The Globe and Mail | Sandi Gilbert | July 11, 2014

Equity crowdfunding, where companies offer equity in return for financial investment, is a new and relatively unchartered means for raising capital in Canada. It’s an attractive proposition – businesses capture a wider market of potential funding and investors get access to more interesting investment opportunities.

At SeedUps.ca, Canada’s first equity-based crowd-finance platform, we’re fielding hundreds of requests from startups and small businesses looking for a new way to raise money. While the crowd can be a powerful resource, there are also certain steps that a small business must undertake to raise capital:

1. Understand the basics. The term crowdfunding is tossed around, usually in reference to ‘contribution-based’ crowdfunding platforms like Indiegogo or Kickstarter where donors give money to support an idea they believe in and get a reward, perk or prototype in return. Equity-based crowdfunding, however, is where investors have the opportunity to invest in a business and receive equity. In other words, it’s about being an owner versus a donor.

2. Can you raise capital from the crowd? Not all companies are suited to raising capital via equity crowdfunding. You need a strong social following and a compelling story that is easily told through social media and video. Investors typically invest in companies they are interested in or have products or services they want to buy.

View:  Woody Harrelson's tree free paper company decides to use equity crowdfunding through optimize capital markets to raise $5MM as opposed to traditional sources of finance

3. Structure your capital raise. Create a three-year plan to determine your company’s capital requirements over the near term. How much money do you need to raise and should it be a combination of debt and equity. Surround yourself with advisors that can help you navigate through your options.

4. Get your house in order. Many small businesses interested in raising capital are unprepared. The crowdfunding platform and potential investors will ask tough questions about your business model. Get your minute book, corporate records, financial statements and other corporate governance records in order.

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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 About Us or contact us at casano@ncfacanada.org.