Crowdfunding evolving as Canadians reap benefits_FP_052812(1).docx

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Seneca College
Business Administration - Management
Business Administration - Management FIS403

Crowdfunding evolving as Canadians reap benefits Danny Bradbury, Special to Financial Post May 28, 2012 – 9:32 AM ET | Last Updated: May 28, 2012 1:37 PM ET Raymond Loo is milking the crowd for all it’s worth. The cattle farmer from Prince Edward Island has been using crowdfunding to pre-sell his beef and rebuild his business. ‘People don’t have the resources to finance a project on their own. But they do have large social networks to help them’ ―I am hoping to build customer relationships, as well as getting a list of people who had never bought from me before,‖ says Mr. Loo, who used crowdfunding site Indiegogo to market Spring Willow Farms, his community sustained agriculture business. He raised more than $10,000 from selling his beef via Indiegogo. The buyers’ payments will finance the purchase of 12 or 13 cattle in mid-May. They get their meat in November. Mr. Loo, whose cattle headcount collapsed after the mad cow epidemic in 2003, hopes to repopulate his herd with the help of crowdfunding. Crowdfunding, which started out mainly as a way for writers, film makers, artists and musicians to raise money, is shaping up to be the next big financing model for entrepreneurs — and the model is rapidly evolving. Under the traditional ―patronage‖ model, people fund work with no expectation of return. This was Rodney Smith’s approach when raising money for his video site, Watch It Played Smith videos himself and his children playing games and has about 1,600 followers. He needed money to continue putting time into the non-profit venture, and aimed for $5,000 on Indiegogo. He raised $8,760, and is now negotiating with retail sponsors. Patronage is useful for raising money from your own community. ―People don’t have the resources to finance a project on their own. But they do have large social networks to help them,‖ says Colin Lyons, co-founder of FundWeaver, a nascent Vancouver-based crowdfunding network targeting Native people. Others, such as Mr. Loo and Silicon Valley-based Allerta Inc., founded by Eric Migicovsky, a graduate of Ontario’s University of Waterloo, (currently at US$8.38-million and counting for its crowdfunded Pebble watch project), effectively pre-sell product. The third and most contentious is crowdfunding equity investments. Crowd sourced equity investing has been illegal in the United States, but the passing of the JOBS Act will allow companies to source up to US$1-million from small investors via crowdfunding starting next year. The SEC will regulate the operation. In Canada, companies such as Calgary-based Podium Ventures are already doing what they can to bring new investment opportunities to the masses. The company finds nascent high-tech prospects with no product but a good team, and then connects them with groups of seed investors. Podium still targets accredited investors, but does it en masse, says Adam Joyce, co-founder of Podium. ―We have hundreds of accredited investors in our database,‖ he says. The firm sourced 20 investors at an average of $100,000 each for its most recent fun
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