People seem to like the idea of contributing to projects that they want to see succeed – it takes “voting with your wallet” to a new level.
We also think that there’s a lot of potential for social enterprises, nonprofit organizations, and social economy groups to use crowdfunding. We already know of nonprofits who are raising critical funds using social impact bonds. Now that equity crowdfunding is regulated and available, in many provinces, we can foresee social enterprises doing significant capital raises using equity crowdfunding.
Traditional, reward-based crowdfunding is something that a lot of people have experienced and have seen. You can contribute capital to start up projects, capital that they need to purchase equipment and supplies, and watch them succeed. Equity crowdfunding is new – instead of pre-purchasing products or rewards, you can become a co-owner in the enterprise. Your reward is a share (or shares!) in the enterprise, and potentially a share in the profits if they suceed.
Not everything is super rosy about crowdfunding, though. Some crowdfunding projects fail – they never produce the product or project their funders contributed to. This could be possible in equity raising as well, if the business fails. That’s why the Securities Commission regulations on start-up equity crowdfunding stress the risky nature of equity investing. Does that make equity crowdfunding less interesting, or less exciting, since the risk is considerably higher? It’s a good question.
But equity funding is also something that can help social enterprises succeed. While we know that there’s lots of loans and debt funding available for start-up businesses, equity is harder to come by – sometimes even harder than ever-elusive grants. That’s why we’re very interested in the equity potential under new regulations.
But we want to see your thoughts on crowdfunding. We’re launching a survey – accessible from http://inci.pe/crowdfunding – where you can share your views on crowdfunding, equity crowdfunding, and how nonprofits and social enterprises might be able to use these options to multiply their social impact.
Plus, if you fill out the survey, we’ll enter you into a draw to win a cash prize – you can apply it to the next social impact crowdfunding campaign you see!