Following Darren Westlake’s keynote on equity crowdfunding in the UK, Cindy Gordon of Helix Commerce moderated a panel on whether equity crowdfunding should be legal in Ontario, with panelists Peter Aceto (CEO of ING Direct Canada), Brian Koscak (Chairman of the Exempt Market Dealers Association of Canada and a partner at Cassels Brock & Blackwell), Richard Reiner (partner at CC Stratus Capital), Adam Spence (Founder of Social Venture Exchange) and Darren Westlake (CEO of CrowdCube).
Blogging panels is always difficult, and I won’t try to attribute comments to specific people, but here are some of the points covered [my comments in brackets]:
- Crowdfunding isn’t just for startups; it can also provide significant benefits to small businesses looking to expand or take on new initiatives.
- Crowdfunding works well as seed funding to get a startup to the stage where it can be considered for larger funding sources such as venture capital.
- The share structure will need to be considered fair to the early crowdfunding investors and to the later venture investors, in terms of control, returns and liquidity. [This is a major issue.]
- Social and environmental companies have difficulties with access to capital, and may benefit greatly from crowdfunding. [Many small investors will follow their conscience in crowdfunding investments, as has been seen with Kiva microfinancing.]
- Canadians are early adopters of financial technology (ATMs, web banking, internet-only banks) and are likely to accept equity crowdfunding quickly.
- Social media, including some aspects of crowdfunding, encourage/reward transparency. [If you’re going to be successful in raising funds through crowdfunding, be prepared to willingly expose the inner workings of your company.]
- Crowdfunding would make it feel normal to invest in startups, and tax incentives for small business crowdfunding would support this significantly.
There are some crowdfunding approaches already being tried out in Canada, including debt/bond/co-op structures such as with ZooShare, which provides co-operative investment into a plant that turns Toronto Zoo poo into biogas. ZooShare’s scheme requires that you join the co-op as a member, then can buy community bonds that pay interest over seven years. Obviously, allowing for equity crowdfunding will greatly expand the opportunities for investment, since not everyone want to join a co-op to buy bonds in order to invest in interesting opportunities.
We’re going to be doing a table exercise on benefits and concerns of crowdfunding, then the conference wrapup, so this will probably be the last post from this Technicity conference on crowdfunding. I’m not really an entrepreneur any more – I’ve done two startups in the past, but currently just operate as an independent – but I have a lot of friends with Canadian startups that could benefit from crowdfunding, and I’m fascinated by any intersection of social and business.