many levels of opportunities for nonprofits and donors and is the perfect platform for expanding these connections.
A few newbie tips
Check with an accountant before you start. Stay current with information on tax sites to ensure that your campaign fits well within provincial and federal guidelines for donations and providing charitable tax receipts.
Try out a small feasible project first to get your bearings and to gauge what you might need for a larger campaign.
Review the fees that the crowdfunding service provider charges and make comparisons between platforms. Some platforms have monthly fees while others charge a flat rate, a portion of which goes to the provider and a smaller percentage to the payment system. Note that you could be paying out, on average, five percent of the donations to your provider. For my client, having an extended technology team from FundRazr made this a solid investment.
You may like: Crowdfunding best practices (articles database)
When you’re searching for a platform, ask the same questions donors would ask. How legitimate are you, how private will my information be?
Consider whether you have enough staff to crowdfund. The process requires some time to set up and, to be successful, you’ll need follow-through. If you work with a board and volunteers these people can join your “team.” Platforms like FundRazr have a format for connecting your team and followers.
Have a look at the campaigns the platform is already hosting. Find a few favorites, identify what aspects resonate with you and tailor them to your site. Use your best images for backgrounds and posting. FundRazr has the capacity to brand your crowdfunding site to match the branding on your home site.
Pin your project to the top of your Facebook page and provide share-worthy news about other subjects. This will lead people back to your information without overloading them with your campaign.
If you have incentives that you can provide to donors when they donate at a certain level, this can help. Some people just like to give, so incentives can be an option.
Be prepared.
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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 1500+ 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.
Detecting terrorism financing in crowdfunds poses ‘significant challenge’: Fintrac report
GlobalNews | | May 18, 2017
Canada’s money-laundering watchdog is studying the use of crowdfunding platforms by suspected terrorists and says in an internal study that the reporting protocol poses a “significant challenge” in trying to identify such transactions.
The Fintrac report, obtained by The Canadian Press through an Access to Information request, says there is a lack of information available in electronic fund transfer reports on contributors to crowdfunding campaigns.
Financial companies, money services businesses and casinos are legally required to submit the reports to Fintrac for cross-border, electronic transactions above $10,000.
That lack of information poses a problem for financial intelligence, “especially when trying to flag individuals supporting a crowdfunding campaign that may be suspected of being (terrorist financing)-related by an investigative authority,” Fintrac says in the November 2015 report.
See: Anti money-laundering watchdog assessing vulnerability of fintech startups
The federal agency said the reports typically don’t include information on contributors to crowdfunding campaigns because the amounts transferred tend to fall below the reporting threshold of $10,000.
“Terrorism financing and high-risk traveller cases, in particular, most often entail relatively small amounts of money,” spokeswoman Renee Bercier said in an email.
Daryl Hatton, founder of ConnectionPoint.com, a company that runs three crowdfunding websites, said they don’t have to submit funds transfer reports because that is the duty of the payment processors.
“The short answer is that crowdfunding platforms leverage the anti-money laundering systems of our payment processors,” Hatton said in an email.
“We add our own checks on the identities of the people running the fundraising campaigns but trust the much more sophisticated work our partners are doing in this area.”
Hatton said he has removed a “very small number” of campaigns over terrorism financing concerns. The decision to remove the campaigns was made in collaboration with payment processors and was done more as a precaution, he said.
Craig Asano, the executive director of the National Crowdfunding Association of Canada, said it’s important that there are mechanisms in place to detect such transactions.
See: In Crowdfunding, Who is Responsible for Preventing Fraud?
The Financial Action Task Force, an international organization that aims to combat money laundering and terrorist financing, flagged crowdfunding as an emerging terrorism-finance risk in a 2015 report.
The task force report said crowdfunding platforms are vulnerable to being exploited for illegal purposes because people can mask the true reason for their fundraising efforts.
It also said there have been instances in Canada where people under investigation for terrorism-related offences have used crowdfunding sites before leaving the country or attempting to leave the country, suggesting that they could be using that money to fight overseas. But details of those cases were not provided.
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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 1500+ 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.
What 10,000 Kickstarter projects reveal about Canada’s entrepreneurs
CBC | By Roberto Rocha | April 27, 2017
In the last six years, Canadians took nearly 10,000 shots at glory on crowdfunding site Kickstarter.
Only about a third succeeded.
But what are these projects? Which are the most successful? Are there big differences between the creative economies of every city?
Crowdfunding sites like Kickstarter, Indiegogo and FundRazr have changed how creative entrepreneurs fund their passions. No longer confined to traditional sources like banks and venture capital, anyone can get money for an idea provided they inspire enough people to cough up cash.
These sites enable people to donate money to fund a project, usually in return for a reward — for example, early access to a new product, a T-shirt or dinner with the creators. The more one gives, the juicier the reward.
The CBC looked at six years of Kickstarter projects with data provided by Web Robots and HiveWire, two firms that track crowdfunding sites. Only Kickstarter data was used, since it has the largest and most representative sample of Canadian crowdfunding projects.
See: Christopher Charlesworth, CEO and Co-founder of HiveWire, Joins NCFA's Advisory Board
More than half of all Canadian Kickstarter projects are concentrated in the three biggest cities.
It's generally known that Montreal is a hotbed of video game development, while Vancouver has a rich film scene. These are known industry facts, and the Kickstarter data confirms that bootstrapping creators in these cities also operate in these areas.
But some cities seem to flout stereotypes. Halifax, better known for its music, has more game-related projects than other categories.
Equal parts preparation and perspiration
Not all Kickstarter campaigns have the same shot at success. If you want good odds of making it, try funding a play or a comic book. These have the highest success rates: 60% of these types of projects reached their funding goals.
But if you want to fund a tech idea, the cards are strongly stacked against you. Of all the Canadian tech projects on Kickstarter, only about 20% got the money they asked for, making it the toughest category.
And if you don't reach your goal on Kickstarter, you don't see a cent of what users pledged.
SmartHalo, a multipurpose attachment for bikes, is an anomaly. Not only did the project reach its Kickstarter goal, it did it in 15 hours, and is one of the most successful recent projects based in Montreal.
It had a fundraising goal of $67,000. It raised nearly $540,000.
"Early adopters of technology know that's where innovation happens, on Kickstarter," said Xavier Peich, the business director of SmartHalo. "Getting something that no one else has, it's a compelling offer."
See: 5 Things You (Probably) Never Knew About Kickstarter
How Canada compares internationally
Canada is the third-biggest country on Kickstarter in terms of number of projects. Of the 301,000 projects analyzed, fewer than 10,000 were Canadian, compared to 245,00 in the U.S. and 25,000 in Britain.
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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 1500+ 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.
Crowdmatrix Helps Usher in Era of Equity Crowdfunding
Techvibes | Brenda Bouw | Jan 20, 2017
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 1500+ 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.
Jim Orlando’s 2016 Venture Capital predictions scorecard
Betakit | | Jan 4, 2017
Twelve months have flown by and it is time to look back at my Ten Canadian startup and venture capital predictions for 2016. A lot has happened in our ecosystem since this time last year, so it is interesting for me to look back at what was on my mind a year ago and see how my predictions stacked up.
Prediction #1: Deal Volume Would Increase Disproportionately For Early-Stage Startups
A year ago I thought there would be fewer larger investments in later-stage ventures in 2016 versus the previous year, resulting in proportionately more investments in early-stage ventures. A guesstimate using data from the CVCA shows that funding to early-stage companies increased by 30%, while funding to later-stage companies decreased by 5% (the overall funding during the year increased by 15%). For what it’s worth, the four new investments in 2016 here at OMERS Ventures (AmpMe, Nudge, and two unannounced investments) were all early-stage and pre-revenue.
Outcome: TRUE
Score: 1/1
Prediction #2: U.S. Investor Interest in Canadian Startups Would Increase
I felt that in 2016 U.S. investors would be even more interested in Canadian startups than in previous years, with a particular emphasis in late-stage investments. A review of CVCA data shows that foreign investment in Canadian startups increased by 15% in 2016 over 2015.
Outcome: TRUE
Score: 2/2
EARLY BIRD: SAVE 40% 2017 3rd Annual Canadian Crowdfiance Summit (Feb 28-Mar 1)
Prediction #3: 2016 Would Not be the Year for Tech IPOs
I wasn’t bullish on the potential for tech IPOs for 2016 and I was right. Stay tuned for 2017…
Outcome: TRUE
Score: 3/3
Prediction #4: More VC Firms Would Raise Larger Funds
With the Canadian VC industry continuing to mature, I predicted that some of the established VC firms would raise larger funds (> $150M) in 2016 versus 2015. Georgian ($485M) and iNovia ($175M) announced their funds in 2016. New funds from BDC Cleantech, VanEdge, and Yaletown were announced as well, but they were all just below the $150M threshold. The larger two compare against our one OMERS Ventures Fund 2 announcement ($260M) in 2015. Narrowly got this one!
Outcome: TRUE(ish)
Score: 3.5/4
Prediction #5: Equity Crowdfunding Would Take Hold in Canada
A year ago, I felt that the then-new equity crowdfunding rules would impact early-stage startups in 2016, similar to what has happened around the world. A mid-2016 report from the National Crowdfunding Association of Canada forecast a significant increase in crowdfunding capital for 2016. The numbers are still relatively small compared to the overall venture capital industry but the underlying trend is there.
Outcome: TRUE
Score: 4.5/5
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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 1500+ 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.
