Financing your growth through crowdfunding

Issue link:

Contents of this Issue


Page 0 of 1

MARKET CREDIBILITY REPUTATION DONOR EXHAUSTION PUBLIC FEAR OF ABUSE MARKET MARKET CREDIBILITY CREDIBILITY REPUTATION REPUTATION DONOR DONOR EXHAUSTION EXHAUSTION PUBLIC FEAR PUBLIC FEAR OF ABUSE OF ABUSE Financing your growth through crowdfunding But while crowdfunding is still a very new and exciting way of raising capital, mining companies should be aware of its inherent risks, which could include 3 At a time when mining companies are struggling to stay afl oat, many are turning to crowdfunding as a viable option to raise capital. Nearly one-third of junior minors need to raise additional funds within six months, and 35 percent of major miners anticipate a need to change their capital structure within one year, according to the Grant Thornton Global Mining Survey. Traditional capital markets that historically supported venture issuers have been dwindling in recent years, contributing to the downward cycle for small scale exploration. As traditional forms of funding appear to be shrinking, however, crowdfunding is increasing in popularity. In 2013, the crowdfunding industry grew to over $5.1 billion worldwide. 1 Moreover, a 2014 report released by The Crowdfunding Centre reveals that more than US$60,000 dollars was raised on an hourly basis via global crowdfunding initiatives. Also during this time period, 442 crowdfunding campaigns were launched globally on a daily basis. 2 "Mining companies are leaving no stone unturned, looking for ways to stay a oat. Crowdfunding could very well be another option." Robert Riecken, Partner, Grant Thornton LLP mining industry practice group Toronto-based Klondike Strike aims to be the fi rst mining-centric equity crowdfunding portal. Earlier this year, it took a signifi cant step toward this goal by appointing a new CEO with strong ties to the mining industry. Chad Williams is the founder and president of Red Cloud Mining Capital and the former CEO of Victoria Gold Corp. His hope is to provide a valuable platform for mining companies to generate new capital and, ultimately, increase their chances of success. 1 negatively impacting one's reputation by failing to meet campaign goals, generate interest or deliver on a project after successfully gathering public support; 2 causing donor exhaustion, which can occur if the same network of supporters is tapped into multiple times, resulting in this network eventually ceasing to provide support; 3 deteriorating market credibility if third parties, such as investment banks, become reluctant to recommend or dissuade investment; and 4 public fear of abuse (many supporters may be concerned that, without a regulatory framework, the likelihood of a scam or an abuse of funds is high). 4

Articles in this issue

view archives of Insights - Financing your growth through crowdfunding