Equity crowdfunding your next turbine: cleantech firms eye new funding option

Changing regulations have given a different type of financier a chance to support Canada’s booming wind industry and other fast-growing sectors of the clean economy. PHOTO: CanWEA

VANCOUVER—Over the past year, substantial changes to investment regulations have overhauled how Canadian companies can raise capital. While previously only professional investors could throw money behind early-stage companies, this restrictive rule is no longer in place.

Canada’s new regulations allow startups to raise capital from a broad pool of investors, including the regular people and loyal customers who believe in what a brand stands for.

These opportunities are made possible through new online equity crowdfunding portals, such as Vancouver-based FrontFundr, which closed Canada’s first deal of this nature last September. Several companies have already closed successful funding rounds on FrontFundr—and now cleantech companies are beginning to eye the opportunity as well.

Nova Scotia-based LUX Wind Turbines, for example, currently has a campaign with FrontFundr that seeks to raise between $500,000 and $800,000. The company is using equity crowdfunding as a means to raise capital from regular people who are passionate about renewable energy and are interested in becoming investors on the ground floor. The funds LUX raises through FrontFundr will allow the company to build out their innovative new product and take it through the necessary testing to launch.

LUX Wind Turbines’ six-bladed vertical axis turbine. The company is currently look to tap into capital from regular people passionate about renewable energy. PHOTO: LUX

“We’re excited to raise money from brand champions who are passionate about the environment and believe in supporting our vision,” Terry Norman, president and CEO of LUX Wind Turbines, said. “We’re looking to raise capital from both regular people who love our concept, and professional investors.”

An equity crowdfunding raise has many benefits beyond accessing the necessary funds to take a business to the next level. In addition to building capital, a successful crowdfunding raise can serve as a proof of concept for future investors. If the “crowd” is interested in making an investment, it can go a long way in validating a business concept.

Furthermore, crowdfunding ensures a company’s investors are true brand champions. If someone invests because they believe in the business, they’re more likely to help spread the word to their friends and convert more customers and investors on the company’s behalf.

“The changes in Canadian legislation over the past year have created unprecedented opportunity for early stage companies. These companies are able to raise funds from their advocates and brand champions,” Peter-Paul Van Hoeken, CEO of FrontFundr, said.

“Canadians can become investors in companies they’re passionate about, and drive innovation, economic growth and job creation. We’re providing ordinary people with access to carefully screened investment opportunities, and entrepreneurs with access to more capital to support their growth,” Van Hoeken added.

While equity crowdfunding allows regular people to invest in companies, it leaves room for professional investors too. In fact, most crowdfunding portals suggest companies have a balance of both regular and professional investors—a mix that will give them both professional expertise and a loyal fan base.

Since emerging in Canada about a year ago, the equity crowdfunding model has become a go-to solution for many early-stage companies looking to raise capital. More and more firms are turning to this innovative solution to find investment that’s beneficial for both the companies and their investors.