April 28th, 2017
Canadian Alternative Finance Crowdfunding Market Grows 48% from 2013-2015 and is Predicted to Reach $190 million in 2016
NCFA Canada | Craig Asano | December 13, 2016
Fresh Research Just Released
TORONTO, ON December 13, 2016 – The National Crowdfunding Association of Canada (NCFA Canada) and partners are pleased to release this ground-breaking report on the state of the alternative finance crowdfunding industry in Canada. Crowdfunding is on its way to being an integral part of the capital raising ecosystem in Canada and around the globe. With innovative and emerging fintech infrastructure, a growing number of funding portals and licensed dealer-brokers on both buy and sell sides can service a steady flow of start-ups and scale-ups interested in raising up to $5M of capital online to launch, grow, and commercialize ventures.
The 2016 Alternative Finance Crowdfunding in Canada is the inaugural report of NCFA’s annual exercise in providing Canadian benchmarks for market size, platform characteristics and funding transactions, as well as an overview of legal considerations, the regulatory environment and emerging market trends and developments in what is arguably one of the most innovative financing tools of our generation. Crowdfunding combines technology, the internet and the power of the ‘crowd’ to streamline the process of raising capital from a full spectrum of investors while filling an under-serviced funding gap in venture markets.
Market volume: Crowdfunding volumes in Canada grew 48% from 2013 to 2015 and reached $133 million in 2015 confirming that it is a genuine source of seed and growth capital for companies seeking funding with the market predicted to reach $190 million in 2016. Canadian markets are growing much slower than leading international comparators such as the U.S. and U.K. where online alternative financing volumes are reported at USD 36 billion and GBP 3.2 billion, respectively.
Market formation trends based on survey response data indicate that the industry is evolving with larger platforms emerging and an increasing number of issuers and backers entering the market. Industry niches such as real estate are growing rapidly in the U.S. ($3 billion in 2015) and are beginning to gain attention here in Canada. There was an increase in the percentage of platforms having more than 2,500 investors per year with 60% of the portals reporting between 1001-5000 investors on their platform in 2015.
Emerging Trends and Developments: The industry is diverse, encompassing many positive trends and emerging developments such as the growth of P2P / marketplace lenders, mainstream adoption of crowdsourced platforms (eg., Airbnb) and increasing popularity of blockchain powered 'Crowdsales' (or Initial Coin Offerings), as well as the launch of OSCs Fintech Launchpad initiative.
Risks to market formation: Canada has a complex web of regulatory prospectus exemptions that are available for raising capital online. For regulated crowdfunding markets to efficiently develop, regulators are encouraged to adopt uniform and competitive regulations while avoiding stifling the market. There is need for more education and awareness, transparency, standards and market confidence.
Call to Action:
Action needs to be taken now to address the risks of any non-competitive market stifling regulations and a much more active approach should be taken by all stakeholders to increase the awareness and financial literacy of the funding opportunities that exist for small to medium-sized businesses and participation opportunities that exist for investors. While alternative finance crowdfunding markets are quickly becoming a genuine source for early stage capital and are growing in Canada, they are not achieving their full potential and growing at a much slower rate than Canada’s international comparators in the United States and United Kingdom. Competing jurisdictions are moving forward and further ahead of Canada. Activity is being pulled south of the 49th parallel in a tale that is all too familiar to Canadians.
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Thank you for downloading the 2016 Alternative Finance Crowdfunding in Canada report. Hope to see you at the upcoming 3rd Annual Crowdfinance Summit and Alternative Finance Expo next March!
The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support and networking opportunities to over 1500+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at www.ncfacanada.org.