Crowdfunding: An alternative way to apply for grants and loans ?
Are your clients looking for different funding opportunities for their businesses?
We spoke with Christine Cook, Senior Marketing Executive from Crowdfund UK, to help us understand if crowdfunding could be an option for some women-run businesses in Canada. Crowdfunder UK recently added a Canadian arm to its company – Crowdfund Canada. “Canadians,” says Cook, “are an open-minded and community-focused people. Much like Brits, Canadians want to support local businesses and causes. We work to provide an efficient, secure, and visible way of distributing extra funding to projects across Canada.”
WEOC: To start off, what is crowdfunding?
Christine Cook: Crowdfunding is an alternative way of raising money for great ideas through the people around you. At the heart of it all is a compelling mix of innovation, engagement, and storytelling, which opens new possibilities for funders.
Unlike applying for loans or grants, there’s nothing to pay back with crowdfunding. When it comes to rewards-based crowdfunding, entrepreneurs don’t give away any shares in their business. As the name suggests, rewards-based crowdfunding involves the exchange of a pledge from a supporter for some kind of reward from the project owner. The more tempting the reward, the more likely a supporter is to pledge – simple! Once entrepreneurs crowdfund, build their business’ community, and make their first sale, they have created a fantastic foundation for future investment.
How have you seen crowdfunding be beneficial during COVID-19?
As we are all aware, this year has been extremely challenging for businesses – both new and experienced. For experienced entrepreneurs, crowdfunding can be a way to reach out to existing, loyal customers, and allow them to play a huge role in the success of the business through their financial contributions. Their money can help businesses pivot to online services, deliveries and more.
Through crowdfunding, entrepreneurs will learn how to market their idea and talk about their business with friends, family, and new networks. It is also important to find out what images and videos work best for their business and which messages will resonate with their audiences.
Do you have a favourite crowdfunding success story?
Iron North Studio is a multidisciplinary fitness studio, and its story is incredibly inspirational. Like many other small businesses, Covid-19 prevented them from operating as usual, but in June 2020 they successfully raised $10,858 with 109 supporters in 56 days.
ADDITIONAL RESOURCES AND INFORMATION ABOUT CROWDFUNDING:
From BDC: What is crowdfunding?
Crowdfunding is a way for companies to raise money by collecting small, individual contributions from a large pool of donors through online platforms such as Kickstarter, GoFundMe and social networks.
The three main crowdfunding models are:
- Equity crowdfunding—In exchange for their money, investors receive either shares in a company or the right to a portion of revenues or profits from a specific product. This model is usually best for early-stage companies that want to grow.
- Debt crowdfunding—In this model, investors lend their money to a company at relatively high interest rates. Because each individual amount they lend is small, they mitigate their overall lending risk by spreading a large amount of money in small increments across many loans.
- Donation/rewards-based crowdfunding—Here, a company sets a fundraising target and asks for donations—in exchange for a token or receipt of the eventual product or service to be developed. If the target is not met, the funds are returned to the investors.
From startupsinvesting.com: What To Look For In A Crowdfunding Agency
Our rankings are painstakingly researched by experienced crowdfunders with full knowledge of the Kickstarter and Indiegogo crowdfunding industry. But if you’re new to crowdfunding and looking for the best agency then you might not know what to look for. We’ve narrowed the top things to look for to the following:
- Find an agency that specializes in crowdfunding full time.
- Try to get a crowdfunding agency that will partner with you in some way.
- Speak with an expert, not a salesman. A good agency will see if your product is a fit for crowdfunding first.