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Canadian Startups are Shut Out of Crowdfunding

document Crowdfunding

Canadian Startups are Shut Out of Crowdfunding
Posted Feb 21, 2012 , By Harriette Halepis

Raising money for your business or product is one of the hardest hurdles you’ll have to vault. For some, gaining startup funds through sites like Kickstarter is one avenue to explore. For others, using the Internet to gain seed funding isn’t yet a possibility. Interestingly, business plans and roadmaps have very little to do with the way that North American entrepreneurs can access crowdfunding. Instead, it seems, it’s a matter of location. Launched back in 2008, a site called Kickstarter is a “new way to fund creative products (according to the company website).” The premise behind Kickstarter is simple enough, and it’s one that many entrepreneurs have found highly lucrative. Essentially, Kickstarter works through crowdfunding. An entrepreneur or startup can post a product or service (including all details and specs) on the Kickstarter site, set a fundraising goal and deadline, and ask available investors to contribute to that goal. If the original goal is attained, a startup will have the desired cash to proceed (most investors contribute to a project via credit card).

Here’s the, well, kicker: if a project does not achieve its fundraising goal, all pledged money is returned to the investors. In addition, a project date and monetary goal can’t be altered during the duration that said project is listed on the Kickstarter site. There are other fine print rules that go along with opening a Kickstarter account (like the rule that you must have an Amazon Payments account), but a lot of entrepreneurs have gained needed funding through this site. One game developer, Tim Schaefer, earned more than one-million dollars in 24-hours using the Kickstarter service (Schaefer’s game, “Double-Fine Adventure” also earned a spot on various tech blogs and USA Today, which also helped him reach fundraising goals). Of course, some startups that attempt a Kickstarter account aren’t so lucky, and the site doesn’t guarantee that an idea won’t be subject to theft. This (among other concerns) is one of the main reasons why Canada is so reluctant to let sites like Kickstarter operate in the Great White North. A similar site called Fundchange.com (a crowdfunding site for nonprofits) was founded last February by Ottawa-based owner Paul Dumbowsky, but Canadian legislature currently blocks Dumbowsky’s site from operating. According to current Canadian law, startups (non-profit or otherwise) are barred from offering any kind of revenue percentage when that revenue has been raised through crowdfunding – a law that many feel is outdated. Based on a recent press release, The Canadian Advanced Technology Alliance (CATA) has just starting campaigning for changes in the law to allow crowdfunding of startup organizations.

Until CATA (and other proponents that may arise) is successful, Canadian entrepreneurs may be left out in the cold unless Canadian lawmakers are “…pushed harder because access to capital is a big issue (as Dumbowsky related to press).”

Summary Raising money for your business or product is one of the hardest hurdles you’ll have to vault. For some, gaining startup funds through sites like Kickstarter is one avenue to explore. For others, using the Internet to gain seed funding isn’t yet a possibility. Interestingly, business plans and roadmaps have very little to do with the way that North American entrepreneurs can access crowdfunding. Instead, it seems, it’s a matter of location.

Description According to current Canadian law, startups (non-profit or otherwise) are barred from offering any kind of revenue percentage when that revenue has been raised through crowdfunding – a law that many feel is outdated. But the Canadian Advanced Technology Alliance (CATA) has just starting campaigning for changes in the law to allow crowdfunding of startup organizations.

Tags: Canada, Canadian Advanced Technology Alliance, Canadian law, Canadian startups, CATA, Crowdfunding, Crowdsourcing, Knowledge

Posted by Rebecca Gutierrez

Feb 22, 2012 12:28 am GMT Viewed 2049 times

Author: Harriette Halepis Source

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