On Friday the Saskatchewan FCAA announced their new equity crowdfunding initiative that will allow ‘small businesses and start-ups in Saskatchewan to sell stakes in their companies to residents of the province through the Saskatchewan Equity Crowdfunding Exemption‘.
Being a youth entrepreneur and having launched a new startup this past year, I know how challenging it can be to raise capital. Having access to financial resources for a new startup can be the difference between turning that great idea into a real product, and then taking that new product to reach an actual market.
This new equity crowdfunding exemption is good news for entrepreneurs, providing another option to raise capital that can work along side other traditional investment routes.
It’s no surprise to the community here that many of our best startups are leaving the province to participate in accelerators or to gain access to larger angel networks. It’s also by no coincidence that these startups seldom return, due to the very nature of those programs that build relationships within these other communities. One of my own personal hopes for equity crowdfunding, is that it helps keep more of our best startups here in the province.
Equity crowdfunding also has many exciting hidden benefits that haven’t been talked about much.
Investors Become Customers
One of major benefits of crowdfunding platforms like Kickstarter or IndieGoGo is it allows people to buy a product before its developed, becoming a powerful marketing tool to build a client base. Equity crowdfunding has a similar benefit but rather than pre-selling a product instead people are offered shares or equity in the company, thus creating a large number of ‘super fans’ who are interested in seeing your company succeed.
Support Community Initiatives
Another interesting benefit of equity crowdfunding, is the ability to support communities initiatives that normally would not have access to raise capital. For example, the Glentworth High School grade 11 and 12 class recently founded The Community Kitchen, a business that offers traditional family recipes from the Glentworth area. Thanks to the new equity crowdfunding exemption, this group could now potentially raise $150,000 from 100 members of their community. Although Hope Blooms group recently had the opportunity to pitch on Dragon’s Den, this is somewhat of an anomaly and most young entrepreneurs ‘fall through the cracks’ for traditional investment opportunities.
Keep Money In Communities
Continuing on The Community Kitchen example, imagine now if they became profitable and start paying dividends to their investors. Rather than that money going to a single investor that may live elsewhere, it would instead go to 100 people in their own community, and that money would likely find it’s way back into the local economy. This is one of the most exciting benefits of equity crowdfunding, the democratizing of investment can help bring money back into rural communities.
Good For Women
Forbes recently had a good article on how “equity crowdfunding is democratizing funding in more ways than one, including opening doors for women”. The challenge with traditional investment communities is they tend to be male dominated, where crowdfunding sites are boasting high statistics on women-led success stories.
Dave Wild the CEO of FCAA said, “equity crowdfunding will help fill the fundraising gap for businesses so that they can compete in our market. This is also an opportunity for Saskatchewan people to invest in Saskatchewan businesses – it’s a unique opportunity to help grow our provincial economy.”
I agree, equity crowdfunding opens up a lot of exciting possibilities for both entrepreneurs and the people of Saskatchewan to become investors. You can learn more about the equity crowdfunding exemption at www.fcaa.gov.sk.ca/SKEC.