2016 small business forum crowdfunding 101 workshop

CROWDFUNDINGCOMPREHENSIVE INTRODUCTION 101+

Date: Oct 25, 2016

Prepared for: 2016 Small Business Forum, Enterprise Toronto

Prepared by: National Crowdfunding Association of Canada

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 Subscribers3200+ Followers

1300+ Members

90+ Platforms20+ Providers

45 Portals

2016

2015

2014

2013

Oct 2012

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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 tooOne big difference…Crowdfunding platforms are evolving & can scale

– Chance Barnett, CEO of Crowdfunder

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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

http://www.investyyc.com/

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Global Growth in 2014 ($13.2 billion)

Past

Prediction

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$36 BillionUSD

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

USDSource: Cambridge University and Nesta UK

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NCFA Canadian Crowdfunding DirectoryReward/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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Rewards

Sample:

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Equity

Sample:

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Lending Sample:

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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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• 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 RisksFor Companies

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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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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)

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 adaptFeedback

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 & StrategyAssess the Strength of Your Network and Establish Realistic Funding Target

Funding LeadStrategy, resourcing, fulfillment

Build Your

Funding TeamTeam Strength?

Content & Media ManagerKey message, content distribution, channel selection, engagement

Compelling SpokespersonSpokesperson, 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 ComplianceDocuments, 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

Planning & Strategy

Not everyone needs a rewardAltruism, especially for donation-based

Reward

Considerations

Budget and timingRewards cost money (shipping fees!)

Bundle rewardsGroup rewards together

Special – Scarce, Creative, VIPLimited quantity, unique experience

Leverage in-kind from partnersUse good will from donated contributions

Types of Rewards

Product

Social

Experiences

Financial

»

Services

VIP Access

Add/update New RewardsTest market and iterate!

Targeting your networks

Marketing campaign

Engaging with your networks and prospects

Reaching out to media and bloggers

Asking networks to:1. Learn about the project2. Share3. Invest4. Champion / help promote5. 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

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

PART 3: QUESTIONS AND ANSWERS

PART 3: QUESTIONS AND ANSWERSBooth #135Booth #135

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