Lessons learned by three intelliFLEX members
Crowdfunding is gaining popularity in Canada as a valid source of seed and growth capital to help companies get to market, but is it right for your business? We talked with three intelliFLEX Members who have crowdfunded, as well as the National Crowdfunding Association of Canada (NCFA), to help answer that question.
The premise of crowdfunding is quite simple: present your project or product to the public on a platform like Kickstarter or Crowdfunder in the hope individuals will favour the idea and invest. For an industrial company, this takes more than a great idea sketched on the back of a napkin. Crowdfunding campaigns typically have dollar-amount goals that must be reached to receive any funds, and must focus on a specific deliverable due by a certain date.
For more information on the general types of crowdfunding and links to additional resources, check out the new page on our site.
According to the NCFA, crowdfunding volumes in Canada grew by 48 per cent from 2013 to 2015, to $133 million. That total reached an estimated $190 million in 2016. Still, the growth of the Canadian market continues to lag the U.S. and the U.K, with financing volumes during that same period reported at US$36 billion and GBP3.2 billion, respectively.
Mounting a successful crowdfunding campaign takes as much due diligence and planning as any other fundraising effort.
“You should remain open and properly research all funding options available to your business, attend educational events and workshops, connect with experts, and also speak with other entrepreneurs and businesses that traveled the same path and can provide candid advice,” said Craig Asano, the NCFA’s Founder and Executive Director.
Laipac has worked in GPS asset tracking and machine-to-machine technology for 18 years. It recently mounted a crowdfunding campaign on Kickstarter for its Look Watch, the first IoT-enabled standalone smart watch. The campaign shot past its goal of $50,000 to $140,000.
Why did Laipac crowdfund?
“We wanted to bring up awareness for the new product and to test the water for B2C marketing,” said company co-founder Diego Lai.
What did Laipac learn from the experience?
“Kickstarter does not help you to market the product, it was totally up to us once the campaign was up and running,” Lai said. “It required full-time attention and a lot of preparation. It was not easy and through the process we have learned a lot about online marketing.”
His lesson for others?
“Allow yourself a lot of time for preparation and do not rush to launch the project if you don’t feel ready yet,” he said. “Media exposure is the key for success.”
Voltera is a new kid on the block that has made a big splash with its award-winning Voltera V-One desktop system for rapid prototyping of printed circuit boards. In 2015, the company hits its crowdfunding campaign goal by the end of day one.
But that doesn’t mean Voltera couldn’t have done better, said co-founder Alroy Almeida.
“The campaign doesn’t end on day 30,” he said. “Our execution over the subsequent year was heavily influenced by our decisions pre-campaign. In retrospect, we should have decreased our logistical stress by limiting our early bird units to Canada and U.S. only. We should have also done a deeper study into what shipping costs would look like as well as ensuring the stability of our supply chain.”
Another lesson learned related to communicating with backers. The standard practice of every four to six weeks just didn’t cut it in many cases.
“Many backers had been burned by failed projects and so they were upset with the lack of visibility into our project,” Almeida said. “We increased our cadence to every two weeks which contributed to our success in terms of the positive attitude our backers had toward us.”
His lesson for others?
“I spend quite a bit of time pushing other entrepreneurs on their decision to use crowdfunding platforms because they aren’t built to sell all kinds of products,” he said. “Some need to go direct to resellers, others need inside or outside sales teams. My personal belief is that these tools should be used if your audience is already on the platform and are already used to buying similar products on these platforms. At the same time, they can be a great marketing tool to supplement other sales activities you might already have going on.”
Kinesix designs innovative sportswear that is minimalist and fully functional. It is in the final days of a campaign on Kickstarter for ThermoSmart, the world’s first customizable smart heating jacket.
CEO Jonathan Albrecht turned to crowdfunding to showcase ThermoSmart on a global scale and help him bridge the gap to make an MVP (minimum viable product) production ready.
“I was still lacking the funding to finalize the jacket and start production,” he said. “So, doing a crowdfunding campaign would help me raise the money I need to finish it and produce it, but most importantly, gauge the potential market size. By showing there is a market internationally, it will hopefully show investors the seriousness of this project and help secure more funding.”
Albrecht admits he jumped in with some ambitious goals and has since realized the importance of preparation.
“A crowdfunding campaign is all about marketing and making your project seen by everyone, everywhere, all the time,” he said. “Winning is in the preparation: how to raise attention and interest to reach a big enough population of early adopters ready to pre-order.”
His lesson for others? There is benefit in seeking professional help to mount a successful campaign, but understand what you can, and should, do for yourself.
“Ask for a lot of advice from people who had a successful campaign,” he said. “You can always pay someone else, but it’s expensive to work with an agency. Some things can be done by you and then take your time to find the right person or company that can truly help you.”
Visit our new crowdfunding page for additional resources. We can also help you connect with other forms of financing.
NCFA’s five considerations for a successful campaign
- Target a funding amount. How much funding do you want to raise?
- Have vision and traction. Do you have a clear vision and enough traction in your idea/business concept or startup that will show others your commitment, achievements to date, roadmap to development or revenue, business plan, financial plan, any related due diligence to meet regulatory requirements, a campaign budget for your funding, the experience to operationalize your company and enough grit to stay the course and execute?
- Pick the right funding model that best suits your business and offer. Are you offering your first products for purchase? Or are you offering an investment in your company that may include perks/rewards, royalties, debt/loans, investment/equity or emerging models such as blockchain initial coin offerings (tokens)? These two approaches would have two very different campaigns and programs.
- Assemble a strong team. Do you have a suitable team with the appropriate experience in place to help you execute the funding round? How will they be compensated or rewarded for their efforts?
- Don’t expect this to be a sprint. Raising capital takes time. Do you have enough time and resources to prepare, execute and follow-up with any deliverables while managing prospects and backers/investors, partners, media and others who may be calling you? If you are offering your first products for purchase, do you have the marketing to create demand?