Written By: Joe Facciolo, Co-Founder of Whistler Tasting Tours & Guusto
Fundraising is an inevitable task that plagues most start-up founders, especially those in Canada who are once, twice removed from the silly money that resides in and around Silicon Valley. As water cooler conversations in the tech community often center around the progress of your current “raise”, the topic regularly turns to stories of how investors south of the border move quickly, with the notion that start-ups boasting a solid business idea, a prototype and a semblance of being able to execute should get a shot at finding product market fit or die quickly.
Whether there is any truth to the tales of our southern start-up brethren quickly and effortlessly raising seed capital, this is not the reality for the vast majority of Canadian start-ups.
This is why May 14th, 2015 was a historic day for entrepreneurs and start-up companies across the country. Long-awaited regulatory changes came into effect and opened the door for equity crowdfunding in Canada; this is a practice that has been legal for over two years in a number of European countries.
With that, I’m excited to say that Guusto, an instant gifting platform (send food, drinks, movies and more) that I co-founded with my childhood friend and business partner, Skai Dalziel, is officially the first Canadian company to raise funds using the ‘Start-up Crowdfunding Exemption’ (via FrontFundr), and were 200% subscribed! Finally, financing opportunities are no longer just the domain of wealthy angel investors.
Eligible start-up companies are able to accept funds, up to $1.5 million annually, from any resident of British Columbia, Saskatchewan, Manitoba, Quebec, New Brunswick or Nova Scotia (Ontario coming soon) in exchange for shares in the company. There is a cap of $1,500-$10,000 per individual investor, depending on the province. The portals also allow for larger sums from accredited investors or friends and family.
Raising funds is no easy task, and that includes equity crowdfunding. To successfully close a deal, it takes thoughtful planning. Below are five strategies that helped Guusto make it happen, and perhaps these tips can help you do the same.
Speak to your lawyer (get one if you don’t have one) and make sure that your shareholders agreement and offering documents are tight.
Get a few investment commitments, even if they are small, so that when you launch your campaign it’s not sitting at 0% subscribed. Moving the dial-up will give additional confidence to others who might be considering the deal. No one wants to be first. Furthermore, list your investors with their bio on the deal site. If they’ve made other successful investments, make sure that this is noted.
Equity crowdfunding is new in Canada and has not reached mass adoption. Take that into consideration when setting your goal. It’s better to set an achievable target and oversubscribe (even if it’s lower than your dream goal) than to never reach the finish line. Overachieving always looks better than underachieving.
People invest in people. Posting a video on the deal site will give potential investors a look at who you are and how you address some of those burning questions. Have someone off camera conduct the interview so that it appears as natural as possible.
If you already have customers that like your product, you’re ahead of the game. Contact them tactfully to see if they’d be interested in taking their relationship to the next level. It’s a great way to move customers to shareholders and brand champions.
If you don’t yet have customers, this is a great opportunity to engage your target market and get real world feedback. If people are interested in making an investment, this is a great sign. If not, the universe may be speaking to you about the viability of your business idea.
Guusto (guusto.com), named a Top 5 BC Tech startup, is an instant gifting platform that allows you to send food, drinks, movies and more – redeemable at 1500+ locations. Pick up the tab at lunch for a client or buy a friend a glass of wine on their birthday and do it from anywhere. Guusto for biz allows high volume gift senders to generate any number of gift links and earn refunds when they go unclaimed.
About Joe Facciolo
Joe is the Co-Founder of Guusto and the Co-Founder of Whistler Tasting Tours. After graduating in 2003 from Western University, he spent four years living and working abroad. The experiences gained sent Joe back to Canada armed with ideas, drive and a heightened social conscience. When not at the office, Joe can be found playing beach volleyball, riding the bike and ski trails in Whistler, or enjoying good food and a laugh with good company.