Warning: preg_match() [function.preg-match]: Unknown modifier 't' in /home/content/68/10442368/html/ca/wp-content/plugins/mobile-website-builder-for-wordpress-by-dudamobile/dudamobile.php on line 603


July 2, 2015— Canada has recently become another nation to pursue the viability of equity crowdfunding as a tool to finance small businesses. This past year nations from the United States to New Zealand to the European Union, enacting regulations and exemptions for equity crowdfunding. In a previous blog post we talked about how crowdfunding is set to overtake venture capital investment over the next year, doubling from $16 billion to $34.4 billion. This showcases the potential impact equity crowdfunding can have on the future of private company fund raising.

In various provinces in Canada, securities regulators have enacted rules and guidance on exemptions for companies fundraising through equity crowdfunding. British Columbia, Saskatchewan, Manitoba, Québec, New Brunswick and Nova Scotia will participate in the new crowdfunding regulations, opening up the realm of private placement investment to the everyday person, even the unaccredited investor. Before, private companies could not solicit investments to the general public, meaning they could only advertise equity offerings from accredited investors and institutions like an investment bank or venture capital firm.

Under Canada’s previous securities law, the only way the general public could invest into a company is after the business went public through an IPO and thereby purchasing shares on the open public market. Now, this is no longer the case. Unaccredited investors can simply log on to a site and view an array of investment opportunities and select one that matches their investment objective.

Spain is making changes to its laws on 'crowdfunding'

Spain is making changes to its laws on ‘crowdfunding’

In a 2011 report from the Venture Law Corporation, figures show that today there should be at least 1 million accredited investors in Canada among the total population of over 34 million. Looking at the demographics of the 25-65 age group, around 25 million Canadian residents could be eligible to participate in private placements. This is a potential 25x increase in the investor pool. Canadian Equity Crowdfunding platforms such as SeedUps and Cloudfund offer investors and companies the opportunity to meet on a common ground and find the most attractive opportunity. This previously excluded population, can now invest side-by-side with accredited and angel investors.

The regulation is called the “Crowdfunding Prospectus Exemption,” which does not require an issuer of securities to include a prospectus. And funding platforms are not required to register as a broker dealer, which follows the same general structuring in U.S. crowdfunding legalize. What this does is make the process cheaper, more efficient, and most likely faster. By allowing unaccredited investors to participate, limiting the amount of documents required for entering into a funding round, a ripe environment is established for crowdfunding platforms to operate in.

Some of the law’s provisions include:

  • Companies can enter into up to 2 funding rounds in a year
  • The maximum reusable amount is $2250, 000
  • The maximum days the round can be open is 90
  • Investors may only invest up to $1,500 per company distribution
  • Crowdfunding portals may not offer investors advice or charge fees and commissions.

Equity Crowdfunding also presents a better option to reward and donation based crowdfunding as the latter gives an investor an actual stake in the business, which is ideally sold for at a greater value in the future. Donation based crowdfunding is not permitted to offer equity stakes. Equity gives investors a bigger incentive to support the company and also creates a mutual interest between company founders because their goal is to maximize shareholder value.

The ability to simply log on to an online platform to look for an investment opportunity among a pool of opportunities is what makes the equity crowdfunding realm a disrupting factor in the private placement space. For Canada, who has experienced a stagnating economy including a stretched out housing market and has felt the impact of the over 50% drop in oil prices over last summer, this can be the catalyst that spurs private business growth it so desperately needs.

Tags: , , , , ,

Canada’s CrowdFunding News

CBC.caSask. ridesharing website aims to fill gap left by STC shutdownCBC.caA Yorkton, Sask., web developer has created a ridesharing website to help facilitate travel when the Saskatchewan Transportation Company stops running [...]

Los Angeles TimesCrowdfunding for medical expenses is rising — when it should be eradicatedLos Angeles TimesNot all crowdfunding needs could be eradicated by universal healthcare. Even Canada, which has a well-developed singl [...]

CBC.caWhat data on Kickstarter projects in Kitchener-Waterloo revealsCBC.ca... crowd-funding campaigns fall into either the design or games categories, a new CBC data analysis project shows. CBC reporter Roberto Rocha crunche [...]

What 10000 Kickstarter projects reveal about Canada's entrepreneursCBC.caThe CBC looked at six years of Kickstarter projects with data provided by Web Robots and HiveWire, two firms that track crowdfunding sites. Only Ki [...]

CBC.caWhat 10,000 Kickstarter projects reveal about Canada's ... - CBCCBC.caCrowdfunding sites have changed how creative entrepreneurs fund their passions. Here's what we found in the largest analysis of Canadian Ki [...]

Whistler QuestionCrowdfunding set up for local injured in VietnamWhistler QuestionUpon hearing the news of Christensen's injuries and the cost of getting her back to Canada, her friend Bretlyne Friday knew she wanted to [...]

ETCanada.comNeil Patrick Harris Backs Museum Crowdfunding Campaign For 'Muppets' ExhibitETCanada.comA New York City museum is asking fans of Jim Henson's “Muppets” to help pay for an exhibition featuring origin [...]

Canada NewsWire (press release)Fineqia Partners with JOI Media's Katipult for Technology PlatformCanada NewsWire (press release)Fineqia will use JOI's proprietary crowdfunding software product Katipult, named as one [...]

Live Crowdfunding .tv

Canada's Crowdfunding Today ....MORE VIDEOS