How crowdsourcing could help startups: Provincial governments get on board: By Vito Pilieci, The Ottawa Citizen: CATAAlliance Speaks Out
The Ontario government is finally starting to show signs that it understands the importance of using social media to raise early stage capital for startups — and, along the way, may be leading a national movement.
Representatives from more than 100 provincial ridings, as well as the Ontario Securities Commission, gathered at a conference in Toronto Monday to get the inside dope on how crowdsourcing can work.
A top draw at the gathering was Sherwood Neiss, one of the authors of a recently passed bill that allows American businesses to seek investment through social media websites such as Kickstarter and Facebook. The legislation places income-based restrictions on how much individuals can invest through crowdsourcing. This is to protect investors from possible fraud.
Neiss said the bill has made billions of dollars’ worth of potential investment available to fledgling firms in the U.S. and could help spark an economic boom. He encouraged Canadian politicians to work together on the idea.
“The way to create jobs is by getting access to capital to job creators,” said Neiss, co-founder of Startup Exemption, an organization created to help legalize crowdfunding in the United States. “Here in Canada it’s the same story. Irrespective of what party you are with, jobs are a nationwide issue. We have to work together to unleash capital and update securities (law) to allow that to happen.”
Neiss was speaking at a sold out event called Crowdfunding Open Briefing. The event was created with the help of Michael Cayley, director of the Toronto chapter of Startup Grind and founder of Cdling Capital Services Inc., as well as the Canadian Advanced Technology Alliance (CATA) which is conducting a massive awareness campaign aimed at drumming up support for the crowdfunding initiative.
According to Cayley, the event is the result of requests by numerous members of provincial parliament, as well as officials from the OSC who want to know more about crowdsourcing. In order to allow the practice in Canada each province would have to revise securities legislation governing investments. That way, each province’s investment oversight organizations — in Ontario it’s the OSC — could begin policing the practice.
“We’ve been getting calls from MPPs for briefings on the matter,” said Cayley. “They realize that there is an opportunity here.”
CATA president and chief executive John Reid said some provinces are now racing to be the first to introduce crowdsourcing in hopes of sparking a startup boom within their boundaries. The province’s of British Columbia and Quebec were the first two provinces to introduce tax credits in the early 2000s aimed at attracting video game and graphic design firms. Today, Montreal and Vancouver are home to the two largest video game development studios on the planet. The studios, owned by Electronics Arts and Ubisoft, employ thousands.
“Some of the provinces are looking at this as a way to become the destination for startups,” said Reid. “You will see one or two provinces adopt this and then it will be adopted across the board.”
However, Reid warned that the clock is ticking.
Another session hosted by Cayley to raise awareness to the issue of crowdsourcing investments and other hurdles faced by startups in Canada saw Eric Migicovsky, the creator of the Pebble wrist watch, speak to attendees.
Migicovsky, a Canadian entrepreneur who couldn’t get funding for his idea here and moved to the U.S. to take advantage of crowdsourcing initiatives like Kickstarter was looking to raise $100,000 U.S. to start making his wrist watches.
He ended up collecting more than $10.2 million U.S.
Migicovsky urged all cash hungry Canadian startups to follow his lead and move to the U.S.
“This is why we’ve picked up on this,” said CATA’s Reid, which has been petitioning governments to update securities laws since hearing of the JOBs act in January.
“This is a major concern that we have.”
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