Crowdfunding Shouldn't Scare VCs Away

John Hills
September 2, 2021
5 minutes
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“Open” and “accessible” are probably not the first two words that spring to mind when you think of investing in Canada’s real estate market, “affordable” even less so. But where some see obstacles others see opportunity. With this mindset, proptech startup Willow set about building Canada’s first real estate exchange, to enable everyone to buy properties in fractions and receive rental income from them.

The vision of an inclusive real estate market aligned well with the democratized funding model championed by equity crowdfunding, which seeks to open up the potential of the private markets to all investors. In fact, this shared belief in accessible investments is what initially prompted Willow to consider crowdfunding, and ultimately led them to complete a successful campaign on FrontFundr.

To learn more, we sat down with Arsh Singh and Mike Hibberd from the Willow team to hear about the benefits of crowdfunding for tech startups and also how they balanced the dual demands of growing their business with running a raise.

Mass-market reach

“To be honest I wasn’t that keen at first,” says Arsh, Marketing Director at Willow, recalling initial discussions about crowdfunding. “I’d heard good stories about startups using it but I’d heard bad ones too. That said, it also seemed like a great chance to reach out to more self-directed investors, people willing to try new things—and I felt that the marketing opportunity was too big to ignore.”

Mike, Willow’s Co-Founder and Chief Compliance Officer, agrees. “The appeal for us was all about being able to reach out to a larger audience and provide them with the opportunity to invest in something they wouldn’t usually be able to, to be in touch with people that believed in our vision and wanted to be part of our company.”

“This was a chance to engage with passionate supporters, people who’d cheer us on and bring a value add to our company. It fit really well with where we were as a company,” he adds.

Teamwork makes the dream work

Despite the marketing appeal and the power of community, many startups are often hesitant to consider crowdfunding as an alternative source of capital, and understandably so. Running a raise requires plenty of time, hours of planning, and 100% dedication. In a startup, this means time away from all the other things you need to do to get your idea off the ground.

How did Willow strike a balance between the two?

“Set clear expectations from the start, make sure you understand everything that’s required,” Arsh explains. “Remember that your brand is incredibly important. What you put out there, intentionally or otherwise, is what people will perceive you as. So take time to think about and define this properly. You also need your whole team’s buy-in for this to work. Both Mike and Logan [Willow’s CEO] put in a lot of hours into ensuring our campaign was a success, which was crucial.”

“It is a pretty intense experience,” Mike continues. “When you launch your raise it’s a very public reveal of what you’re working on. It’s very personal. There is a certain sense of anticipation about how people will receive your idea.”

Though it can be nerve-racking to put it all out there, he says that raising money via equity crowdfunding allows you to reflect and double down on your overall mission.

“If you’re not willing to put yourself out there, if you’re not willing to pitch the idea to your friends, your family, or your friends of friends, you should also question whether you should even be doing this in the first place. But, overall, I’d say it was a cool and energizing experience!”

VC Validation

Another concern for many startups is the impact on future fundraising. Venture capital is sometimes presented as an either/or solution to crowdfunding, and some founders worry that an increased number of shareholders will scare VCs away from what they perceive to be a complicated setup and a fractious decision-making process.

“We had conversations with VC firms prior to launching our campaign and after it as well,” Mike says on the topic. “Overall, the impression they have of equity crowdfunding is actually pretty positive. We also went through a deep due diligence process with our lead investor, which provided a lot of confidence and reassurance to VCs.”

Equity crowdfunding even provided Willow with confirmation that consumers were interested in its business model.

“The fact that we could prove we had shown our idea to a larger audience and they bought into our vision was a really powerful message to go back [to VCs] with,” says Mike.

“On the cap table side, I don’t expect it will be too much of an issue either. We have a voting trust agreement in place with all voting rights assigned to Logan, our CEO, as trustee, so there are no complicated corporate logistics to handle,” he concludes.

The Future of Finance?

The growing acceptance and popularity of alternative financing methods are not limited to the world of venture capitalists and industry insiders either. As Arsh points out, “the general mood has shifted even since we started thinking about capital and fundraising. I think a lot of people are more open to doing things differently with tech and with financing. This is on an upward trajectory, things are only going to get better.”

Part of the appeal is that new investors bring more than just their money to a company, they’re new owners that are keen to contribute in any way they can to a company’s success.

“The people who invested in us through FrontFundr are also the most engaged and the most willing to help us out with user testing,” Arsh says. “It makes sense though—they’ve seen all our materials and they’re personally invested in our company. They're passionate supporters we can lean on, and we have so many more of them than we do VCs. They’re cheering us on as hopeful first users, they’re a huge value add.”

Though it took a lot of effort, the hard work clearly paid off for Willow. With the help of FrontFundr, they raised an impressive 133% of their original funding goal, a total of $1,333,350, which they will use to strengthen their marketing and growth efforts throughout 2021 as they work toward their goal of launching the exchange.

Check out Willow online to stay up to date with its latest news and if you’re interested in learning about crowdfunding for your own business why not reach out to our team?

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John Hills