Startup companies in Nova Scotia stand to benefit greatly from the spread of the crowdfunding movement. It’s just not happening fast enough.
Crowdfunding, according to the Oxford Dictionary, is the practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the Internet.
This opens up the world to Nova Scotians with good ideas who need access to money in order for their business dream to become reality.
In the past, because of our small population, Nova Scotia startups have been limited to seeking help from government and/or a handful of angel investors willing to participate in the process of getting a business off the ground.
Crowdfunding is a game-changer for would-be entrepreneurs in our region because it will not only allow them to get their enterprise started, they can potentially return to the crowdfunding model over and over to support expansion of their ideas.
Andrew Weir, vice-president of communications for Invest Crowdfund Canada in Toronto, says crowdfunding has evolved into something more than passively putting a PayPal link on a website that allows people to contribute to the venture.
“The most popular kind (of crowdfunding) on the web right now exists on platforms that are dedicated to crowdfunding … on which people post ‘calls for funding’ and they’ll put out their idea, their plan and their reason for seeking funding in an open call.”
The difference is that the entrepreneur or venture is actively putting their request for funding out on a site that is used for that specific purpose by many organizations, he says. Because of that, it attracts a larger number of people interested in contributing to ventures they find intriguing.
Crowdfunding has been successfully used by small companies looking to launch a new product or service. One popular example in Halifax is the Brooklyn Warehouse restaurant, which used crowdfunding to help finance the expansion of that north-end establishment.
Contributors are often provided a reward in return for their upfront contribution to the cause, such as products or discounts.
Andy Osburn, president and CEO of Equals6, a company that aims to connect students with universities and their future careers, says his Halifax venture is getting ready to start crowdfunding pooled scholarship funds. The funds would be accessed by students seeking help paying for their education.
“It’s not like funding to start a company or anything but it is something we think will go a long way in students addressing the need issues they’re experiencing,” Osburn says.
While he may have considered crowdfunding to help his company, Osburn says there are some issues around that.
Tanya Wiltshire, who speaks on behalf of the Nova Scotia Securities Commission, says there is currently no legislation governing crowdfunding for business startups but provincial securities commissions across the country are talking about it.
“We are trying to figure out right now what is going to happen and how is Canada going to regulate this once the U.S. gets crowdfunding up and running,” says Wiltshire.
The idea of using crowdfunding to help finance small business has been promoted in the United States with the launch of the Jump-start Our Business Startups Act. Wiltshire says there is concern that Canadians will be hit with a wave of crowdfunding solicitations from the U.S., some of which may be scams.
Weir says he understands the provincial regulators’ concerns, but there hasn’t been evidence of fraud in the crowdfunding movement so far. Based on the experience in Australia and other countries where crowdfunding of companies has been legalized, he says most contributions seem to come from knowledgeable angel investors.
The sooner Nova Scotia entrepreneurs can access crowdfunding as a means of financing their business startups, the sooner the province will enjoy the benefits of a higher level of activity— most notably in the form of jobs.
Source: Herald Business – ROGER TAYLOR