Crowdfunding

A new approach to funding projects, passions and businesses

MNP Table Topic

November 19, 2013

It can work. Big time.

Or on a smaller scale

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!

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.”

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.

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

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.

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.

Kickstarter – Product Development Campaign

Project: Innovative coffee machine

Need: Finance production run

Goal: 135K

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!

IndieGogo – Wild West?

Fundly – Causes

Largest site for causes. $300M + raised.

Trips: Working on aid projects

Events: Runs, walks, rides

Charities

Health and Medical

Crowdfunding your Business

Two non-equity models:

1. Donations

2. Rewards and pre-purchase

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.

Rewards

Pre-purchase

• Discount on product under development

• Special editions of product

• Influence the design

• Often combined with non-product rewards

Calgary company!

Pre-purchase

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.

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

Reality Check

65%+ of campaigns fail to reach their targets.

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.

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.

Great Videos

Great Videos

Go to video school – for free

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.

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?

More information

http://ncfacanada.org/learning-center/

http://www.kickstarter.com/start

Calgary & Crowdfunding

Let’s crowdsource some ideas!

Entrepreneurial

Adventurous

Generous, charitable

Strong creative community

Thank you!

Jeremy Bernard

jbernard@legendmarketing.ca

403-678-8513

www.legendmarketing.ca

Twitter: @legendmarket