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Crowdfunding - An introduction for entrepreneurs


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High-level presentation about crowdfunding - how it works, examples and best practices. For MNP LP, November 2013.

High-level presentation about crowdfunding - how it works, examples and best practices. For MNP LP, November 2013.

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  • 1. Crowdfunding A new approach to funding projects, passions and businesses MNP Table Topic November 19, 2013
  • 2. It can work. Big time.
  • 3. Or on a smaller scale 
  • 4. Today 1. Crowdfunding Basics 2. Who benefits from it today 3. Crowdfunding sites and examples 4. Types of business fundraising 5. Tax implications 6. What works, and what doesn’t 7. Homework: Let’s crowdsource ideas!
  • 5. Sounds great. What is it? “The collective effort of individuals who network and pool their money to support efforts initiated by other people or organizations.”
  • 6. Why now? Crowdfunded in 1884! 1. Internet and social media - networks of networks. Global reach. 2. SME’s can’t access risk capital. 3. Momentum and buzz - It works and can’t be stopped. Governments are getting onboard.
  • 7. How it works 1. A business or individual has an idea that needs funding 2. Creates and promotes a crowdfunding campaign online, sets target 3. Backers get a “reward” for contributions 4. Crowdfunding site takes about 10% of proceeds
  • 8. Who uses crowdfunding? Causes: Not for profits, education, fundraisers, disaster relief Creatives: Indie art, film, books, design... Product development: Technology products, food, pet toys...huge range Business growth financing: Typically SME.
  • 9. Kickstarter The leader. $800,000,000 raised for 50,000 projects from 4.8 million backers. Focus on creative projects: Art, books, photo, dance, technology, publishing. Now in Canada.
  • 10. Kickstarter – Product Development Campaign Project: Innovative coffee machine Need: Finance production run Goal: 135K
  • 11. Indiegogo: Local success story Pub Pedals: Turn clipless pedals into platforms Canmore’s Jeff Thom Great publicity and $8000 Rewards = Product Now shipping to 30 countries. Backers become customers and reps! Canmore’s Georgetown Inn!
  • 12. IndieGogo – Wild West?
  • 13. Fundly – Causes Largest site for causes. $300M + raised. Trips: Working on aid projects Events: Runs, walks, rides Charities Health and Medical
  • 14. Crowdfunding your Business Two non-equity models: 1. Donations 2. Rewards and pre-purchase
  • 15. Rewards • Offer rewards based on contribution levels. • 3 to 5 reward levels recommended, with one entry-level. • Tips: Don’t overspend. Be creative. Watch out for shipping costs. • Examples: – Handwritten thank you note or thank you video. – Merchandise: Branded t-shirt, etc. – Credit - album liner notes, film credit, packaging.
  • 16. Rewards
  • 17. Pre-purchase • Discount on product under development • Special editions of product • Influence the design • Often combined with non-product rewards Calgary company!
  • 18. Pre-purchase
  • 19. Business Financing: Crowdfunded Equity Access to private capital beyond personal network and banks. Today: US JOBS Act permits equity crowdfunding. Canada: Lagging behind. ON and SK developing frameworks. Legal only through OM exemption – complicated.
  • 20. Tax implications • No free lunch. If funds are used for a business, they may be taxable. • Keep great records. Money received, cost of rewards and any other costs associated with the campaign. • CRA is watching, or will be soon. Source – Devry Smith LLP
  • 21. Reality Check 65%+ of campaigns fail to reach their targets.
  • 22. What Works Define your project. Be specific. Tell a story – make a connection. –Make it personal –Make a compelling video Prime the pump: reach out to your personal network first. Get to 20% of target ASAP. Get social: A strong social media presence helps to reach beyond your personal network. Offer great rewards. Have and entry-level donation amount. Average is around $20.
  • 23. The Video This is the most important part of your campaign. Treat it that way. Quality counts. Ask for help. Rent or borrow a DSLR. Be brief. Attention spans are short. Max 3 minutes. Be clear. After 30 seconds, the viewer should know what your campaign is about. It’s not all about you. Make the ask.
  • 24. Great Videos
  • 25. Great Videos
  • 26. Go to video school – for free
  • 27. What Doesn’t Work Set it and forget it. • You need to be persistent, engage with your backers and spread the word. Reach out to media. No video: Cuts success rate by 70%. Unrealistic goals: Raise only what you need for that specific project. No rewards = no chance. Unless it’s a charity.
  • 28. Personal Checklist  Am I ready to work hard for the duration of the campaign?  Do I have a story, not just a product pitch?  Is my idea unique or interesting enough that a stranger would back it? Will people share it?  Can I deliver on my promises to my backers?  Can I handle the risk of rejection?
  • 29. More information
  • 30. Calgary & Crowdfunding Let’s crowdsource some ideas! Entrepreneurial Adventurous Generous, charitable Strong creative community
  • 31. Thank you! Jeremy Bernard 403-678-8513 Twitter: @legendmarket