Crowdfunding In Canada - Tips For Raising Money

Looking for some crowdfunding investments to get your business started or expanded? This type of investing has become a viable way to collect capital that can be put to good use. As with everything in life, there is no such thing as a free ride. Here are some tips to consider when raising money through crowdfunding:

Tip #1: Show What You're Creating

Since your crowdfunding campaign will no doubt be launched online, there is no excuse not to include photos and/or videos of exactly what you plan to sell, make or provide. Even if you've created the next great "widget", make sure that you have a prototype that you can show off. Make sure your ideas are protected before you share them with your potential investors. When those money folks can see something tangible, they'll be more likely to part with their money.

Tip #2: Research Your Platform

Among crowdfunding sites, Kickstarter and Indiegogo are the most popular. These are the ones that most folks will go to first because they seem to be getting all the good press. Here in Canada, Kickstarter is getting ready to lower restrictions for more participation. Also check out Crowdfunder, RocketHub and Quirky. Spend time getting to know these sites and the community they attract. This research should help you find the right fit for your campaign.

Tip #3: Copy From Success

There are many crowdfunding success stories out there. Guess what? You can borrow from them when it comes to building your page. See what those campaigns used to attract investors. You can learn a lot from those investor comments. Was it the video that made the difference? Was it the pitch? Whatever worked, try to adapt it for your cause.

Tip #4: Build Up Some Sweet Perks

The benefit of crowdfunding is that there is no obligation for a return on that investment beyond the perks. To attract investors, you'll want to offer some goodies. The recent wildly successful "Veronica Mars Movie" Kickstarter campaign offered walk on parts in the movie, autographed scripts and interactions with the stars. All of these perks came at certain levels of investment. In other words, save the good stuff for the big bucks. Special note: Start the perks at the $25 level. This is the most common donation and a good way to get things fired up.

Tip #5: Work Outside the Crowdfunding

Just because you set up a page on Kickstarter doesn't mean your work is done. You need to get the word out about what you're trying to accomplish. There are many folks who stop by crowdfunding sites to see what’s new, however, that's not going to be enough for your needs. Think of your social media outreach. You should be using Twitter, Facebook and any other media outlet you can tap into to spread the news about your campaign.

Make it fun and watch the money roll in! 

Five Reasons to Avoid Crowdfunding

In the wake of tight credit markets in North America, crowdfunding or crowdsourcing, has quickly become a source of readily available financing to startups, charities or projects. This form of financing is extremely popular with the creative industry such as documentaries, artists and writers.

This new form of financing allows a person to get funding through small contributions from a large group of individuals through an online platform.  The entrepreneur makes an online pitch to a community, which then decides if they want to support the project by giving money towards it.

Raising funds for your small business by crowdfunding has its own set of dangers that can be harmful to your company’s success.  Here are the top five reasons to avoid crowdfunding as a financing option.

Crowdfunding is not meant for large projects.

If you need a million plus dollars to get your business up and running, crowdfunding is probably not the best source for you. Yes, there have been exceptions, but raising the large pool of capital works best with venture capitalists that you can focus on as opposed to the sometimes-scattered approach of crowdfunding. The other thing to consider is repayment. Imagine trying to keep 1,000 investors happy!

Crowdfunding is not sophisticated investing.

There is a kind of hip, underground vibe to crowdfunding. You could kick in a couple of hundred dollars towards an edgy independent film and feel like you’re part of the creative process. However, some professionals might not want to open up their business plans for such wide scrutiny.   

Crowdfunding could impact future investments in your company.

If you're tapping into crowdfunding as source of capital, you want to think about the longevity of your business. A single project can benefit from the financing, but if you've giving up shares in a company that might become extremely successful, those shares could tangle up future investment opportunities. See "The Social Network" for a perfect example of this dynamic playing out with billions at stake!

Crowdfunding has a limit on share values.

The cap with crowdfunding is $1 million. If you manage to raise more than that amount you'll be frozen out of crowdfunding for at least a year unless you want to become involved in security registration compliance. Suppose your company experiences rapid growth? You might be stuck if crowdfunding is your only cash flow source.

Crowdfunding is not a quick option.

If you need cash fast, crowdfunding is not the way to go. Once you place your proposal up on a site you essentially have to wait until it catches "fire." You'll also have to do a lot of your own promotion to drive people to your plan. This process can stretch on for weeks and months. Now consider being approved for a loan from a bank and having the funds by the end of the week. Which works better for your plans? 

Small Business Financing - It's All About Who You Know

Believe it or not there are plenty of folks out there looking to invest in a small business. Your challenge is to get your business plan in front of them. Easier said than done, right? Actually, if you apply yourself you’ll find that it’s quite easy to build a network of potential investors. First, make sure you have a rock solid business plan ready to go. It makes no sense to seek out investors unless you’re ready to pitch. You might get only one shot and you have to be ready. Here are some tips for building up a network of investors.

1)      Go Online

There is a huge social network waiting for you to explore that is only a few mouse clicks away. LinkedIn is the most obvious choice to start your campaign to connect with potential investors. Here you’ll have a chance to build up a professional profile and find other business professionals who might be able to help. A connection you make on a site like LinkedIn might not be in a position to write you a check but they could connect you to someone who can.

2)      Try Crowdfunding sites

Beyond the direct networking possibilities of social media, there is another burgeoning source of investors you could find online and that would be with group funding. A site like Kickstarter is bringing together pools of small investors who are willing to share their funds with a business that looks promising. Once again, you have to be ready to fire up your business machine and answer any question in a competent matter.

3)      Ask your family and friends

It’s amazing the amount of help we can get from our family and friends if we just ask. You might have a favorite aunt or uncle who is willing to take a shot at investing in your business. As long as you treat them as you would any other potential investment then there is no reason not to present them with a business plan. Just as your online network could help you bridge the gap to meeting potential investors, you might have a friend who works for a company or has their own relationship with a potential investor. Throw a friendly dinner party and make your pitch. Keep it honest and sincere and you’ll reap the benefits.

4)      Network at events

This is a no-brainer. There are plenty of tradeshows geared for entrepreneurs to help them connect with investors. Seek them out but don’t stop at the tradeshow. Follow the money. This means going to places where the “money” would hang out: a country club, museum opening, first night at the opera, polo pony matches… wherever you might think that serious minded business professionals would gather you should try to infiltrate. This doesn’t mean barging in with your stack of business plans ready to hang out. Go make some new friends and see where that takes you.

Is Crowdfunding the Best Strategy for Your Startup?

In the last few months, there has been a new trend in startup investing that has gotten the attention of the VC world.  Taken from the idea of crowdsourcing - crowdfunding allows the smaller investor to get into investing into a potential startup by mitigating the risk with a group of people.

As Blake Coler-Dark mentions, crowdfunding is.. “The ability of many individuals to fund a specific project or individual.”

This is what makes crowdfunding so appealing to many people - it gives people the opportunity to fund a project that they really believe in, with minimal risk. This engages a much wider group of people, who want to be in the forefront of great ideas or projects but may only have $20 to contribute. Crowdfunding lets everyone get in on the fun of investing in a new project.

One of the more popular crowdfunding sites is Kickstarter. Kickstarter’s funding process is simple. You’ll be given an opportunity to pitch your business to the Kickstarter community and if the crowd likes what they see, they’ll start providing the funds.

Don’t get this wrong. This isn’t free money; these are considered investors according tax law who expect to be paid back. But it’s a good way to get capital fast, especially for startups who have not had success in the traditional financing route with bankers.

How is this a good strategy for your startup? Consider these potential benefits of crowdfunding:

You’ll Get Instant Validation of Your Business Idea

Setting your business up for crowdfunding investment means you’ve really got to put yourself out there. Think of this as a kind of audition for your company. If you’ve got a great idea whether that’s for a restaurant, a dog grooming business or cleaning service you’ll know right away if yours is a good idea for this investment community. If no one bites, it might be time to rethink your business idea.

You’ll Sharpen Your Marketing Strategy

Many crowdfunding sites allow you to post videos or photos as part of your business pitch. Just like you’ll be instantly told whether your overall idea works you’ll also have an instant response to your marketing campaign. Yes, your pitch isn’t the same thing as a television commercial but you’re still tossing out what you think is the best approach to selling your product. The amount of money you receive will tell you if your pitch worked or not.

You’ll Get Help

By tapping into crowdfunding you are basically taking on many new business “partners.” This doesn’t mean that all the investors are going to be chiming in with how you should be running your company but there could be a vast amount of knowledge that you can tap into besides the investment.

For instance, a restaurant owner who is looking to expand their business might find a former restaurant owner among the crowd who can offer sage advice. There could also be a contractor which might offer a good deal on the work. The bottom line is that you just don’t know who might be in your crowd that will be a help for your business.

You’ll Get Better Organized

Anytime you seek out investors for a business you have to be organized. Investors want to know their money will be put to good use. This means providing a business plan and opening up your books for inspection. If you’re not organized then you’re not going to attract any type of investor. Knowing you’re going up on “stage” will get you organized rather quickly.