Oct 25, 2016, I delivered an hour Crowdfunding 101+ workshop at the 2016 Small Business Forum at the Metro Toronto Convention Center. This is an annual trade show hosted by Enterprise Toronto that attracts thousands of small businesses each year looking for funding, mentorship, tools, products and services to help them launch and grow. The presentation provides an overview of Crowdfunding markets, both regulated and non-regulated, case studies, deal characteristics to help startups and scaleups understand if Crowdfinance is right for their business. The deck also provides some insight into practical keys to success with planning, executing and following up on a crowdfunding campaign or investment round.
2. OUR AGENDA
2016 Small Business Forum: Enterprise Toronto
PART 1: CROWDFUNDING OVERVIEW
• What is Crowdfunding and why is it a game changer?
• Crowdfunding examples and market growth
• Is Crowdfunding right for me? Pros/cons for SMEs
PART 2: PRACTICAL KEYS TO SUCCESS
• Pre-Planning and Strategy
• Executing a Campaign
• Post-Campaign
• Common mistakes
PART 3: Q&A (15mins)
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NCFA @2016 Small Business Forum
National Crowdfunding Association of Canada
1500 Subscribers
3200+ Followers
1300+ Members
90+ Platforms
20+ Providers
45 Portals
2016
2015
2014
2013
Oct 2012
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NCFA @2016 Small Business Forum
Part 1: CROWDFUNDING OVERVIEW
1. Seeking Capital
• Online marketplaces that
connect companies to investors
• Consultants (social media,
marketing, advisory services)
2. Funding Portal & Enablers 3. Investors
Retail or
Accredited
Individuals or organizations
seeking funding
Definition
Raising capital online to fund all sorts of projects and
ventures such as startups and scaleups
(using the internet, social media and technology)
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Crowdfunding Part of the Capital Stack
Crowdfunding isn’t a stand alone funding source.
Crowdfinance includes retail, angels and VC participation too
One big difference…Crowdfunding platforms are evolving & can scale
– Chance Barnett, CEO of Crowdfunder
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NCFA @2016 Small Business Forum
Crowdfunding Case Studies
Source: Kickstarter Campaign page
1. Innovation and Economic Growth
Pebble Smart Watch (Great Canadian success)
• Goal was $100K; Viral success preselling
69,000 watches raising over $10 million on
US portal Kickstarter
• Owner and Waterloo Engineering student,
Eric Migicovsky, started company in U.S.
Oculus Rift – Potential for Equity
• Raised $2.4 million (goal was $250K)
• Crowdfunding as an economic generator
and on-boarding ramp to follow-on
investment
• March 25th news report Oculus was just
bought by Facebook for $2 billion
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Crowdfunding Case Studies
2. Community Development in Canada
Invest YYC, Calgary, Alberta
• Platform: InvestYYC (www.investyyc.com)
• Launched Jan 2013
• Funds raised $650,000 across 47 projects
• Average raise $13,892
3. New Product Development & Marketing
“Coolest Cooler”, Portland, Oregon
• Platform: Kickstarter
• Launched Jan 2014
• Goal was $50K; raised over $13 million from
over 62,000 backers
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NCFA @2016 Small Business Forum
Global Growth in 2014 ($13.2 billion)
Past
Prediction
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NCFA @2016 Small Business Forum
$36
Billion
USD
Source: Cambridge
University and Nesta UK
• World Bank Forecasts worldwide $96 billion annually by 2025
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• Growing market but small
compared to the US
• Impact of Canadian banking
oligopoly
$200
Million
USD
Source: Cambridge
University and Nesta UK
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NCFA Canadian Crowdfunding Directory
Reward/Donation:
Equity-based via Dealer:
• Steady growth in portals
• Equity and Debt emerging
• Fintech is all the rage
• Real estate crowdfunding emerging
Consumer and
Small Business Loans:
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Basic Crowdfunding Models
< $10K $10 - $250K < $100 - $350K+ < $250K - $3M+
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NCFA @2016 Small Business Forum
Regulated vs. Unregulated Markets
< $10K $10 - $250K < $100 - $350K+ < $250K - $3M+
RegulatedUnregulated
• Not issuing a security
• Portals, transactions and
participation is global
• DIY approach to raising capital
from an online community
• Early seed stage type funding or
community capital
• Platform fees range from 0% - 9%
• Regulated by provincial securities
commission and other regulatory
bodies
• Many financing ‘exemptions’ or
tools can be used, some have caps
• Work with licensed Dealer-brokers
(gatekeepers)
• Fees are higher than unregulated
(success fee, listing, carried interest
management fee)
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NCFA @2016 Small Business Forum
• Wide distribution over the internet
• Low cost, efficient, transparent capital
• The `great equalizer`
• Media/PR, awareness
• Increase customer engagement and
• Evangelize backers into investors
(customer acquisition)
• Reduce risk by getting feedback on
new launches (product or ventures)
• Market research
Access to Capital
Marketing Platform
Validation
• Raising funds via crowdfunding markets is a
very public and transparent
• Protect your IP and speak to a lawyer
• Crowdfunding takes a lot of effort and
commitment
• The majority of Ideas fail to reach their
funding goal
• How will this affect your companies
brand?
Expose your Idea
Resourcing
Failure
Crowdfunding Pros/Cons
Benefits Risks
For Companies
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NCFA @2016 Small Business Forum
Seedrs Portfolio Analysis (253 deals mid 2012 - 2015)
Most popular category (of total 15):
• Food & Beverage (11%)
• Finance & Payments (11%)
• Travel, Leisure & Sport (10%)
Investors Returns
• Platform Investors IRR 14.44% (Tax relief adj 41.87%)
• Investors with 20+ investments outperformed overall market
Is Crowdfunding Right for Our Business?
40% Digital Business 40% Hybrid20% Non-digital
60% B2C Businesses 10%20% B2B
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NCFA @2016 Small Business Forum
Trends in Crowdfinance & FinTech
• Crowd is Growing more Liquidity: Syndication of investment opportunities
(retail, accredited, angels, VCs, institutions)
• FinTech Innovation: Improving transparency and removing information barriers
that exist in private markets, data driven. Blockchain, ICOs, smart contracts
• Regulations are opening up (OSC LaunchPad – Innovation Sandbox)
• Companies are staying private longer (rather than going public)
20. PART 2: PRACTICAL KEYS TO SUCCESS
“The harder I work, the luckier I get”
Samuel Goldwyn
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Crowdfunding Lifecycle
Planning & Strategy
• The greater your planning efforts, the
greater your chance of achieving your
funding goal
• Do not launch a crowdfunding
campaign if you are not ready.
(3 months)
(40 days – 90 days)
(Ongoing)
Post-campaign
• Your campaign is done but now you have to
deliver on your promise
• Fulfillment
• Ongoing customer engagement
Campaign Execution
• Daily execution of tasks outlined in the
campaign plan
• Control, monitor and adapt
Feedback
Loop
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Success Factors
SUCCESS
2. Network Strength
• Sizeable online network and
social media presence?
• Will media/PR and influential
bloggers cover your story?
1. Quality Idea & Pitch
• Unique, enterprising and clear value proposition
(conveyed online in a simple manner)
• Get others excited about your story?
• Clear funding target and specific goals?
4. Key Docs
and Content
• Compliant and
necessary for investor
review
3. Strong Committed Team
• Is your team credible, committed and
willing to deploy the resources and
time to execute effectively?
• Time management
HARD WORK!
5. Marketing
Campaign &
Incentives
• Planning and strategy
with ability to execute
through launch to post
campaign
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• Build your crowd before
you launch
• Recommend content
generation and social media
workshops
• Develop an online strategy for
your business
• Start with internal networks
• PR Push: Build rapport with
media folks, journalists and
bloggers
• Attend industry networking
and community building
events to grow your crowd
• Evaluate your internal networks
social reach to forecast a
realistic ‘Funding Target’ based
on conversion rates (i.e., 2%)
• Prime your network before you
launch (reach out, engage)
• 20-30% of your campaign funding
will come from your internal
‘friends and family’ network
• Understand the difference
between ‘Keep what you Raise’ vs
‘All or Nothing’ funding types
Low Mid High
Planning & Strategy
Assess the Strength of Your Network
and Establish Realistic Funding Target
24. Funding Lead
Strategy, resourcing, fulfillment
Build Your
Funding Team
Team Strength?
Content & Media Manager
Key message, content distribution,
channel selection, engagement
Compelling Spokesperson
Spokesperson, media engagements
NCFA @Money Forum
• Is your Team 100%
Committed and credible?
• Do you have family and
friends that can support?
• Outsource?
Legal, Accounting and
Compliance
Documents, resumes, valuations,
trademarks/patents, incorporation etc.
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Equity Planning & Strategy
• Key Milestones that impact business valuations
• Minimum capital required to reach each stone?
• What securities will you offer in which jurisdictions?
• Funding platform you want to work with?
Solid Capital Raising Plan
• Business plan, portal compliance, financial statements
• Investor term sheet, subscription agreement, pitch deck
• Video, prepared PR releases, email responses etc.
Prepare Key Documents (offline / online)
• Identify potential investors, prime the pump, range
investor potential to commit
• Network, keep all doors and opportunities, road show,
leverage PR/media, do not just rely on portal
• Treat everyone you deal with, with respect
Prepare for Outreach Campaign
• Have them review to ensure compliance and credibility
• All documents, offline and online and remediate where
necessary
Contact Legal and Other Professionals
Getting Ready for an Equity
Crowdfunding Raise
26. Planning & Strategy
Not everyone needs a reward
Altruism, especially for donation-based
Reward
Considerations
Budget and timing
Rewards cost money (shipping fees!)
Bundle rewards
Group rewards together
Special – Scarce, Creative, VIP
Limited quantity, unique experience
Leverage in-kind from partners
Use good will from donated contributions
Types of Rewards
Product
Social
Experiences
Financial
»
Services
VIP Access
Add/update New Rewards
Test market and iterate!
27. Targeting your
networks
Marketing campaign
Engaging with your
networks and prospects
Reaching out to media and
bloggers
Asking networks to:
1. Learn about the project
2. Share
3. Invest
4. Champion / help promote
5. Support / volunteer
Constantly monitor with
analytics
Are contributions
happening?
Make changes
Daily Task List Online & Offline Feedback Loop
Campaign Execution
NCFA @Money Forum
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Post Campaign
Thank You Messages
Thank you team and
backers/investors
Positive
Reinforcement
Contributed to
success of project
Fulfillment
Deliver on your
promise
Start to fulfil rewards
right away
Manage expectations
Transparency
Equity
Considerations
Shareholder Register
Company Minutes
Annual reporting
requirements to
shareholders
Nurture New
Relationships
Ongoing
communications and
engagement
Foster sense of
community
Develop integration
plan
Digital experience
that moves people
29. Common Mistakes
• We underestimated the time commitment involved
• We didn’t test our campaign sufficiently
• We launched before we were ready
• We didn’t develop an accurate budget
• We didn’t consult legal counsel or professional providers
• We didn’t account for taxes
• We tried to do everything on a shoestring
• We didn’t realize how important the video was
• We didn’t understand liability exposure (eg.
misrepresentation) and intellectual property
• We had little to no traction so we gave up
• We blamed it on the portal
32. Join Us
Education & Research
Market Access
Crowdfunding Infrastructure
Capital Raising Prep Services
Support and Leadership
Advocacy
GET IT IN
TOUCH
Canadian Crowdfunding Industry
ncfacanada.org
crowdfundingsummit.ca