Startup Canada should endorse crowdfunding to address fundraising gap

When the Startup Canada campaign hits its climax in a series of coordinated press conferences across Canada on Tuesday, it should strongly advocate for the path for equity-based crowdfunding to be laid in Canada.

Victoria Lennox will be crystallizing a five-month, nation-wide tour of events designed to talk to entrepreneurs and distill a set of action items that need to be taken to help innovation in Canada. The collected wisdom will be released in an online platform dubbed Startup Blueprints, also launching on Tuesday. Its objective is to lay out the pay to a better entrepreneurial culture in this country. If Startup Canada heard about the same challenges as I have in my time following the scene, they know it all boils down to the money.

A countdown to the press conference for Startup Canada’s tour roundup.

Especially since the global recession in 2009, the constant pain point expressed startup businesses in Canada convey is the lack of funding available to take their idea from concept to R&D to commercialization. The venture capital scene is starting to emerge as more positive, but still offers funding only to those firms most likely to produce exponential financial growth. Banks are risk-averse with their capital loans, and government programs required bureaucratic hurdles to be jumped before money starts flowing.

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Don’t take it from me. The Startup Genome report that ranked three Canadian cities among the world’s top 20 startup eco-systems (based on usage of its own online benchmarking tool) identified one common weakness that dragged those Canadian cities down in the rankings: lack of access to funding. On that dimension, Toronto ranked 9th out of the top 20, Vancouver ranked 12th, and Waterloo ranked 16th. For Toronto and Vancouver, those ranks are lower than their overall rankings on the index, while for Waterloo, it is equal. The report identified funding as an entrepreneur-named challenge in each of these three cities.

Crowdfunding EventTechicity: Innovating Investment with Crowdfunding
Our objective is to make Toronto the best place to retain & attract new companies through embracing innovation.

Equity-based crowdfunding could offer cash-strapped entrepreneurs one more avenue for raising money to get to the market. This would fill a gap for companies not expected to offer gangbusters growth by venture capitalist types, but could still make a profitable small to mid-sized business if given enough startup capital. It would also sidestep the awkwardness of government picking winners in a free market, and avoid the risk of government cash being wasted on a business that doesn’t result in creating more jobs or economic value.

The Canadian crowdfunding examples we’ve been featuring, and will be continuing to feature this week, are the exceptions to the situation in this country, not the norm. They are using U.S.-based platforms that operate a different kind of crowdfunding that offers either the promise of a future product, some sort of related merchandise, or nothing at all. Kickstarter, perhaps the most famous platform, is limited to those who are American citizens. Indiegogo is associated with more charitable projects and artistic fundraisers than it is a serious startup business platform.

When I spoke with Day Job documentary creator David Chan about his crowdfunding experience with Indiegogo earlier this week, he was candid about it. He had wanted to use Kickstarter, but was excluded because of not having an American SIN number. Although he wasn’t thrilled with Indiegogo as a platform, he felt like it was his only option. Facing a shortfall of funds to produce his documentary – which itself looks at the challenges of startups – he gave it a shot. At time of writing, the campaign has yet to hit 10 per cent of its goal with 59 hours to go.

Equity-based crowdfunding has its own pitfalls and regulatory challenges to work out. It won’t be for every entrepreneur. But many would happily embrace the model to see their business dream brought to fruition.

When Startup Canada has the attention of the nation’s public and private sector on Tuesday, hopefully it will be part of their road map.


Brian Jackson
Brian Jackson
Editorial director of IT World Canada. Covering technology as it applies to business users. Multiple COPA award winner and now judge. Paddles a canoe as much as possible.

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