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Get found in the crowd: start up financing

When you’re thinking about financing your start up, there is safety in numbers.

Crowds are often known for their mob-like behaviour, but they also possess wisdom when it comes to allocating funding resources to viable start ups.

Where an opportunity exists to deliver an innovative service or product, look to crowdfunding as a potential source of financing.

Crowdfunding is a fairly new phenomenon that has been ushered into the new economy through the broad connections available through the internet.

Where a start up previously had limited access to a large audience of interested investors, this is now literally a few clicks away.

In fact, an entire sector of the economy is exclusively dedicated to crowdfunding, which is encouraging for unorthodox or risky start ups that may not have been able previously to cast a wide enough net to capture an adequate source of funding. Basically, in a world of billions of internet users, the scale of the platform is its appeal: where else are you going to have literally thousands or millions of small-scale investors looking at your pitch?

The North American crowdfunding scene is looking up. According to the National Crowdfunding Association of Canada, North America is currently the largest crowdfunding market by volume. In 2014, crowdfunding platforms grew by 145% to reach almost $10 billion. Most of the action is in lending-based crowdfunding, with additional growth in equity-based and hybrid or royalty-based crowdfunding.

One caveat: the crowdfunding equity market in Canada has been slow to pick up steam, relative to global trends. Although equity crowdfunding has been available under Canadian securities laws since 2003, it is still not picking up as much traction as some would expect. Much of this may relate to a lack of investor awareness of the availability of equity crowdfunding, or it could simply be a conservative Canadian investment culture.

Two Canadian provinces (British Columbia and New Brunswick) offer tax credits that may be of some assistance to crowdfunding investors, in that they aim to reduce the risk of investment into venture deals.

You can seek crowdfunding via the two big boys on the block, Kickstarter and GoFundMe, but do consider broadening your scope. The sheer variety of players in this space means there can be a benefit to shopping around.

This video offers some pointers on how to exceed your fundraising goal using Kickstarter, while this article covers a case study on how to drive web traffic to your Indiegogo campaign (hint: marketing, marketing, marketing).

Here are some additional methods to keep in mind before you launch your crowdfunding campaign:

  • Bone up on your research – absorb and take notes of any and every crowdfunding success story that exists. Although there may not be much in common between your pitch and what you’re reading about, you can still learn a lot about what works and what doesn’t, and then apply the tactics and strategies to your own project.
  • Firm up your narrative – people love a great story behind a product. Rags to riches, eureka moments of inspiration, dogged determination, or just plain serendipity: the crowd wants to hear the tale of the tape.
  • Pictures tell a thousand product stories – make sure your product cleans up well on your crowdfunding landing page. Which takes us to a really important point…
  • MAKE A GOOD VIDEO TO SHOWCASE YOUR PITCH – if you want to generate buzz and viral interest in your pitch, the video portion of your landing page could be the make or break component.
  • Spread the word – use every network you have at your disposal (friends, family, workplace, and social media) to make people aware that you’ve launched a crowdfunding initiative.

So where’s your best bet for crowdfunding opportunities? If you think you’re ready to take your start up to the crowd, be sure to check out this helpful directory of Canadian crowdfunding opportunities for a thorough overview of the opportunities that exist.

October 8, 2015

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