In the wake of recent legislation enacted in the United States to legalize crowdfunding (for investment purposes), commonly referred to as the JOBS Act, some Canadians have started to wonder whether we can expect similar legislation North of the border anytime soon. With that in mind, a conference designed to spark the ‘Conversation on Crowdfunding’ convocated yesterday in Toronto to shed some light on the burning question – is legalized crowdfunding coming to Canada?

While Canada may have emerged from the ‘08 Financial Crisis in stable condition, a lot of uncertainty still lingers in the air about the future of our nation economically. With a massive dependence on resources, a serious lack of innovation and a housing market that is starting to show signs of a bubble, Canada is far from being immune to economic troubles. That’s why there is no better time to be kickstart the ‘Conversation about Crowdfunding,’ an event that was held yesterday at the Centre for Social Innovation in Toronto.

The event was highlighted by an appearance from Sherwood Neiss, one of three American entrepreneurs who lead the push to legislate the American JOBS (Jumpstart Our Businesses) Act, and a panel of Canadian business and law experts who are spearheading the charge to legalize crowdfunding for investment purposes in Canada. The place was packed, as Canadians of all ages tuned in to hear Sherwood’s story and learn about crowdfunding in the Canadian context.

Why is crowdfunding relevant to Canada?

Crowdfunding is a new funding model where a lot of people each contribute a small amount of money to fund projects they love. Through technology and social networks, crowdfunding leverages the power and wisdom of crowds to make great projects come to life. Cultural, creative, social or startup, crowdfunding has evolved from its embryonic state, when Kickstarter launched in 2009, into a full-fledged global movement.

In its original context, crowdfunding is done by collecting donations from the crowd in exchange for social rewards; a new model of crowdfunding is emerging, however, one that allows everyday people to actually invest (buy equity) in new ventures and small businesses. Commonly referred to as crowdinvesting (see post Strategy Session: Crowdinvesting + The Entrepreneur), or crowdfund investing, this model will effectively democratize the finance landscape and redefine how early-stage ventures are financed globally. Earlier this year, the United States became the first country to legalize crowdfunding on a national level with the passage of the JOBS Act, while last week UK-based Seedrs became the first regulator-approved crowdfunding platform to launch in the world (see post Finance 2.0: Wall Street Meets the Web).

Why do we need to legalize crowdfunding?

Due to ancient security regulations, it is illegal to solicit investment from ‘the crowd’ in Canada without first filing a prospectus. Yesterday’s event was designed to start the movement towards legalizing crowdfunding in Canada, with Sherwood Neiss providing the inspiration following his group’s amazing effort down South. He and his team led a 460-day charge that started as a Thanksgiving conversation at the dinner table and ended with President Barack Obama signing it into law. Following a review period by the SEC, everyday Americans will be able to invest in small businesses and startups from the comfort of their living room from coast to coast – legally.

Everyday Canadian citizens who want to become armchair investors in emerging Canadian companies may soon get their chance, as it is anticipated that with a coordinated push we may see crowdfunding legalized in Canada (securities regulation is provincial) by mid 2013.

The real shift required to make crowdfunding work, however, is a cultural one. Crowdfunding culture is collective, it’s collaborative and it requires buy in across disciplines, demographics and generations. Does Canada have what it takes to create a culture that supports crowdfunding?

I guess we will find out. Sherwood did a great job to light the fuse and many well-connected Canadians have gotten involved to make the political push, but the x-factor is whether or not Canadians want this bad enough to make it happen. Queue the crowdfunding movement in Canada?


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In the previous blog, we talked about letting the market be your guru. Businesses can benefit greatly by allowing the market to guide an idea through the many stages of its development. This principle guides Wesley Clover, an organization built by entrepreneur Terry Matthews to incubate technology start-ups around the world.

A couple years ago, in the halls of the University of Victoria’s School of Business (now renamed the Gustavson School of Business), our Entrepreneurship class was paid a surprise visit from a man whom most of us had never heard of, Terry Matthews. He told us about Mitel, the telecommunications hardware/software company he built from the ground up, and touched on a few other high points in his life. Some of the students were starry-eyed about sitting in the presence of such a big-time entrepreneur, like the MBA student who, when Terry finished his presentation, promptly asked what his net worth is. But others were much more interested in his methodology for building a business, a methodology that he has created at Wesley Clover.

A few weeks after Terry’s lecture, his son Owen, who now runs Wesley Clover, was in giving a small group of students a talk about the organization. The Wesley Clover model is to take a select group of university students, usually three or four from engineering and one from business, and provide them with accommodation, a small base salary and shares in the company. The idea for the company itself is not pre-conceived by one of the team members, but rather derived from a study of a prominent market need in the technology sector. The Matthews open up their Rolodex and get in contact with market leaders in the technology sphere who have a problem to solve, and the process begins.

At the core of Wesley Clover is an ideology that is the exact opposite of a typical University. It is a market-driven philosophy versus a product-driven philosophy. In October, BC Business wrote an article about this dichotomy that highlights the two models and how they differ. Essentially, it’s a push versus pull model; in a university technologies are developed in-house and pushed out into the market; in Wesley Clover’s organizations, they try and pull insights from the market and develop a solution. The article stated, “Universities too often develop ideas in a vacuum, then try to find homes for them in the marketplace.”

In September of this year, Wesley Clover teamed up with entrepreneurial faculty members to create a pilot masters program called Engineering [email protected]. The project includes four hand-picked students from UVic who work with faculty members and Wesley Clover staff to create a technology product and form a business. The program is about more than proving that the Wesley Clover model works — it is part of a larger effort to more effectively commercialize technologies out of Canadian universities. But it does put one model in direct overlap with the other, which will allow this project to be directly compared to those that are spun out of the university technology transfer office.

All this begs the question: Does Wesley Clover have it right?

Of the many companies that Terry Matthews has created over the years that use this model, the success rate in building a profitable technology company has been phenomenal: 80 tech companies have been created and only five have failed. Of those successes, some of them have been absolutely huge and the majority were lucrative for everyone involved.

Wesley Clover incubates five new companies a year and is currently trying to raise between $100-million to $200-million for the Wesley Clover Technology Acceleration Fund. Whether or not previous success will translate into future gains remains to be seen, but it puts the two models in the spotlight and that in itself could be instrumental in defining how technology is commercialized in Canada going forward.

The small group of us that heard Owen talk about applying for Wesley Clover remarked the whole program seemed a bit intense. While I personally wasn’t enthused enough to consider joining the organization, I was keen to learn more about the model. Since that time, we at Lumos have worked with many technology entrepreneurs and seen a lot of this product-focused thinking. But there is a growing consciousness toward more market-focused solutions and that bodes well for the future of innovation in Canada.

Overall, it appears that the folks at Wesley Clover might be on to something. If Wesley Clover, Engineering [email protected] and other similar organizations produce outstanding products and bring innovative Canadian technology into the market, then the debate will definitely intensify. And since the past can often be a good indicator of the future, I wouldn’t bet against them. After all, everyone stands to benefit.

This is the final post in a six-part series on Spurring Innovation in Canada. Check out the conclusion to see an overview of our thoughts, or click any of the links below to see previous posts on the topic.

Intro: Bucking the Trend – Spurring Innovation in Canada

Part I: Inspiration from Abroad

Part II: Why Failure is a Misnomer

Part III: Catalyzing Creativity and Breaking Down Silos

Part IV: Design Thinking and Business Model Innovation – A Dynamic Duo

Part V – Let the Market be your Guru (http://www.lumosforbusiness.com/blog/763/25-01-2011/Part+V+Spurring+Innovation+Let+the+market+be+your+Guru):http://www.lumosforbusiness.com/blog/763/25-01-2011/Part+V+Spurring+Innovation+Let+the+market+be+your+Guru


+ Building Blocks for the New-Era Business
+ Finance 2.0 – Wall Street Meets the Web

Crowdfunding Strategy – Summary


Trends and Research – Summary


PLAN – the Business Model

It’s time to buck the trend and put the spurs to ‘er – Canadians need to get serious about innovation, before we get trampled by our competitors and left in the dust. In Lumos’ new multi-blog series, “Spurring Innovation in Canada,” we dig deep and find ways to saddle up and kickstart innovation in our economy.

The headlines tell the story: “The Death of Innovation in Canada,” “Canada’s Sorry State of Innovation,” Canada has everything going for it — except for innovation,” the list goes on. The strong emergence of our country from the financial crisis in 2008 has recently been overshadowed by reports highlighting our lackluster performance in innovation. It has officially become the elephant in the room that can’t be ignored any longer.

While there is no official metric to measure a country’s rate of innovation, there are a few effective ways to assess it. The number of patents filed is one commonly used metric, and Canada holds just 1.36% of patents filed worldwide compared with 30% held in the U.S. The Conference Board of Canada gave Canada a ‘D’ grade for its innovation environment and ranks the country 14 out of 17 . Clearly the proverbial socks needs to be pulled up.

Business and government leaders across the country have stepped up to the microphone to offer their two cents on what it will take to spur innovation in our country. The Canadian Council of Chief Executives issued a report with ten high-level recommendations, while Industry Minister Tony Clement chimed in by saying, “The key is for Canada to differentiate and not to imitate.” Everyone is joining the conversation.

Naturally, everybody wants to try and understand how we got here. One survey of Canadian CEOs suggests there is a strong tendency toward risk-aversion among executives, as well as a culture of complacency. Since innovation, by definition, requires taking a risk, it is easy to see how innovation could be crimped in this kind of environment. To really get to the heart of the issue, however, requires digging a bit deeper.

Over the following month, we will take a Lumos look at innovation and come up with a few ideas to kick-start the process. In a series of six blogs, we will look at the issue from a bottom-up perspective and come up with some practical ways to get the everyday entrepreneur fired up. So let’s get started …

Check out Part I: Inspiration from Abroad , as we look at why second- and third-world countries provide great sources of inspiration for innovation, and how immigrants to Canada are helping us pull our socks up.

Part II: Why Failure is a Misnomer

Part III: Catalyzing Creativity and Breaking Down Silos

Part IV: Design Thinking and Business Model Innovation – A Dynamic Duo

Part V – Let the Market be your Guru

Part VI – Does Wesley Clover have it right?

Summary: Saddle Up and Go


+ Business Model Breakdown: Crowdfunding
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Crowdfunding Strategy – Summary


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