Wisdom of the crowd: How crowdfunding platforms are kickstarting the Startup Generation

Financial Post  |  | Oct 15, 2013

Crowd 300x228 - Wisdom of the crowd: How crowdfunding platforms are kickstarting the Startup GenerationThalmic Labs and Pebble Technology are two young darlings of the North American start-up scene that both make products people strap on their arms. In Pebble’s case, one of the first commercial smartwatches; and from Thalmic Labs, a gesture-controller in an armband.

They also have another thing in common: both companies used crowdfunding platforms to take pre-orders for their first products and, in the process, raised their first serious capital as well — US$10.3-million for Palo Alto-based Pebble in 2012, $3.7-million for Waterloo’s Thalmic Labs earlier this year.

Pebble used the well-known Kickstarter service, while Thalmic built its own preorder system. Together, the two companies quickly came to stand as extreme examples of crowdfunding’s power to help the growing ranks of young entrepreneurs — in particular, the so-called Millennial generation of “digital natives” born between 1980 and 1995 — raise money to fuel their businesses and, potentially, attract investors.

A new Angus Reid survey has found that Millennials are increasingly shifting their career ambitions towards entrepreneurship.

The survey, conducted in August and commissioned by business and financial management solutions provider Intuit Canada, found that in the next 12 months, 16% of Millennials want to start their own business, compared to just 8% of Canadians as a whole.

“I think crowdfunding needs to be on every entrepreneur’s radar,” says Gideon Hayden, a 24-year-old former start-up founder who now works as an associate at OMERS Ventures, a large tech VC in Toronto.

Related:  Canadian Crowdfunding Platforms  and The rise of fat venture capital

Crowdfunding — the practice of funding a project or venture by raising small amounts of money from a large number of people — has grown in popularity since the launch of Kickstarter.com in 2009. Since then, more than two million people have pledged over $300-million projects proposed entrepreneurs, according to Crunchbase.

Still, Mr. Hayden is quick to point out that platforms like Kickstarter and the also popular Indiegogo are just a small part of the crowdfunding-for-entrepreneurs story.

“Kickstarter is good for specific things, hardware and products. But it’s essentially a pre-ordering system,” he says. It doesn’t offer much for startups without a product, nor does it hold out any promise of equity funding.

Not surprisingly, perhaps, Mr. Hayden sees crowdfunding’s biggest potential impact on the equity side. He singles out the AngelList platform, another called CircleUp, as well as the brand-new AngelList Syndicate, as the most “disruptive.”

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