Category Archives: NCFA Blog

Jan 8, 2018: Intro Presentation on Raising Equity and Funding for your Startup

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NCFA Canada | Jan 15, 2018

Slides:  NCFA Canada Founder and CEO, Craig Asano, delivers a presentation on raising equity and funding for the graduating class of Founder Institute companies in Toronto on Jan 8:

  1. Equity & Funding Introduction Date: January 8, 2018 Prepared for: Founders Institute Toronto Prepared by: Craig Asano, NCFA Canada
  2. Fintech & Funding Association Massive Fintech Network Partners Advisors Members 90+ Platforms 20+ Providers 45 Portals 2018 2017 2016 2015 Oct 2012 Programs Services Global Network P1 P2
  3. Are you ready to raise capital?
  4. Are you ready to raise capital? Set your valuation appropriately • Look for comparable businesses • Geographic and investor group dependent • Discounted cash flow. Make your projections realistic. would you be willing to take your compensation as a % of forecast? • Ultimately a negotiation between investors and the business • Expect 10% - 30% dilution per round • Use preferred shares, convertible notes, SAFE / SAFT if uncertain or to avoid significant dilution How much time can you devote to funding? • Do not do this half ass. If after a defined period (ie 1 year) you’ve been unsuccessful then face facts (markets are highly efficient) • Understand potential impact to ego / brand equity and team motivation • Leverage templates. Be resourceful. Seek expertise.
  5. Are you ready to raise capital? How much money should we raise? • Determine key milestones that impact business’ value • IP strategy, Prototype • Sales and Revenue (ie repeat customers/month • Product/market fit or key development milestones • Human resources and team building (growth) • Raise what you need to get you to the next milestone (iterate and prove) Bootstrapping: advance your situation using existing resources Lean start-up: get to market and revenue positive as quickly as possible What non-dilutive sources of capital are available at each step?
  6. Are you ready to raise capital? Understand your initial capital structure (and dilution) • Founders (80-90%), Leadership team (10-15%), Advisors (1-3%) • Skin in the game • Put in writing and use vested agreements • Source cap table excel sheets online
  7. Where can I find Investors? • Identify potential investors and sources of funding (keep doors open): • Government grants / funds • Corporate sponsorships and grant programs • Friends and family, Loans and credit • Crowdfunding (Equity, debt/lending, reward, ICOs/tokens, Royalty) • Angel investors • Venture capital • Dealer-brokers, agents, intermediaries • Private equity interested in side-car investments • Ask for introductions • Global markets Sources of Private Capital
  8. Be strategic with your approach • Make a list of contacts that can realistically help (assign probability and amount you are seeking from them) • Seek to develop long term relationships and understand what you can offer them and vice versa. • Learning loop: Listen – learn – track and improve (alignment, probability) • Start building your funding networks yesterday • Online – personal & company profiles • Offline - Events, conferences, pitch forums, investor networks • Understand the timing of your ask relative to the ‘funding window’ and type of investor • Stay on top of funding research and news to find similar companies to learn from / with. • Ask for introductions • Turn advocates into loyal customers and investors Get in Funding Mode
  9. What are investors looking for? • A product/services that addresses a large market need (not a nice to have) • Team that can execute who has a solid understanding of business and challenges • Validation/proof (de-risk) • Some are seeking social impact or to balance impact with profits The Investment Process • Pitch deck is bare essential • Meet and greet is only the first step • All investment basics must be met • Due diligence review • Terms negotiated • Close (in person) What are investors looking for?
  10. Deal Breakers and Tips • Avoid one man team, no skin in the game, unrealistic valuations, serious character flaws • Raise equity capital with no clear purpose, to replace debt, pay big salaries, to develop an idea and not a business • Face to face meetings (3-5x more capital $ than email or call) • Securing initial key/lead investor will make raising $ significantly easier • Only invest if they know you, know the business and like the investment opportunity What you Need to get Started
  11. Basic Crowdfunding Models < $10K $10 - $250K < $100 - $350K+ < $250K - $3M+ Social Material Investment Benefits
  12. Raising Capital Online in Canada
  13. Wide distribution over the internet • Low cost, efficient, transparent capital • The `great equalizer` • Media/PR, awareness • Increase customer engagement and • Evangelize backers into investors (customer acquisition) • Reduce risk by getting feedback on new launches (product or ventures) • Market research Access to Capital Marketing Platform Validation • Raising funds via crowdfunding markets is a very public and transparent • Protect your IP and speak to a lawyer • Crowdfunding takes a lot of effort and commitment • The majority of Ideas fail to reach their funding goal • How will this affect your companies brand? Expose your Idea Resourcing Failure Crowdfunding Pros/Cons Benefits Risks For Companies
  14. Examples Source: Kickstarter Campaign page Innovation – Social – Incentives – Economic Growth Quidni Estate Winery (NCFA Director) • Just completed $100K equity raise (for 3% equity ownership) • Took over a winery. Went digital (including online wine sales). Converted virtual wine tasters into investors Impak Finance (Equity Offering) • Raised $1.2 million (goal was $500K for 6%) from 1450 shareholders to create first socially responsible Canadian bank • $500,000 in the first 24 hours! • Inclusive & accessible: $100 shares for $100
  15. NCFA Canadian Online Funding Directory Reward/Donation: Equity-based via Dealer: • Steady growth in portals • Equity, Debt & Royalties all emerging • Fintech is all the rage • Real estate and entertainment, film/media crowdfunding emerging Consumer and Small Business Loans:
  16. Crowdfunding Framework Planning & Strategy • The greater your planning efforts, the greater your chance of achieving your funding goal • Do not launch a crowdfunding campaign if you are not ready. (3 months) (40 days – 90 days) (Ongoing) Post-campaign • Your campaign is done but now you have to deliver on your promise • Fulfillment • Ongoing customer engagement Campaign Execution • Daily execution of tasks outlined in the campaign plan • Control, monitor and adapt Feedback Loop
  17. Success Factors SUCCESS 2. Network Strength • Sizeable online network and social media presence? • Will media/PR and influential bloggers cover your story? 1. Quality Idea & Pitch • Unique, enterprising and clear value proposition (conveyed online in a simple manner) • Get others excited about your story? • Clear funding target and specific goals? 4. Key Docs and Content • Compliant and necessary for investor review 3. Strong Committed Team • Is your team credible, committed and willing to deploy the resources and time to execute effectively? • Time management HARD WORK! 5. Marketing Campaign & Incentives • Planning and strategy with ability to execute through launch to post campaign
  18. Common Mistakes • We underestimated the time commitment involved • We didn’t test our campaign sufficiently • We launched before we were ready • We didn’t develop an accurate budget • We didn’t consult legal counsel or professional providers • We didn’t account for taxes • We tried to do everything on a shoestring • We didn’t realize how important the video was • We didn’t understand liability exposure (eg. misrepresentation) and intellectual property • We had little to no traction so we gave up • We blamed it on the portal
  19. Join Us Education & Research Market Access Crowdfunding Infrastructure Capital Raising Prep Services Support and Leadership Advocacy GET IT IN TOUCH Fintech & Funding Association ncfacanada.org crowdfundingsummit.ca

The National Crowdfunding Association of Canada (NCFA Canada) is a national non-profit actively engaged with social and investment crowdfunding, alternative finance, fintech, peer-to-peer (P2P), initial coin offerings (ICO), and online investing stakeholders across the country. NCFA Canada provides education, research, industry stewardship, networking opportunities and services to thousands of community members and works closely with industry, government, academia and eco-system partners and affiliates to create a vibrant and innovative fintech and online financing industry in Canada.  For more information, please visit: www.ncfacanada.org

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Self-regulation: Is it time?

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NCFA Canada | Robin Ford, Advisory Group | 12 Jan 2018

 

The problem

A.  NCFA’s objective for regulation is that it should cost-effectively support (or not unduly inhibit) a competitive and vibrant crowdfunding regime and fintech industry in Canada that provides enhanced access to capital and investment opportunities and is worthy of  investor confidence.

B.  However well-intentioned, the current regulatory regime is inhibiting innovation and competition in Canada (although other factors are also in play). Please see the most recent NCFA submission to Ontario Ministry of Finance: ‘Urgent Need for Regulatory Change’ or the Competition Bureau's market study report titled ‘Advancing the Dialogue on the Future of Financial Services’.

C.  Detailed, prescriptive regimes can cause harm by (among other things): (1) not providing the right incentives for businesses to take responsibility for managing themselves well and treating customers fairly, and (2) distracting senior management and boards from focusing on essential governance improvements, strategic planning, policy and process improvements, fundraising, marketing, etc.

D.  NCFA has argued that the regulatory environment in Canada must change so fintechs, and start-ups generally, may enter the market, grow, and thrive. But supportive regulation is not enough.   Businesses must do more to bridge the gap between starting up, scaling up and maturing.  This is especially true if regulation does not focus on the right things.

E.  So - what can platforms and issuers (and prospective issuers) do, besides continuing to lobby for regulatory change? Answer - quite a bit. This brief post aims to start a conversation about self-regulation and the “right things”.

 

Self-regulation

  1. Self-regulation can be defined as: “regulating (i.e, controlling or governing conduct) without intervention from external bodies”. Self-regulation includes written or unwritten internal policies and procedures (specific to a business) and may extend to regulation by an IIROC-type self-regulatory organization (Investment Industry Regulatory Organization of Canada).

  1. While the NCFA has no particular outcome in mind at this stage, we think most would agree that:

(1) as industries or businesses grow and mature, self-regulation becomes more important and must itself mature;

(2) good self-regulation can enhance the profitability and growth of businesses or sectors by reassuring and educating investors and clients/customers (building knowledge and trust), by improving and aligning business processes (for greater cost effectiveness), by helping to attract and keep employees and so on.

 

  1. There is another benefit.

“As regulators start to develop their own measures for setting and enforcing cultural norms there is a clear advantage for boards who can get ahead of this trend and demonstrate leadership in setting a culture that is strategically effective as well as meeting the lowest common denominator of regulatory acceptability. Companies with strong cultures that support their strategic aims will outperform those with weak or unaligned cultures.” - https://www.linkedin.com/pulse/why-culture-issue-board-julie-garland-mclellan/

Appropriate and effective self-regulation can also help to persuade an external regulator that the businesses being regulated pose a lower risk to its regulatory objectives. If so, supervision may be less intense and specific requirements may be less constraining. It can also help to shift the regulatory approach to one that is more principles based and outcomes focused, and to matters (the “right things”) that are arguably more important for the achievement of regulatory objectives than many of the prescriptive requirements that businesses in Canada now face (and not just from capital markets regulators).

See:  Fintech Regulation: Achieving the right balance to foster innovation

What outcomes should businesses be aiming for? There are several questions to ask:

(1) Our starting point is the UK Financial Conduct Authority's principles for businesses. Capital markets regulators in Canada tend not to require or focus on  these principles, but for UK regulators they are almost always the first priority.  Indeed, the regulatory approach of the FCA (and the FSA before it) has ensured that the principles have become not only the priority  for the capital markets regulators, but also for the regulated firms.

In the UK, regulated firms must be able to demonstrate to the FCA at all times that they meet the principles for businesses, which are:

  1. Integrity: a firm must conduct its business with integrity.
  2. Skill, care and diligence: a firm must conduct its business with due skill, care and diligence.
  3. Management and control: a firm must take reasonable care to organize and control its affairs responsibly and effectively, with adequate risk management systems [and, in particular - robust governance arrangements, a skilled and knowledgeable staff, and adequate record-keeping].
  4. Financial prudence: a firm must maintain adequate financial resources.
  5. Market conduct: a firm must observe proper standards of market conduct.
  6. Customers’ interests: a firm must pay due regard to the interests of its customers and treat them fairly.
  7. Communications with clients: a firm must pay due regard to the information needs of its clients, and communicate information to them in a way which is clear, fair and not misleading.
  8. Conflicts of interest: a firm must manage conflicts of interest fairly, both between itself and its customers and between a customer and another client.
  9. Customers relationships of trust: a firm must take reasonable care to ensure the suitability of its advice and discretionary decisions for any customer who is entitled to rely on its judgment.
  10. Clients’ assets: a firm must arrange adequate protection for clients’ assets when it is responsible for them.
  11. Relations with regulators: a firm must deal with its regulators in an open and cooperative way, and must disclose to the appropriate regulator any thing relating to the firm of which that regulator would reasonably expect notice.

 

We suggest that every business, regardless of regulatory requirements, should be able to make a clear, positive statement to its stakeholders about what it is doing to comply with these principles. 

Since regulation should be proportionate and reflect the nature, scale and complexity of the business (and the risk the activity may pose to consumers), each business will comply with the principles in a different way and will ramp up or change its internal standards and compliance as it grows and matures. At the same time, self-regulation should align with (and perhaps support) external regulation.

See:  The ICO Governance Deficit

(2) Better self-regulation for which sectors in particular? - portals, fintech, DLT, cryptocurrencies, start-ups, ICOs? What are the areas in greatest need of improved self-regulation (for either business improvement or greater trust or both)?

(3) What principles for businesses matter the most right now? For example, should we focus on standards of market conduct?  If so, then (as a first step) a code of market conduct might be suitable. If so, should it be an industry code of conduct that businesses can sign up to? How should it be enforced? Would the code of conduct  be worth the paper it is written on if there is no independent and transparent supervision?  Or would regular reporting by the businesses using the code be sufficient to persuade stakeholders that it is adding value?

(4) How should we take this discussion forward (if at all)?  What role could NCFA play - leader, issuer of guidance, educator?   What other organizations should be involved with this collaborative domestic/- global community effort?

We’d love to hear your views!

Please let us know what you think by email to info@ncfacanada.org by January 19, 2018.

 


The National Crowdfunding Association of Canada (NCFA Canada) is a national non-profit actively engaged with social and investment crowdfunding, alternative finance, fintech, peer-to-peer (P2P), initial coin offerings (ICO), and online investing stakeholders across the country. NCFA Canada provides education, research, industry stewardship, networking opportunities and services to thousands of community members and works closely with industry, government, academia and eco-system partners and affiliates to create a vibrant and innovative fintech and online financing industry in Canada.  For more information, please visit: www.ncfacanada.org

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FFCON18: VELOCITY Blockchain, Crypto, Alt Investing Conference (Mar 5-6, Toronto)

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FFCON18: VELOCITY

Blockchain | Cryptocurrency | Alternative Investing

Join Canada's leading financial technology and funding conference

Building upon three consecutive successful Canadian Crowdfinance Summits (CCS2015-2017), the National Crowdfunding & Fintech Association of Canada (NCFA) is proud to present 2018 Fintech and Funding Conference: VELOCITY (#FFCON18), an expanded 4th Annual of Canada’s leading financial technology and funding conference. If you are a fintech investor, a company actively raising capital or key decision maker/stakeholder in technology and capital markets innovation initiatives and programs, FFCON18 is a must attend event delivering the most comprehensive thought leadership, education, networks, investment and pitching opportunities to 500+ global participants. 2018 is focused on BLOCKCHAIN, CRYPTOCURRENCY and ALTERNATIVE INVESTING and will be held on March 5-6 in downtown Toronto at the historic Design Exchange and various partner sites: The theme is all about speed, efficiency and reducing friction: VELOCITY.

"VELOCITY" uncovers and celebrates the rising stars and who’s who of fintech, blockchain and alternative finance, connecting high growth entrepreneurs and startups seeking seed and growth capital with venture capitalists, retail and accredited investors and institutional asset managers. FFCON18 also attracts the industry’s thought leaders and pioneers, investors, technology and infrastructure providers, regulators, government, media and academia for an unforgettable ecosystem-building convergence in the historic Toronto Stock Exchange in the heart of downtown Toronto.

The conference features 5 different streams of content, immersive learning and networking over 2 full days, including 50+ speakers, 15+ pitching companies, dozens of workshops, VIP 1x1 meetings and cocktail networking receptions.

Hosted By:

Exclusive Presenting Partner:

FFCON18 SPEAKERS

50+ blockchain, cryptocurrency, alternative investing and fintech experts and innovators

Investors

Discover new blockchain, crypto and startup/scale-up deal flow opportunities and investment strategies. Gain access to high grow start-ups and leading-edge insights.

Professionals

Lawyer, accountant, marketing specialist or tech guru? Get access to emerging early stage companies, deal flow and partners through new financial instruments to generate revenue and leads for your practice.

Companies

Network and pitch your venture to investors, customers and partners. Learn about the latest funding strategies and options.

Enterprise

Connect with leading capital markets innovators, consultants, fintech and blockchain leaders to develop an internal sandbox, rapidly iterate, test, deploy a nextgen global solution.

Fintech Leaders

Celebrate the transformation of digital finance with fintech peers and share how you are unbundling and enhancing financial services, mint your brand while fostering global opportunities.

Policy Makers

Discuss and learn how emerging digital technologies will impact the future of financial transactions and services globally and what it means for existing regulatory cultures and policies.

Platforms & Ecosystems

Gain valuable industry insight and make new connections with customers, partners, investors, entrepreneurs and innovators.

Innovators

Join 500+ investors, entrepreneurs, hackers, and industry experts to learn, network and be inspired by leading-edge content and the power of co-creation, innovation, tech and the crowd!

FFCON18 PROGRAM

5 streams, immersive learning and networking over full days including 50+ speakers, 12+ pitching companies, company demos, workshops, VIP 1x1 meetings and cocktail networking receptions.

view full conference website

NCFA MEMBERS:  GET 20% OFF

Use code NCFA_MEMBER_DEAL

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FFCON18: VELOCITY Blockchain, Crypto & Alt Investing Conference: Meet one of the Volunteers (Janni Hjorth)

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NCFA Canada | Jan 8, 2017

With FFCON18:  VELOCITY.  Blockchain, Cryptocurrency and Alternative Investing Conference fast approaching March 5-6 in Toronto at the Design Exchange, we thought it would be great to feature some of the volunteers this year.  Meet Janni Hjorth.  A new comer to Canada from Denmark (4 months in Toronto) who has been volunteering and working on her own business and funding campaign.

Why did you choose to volunteer for FFCON18 and the NCFA?

Volunteering is a great way for communities to grow, for individuals to acquire new skills and to support those around us. But for me it’s also a part of my strategy to establish and grow my network in a globalized world, and the upcoming Fintech & Funding 2018 Conference - FFCON18:  VELOCITY and 'all things' Crowd & Crypto is a perfect fit.  We're looking to raise capital for our business, meet investors, movers ad shakers and expand our network in the fintech arena.

See:  FFCON18:  VELOCITY - Join Canada's leading financial technology and funding conference March 5-6 Toronto

I have travelled my whole life both for personal and professional reasons. The first time I moved to another country as an 18 year old, I realized that in order to become established and to accomplish my goals I needed to form fundamental networks. Those that come more natural to you when you live in the country you were born. I started understanding the importance of tapping into local communities and connecting with local organizations by volunteering for them. Ever since then I have practiced this no matter where I go, and so far I have lived in 7 countries. At the moment I am doing the same here in Toronto, volunteering has been an important part of my strategy to establish a network, getting to know the local culture and getting involved. The NCFA was a great place for me to offer my assistance, as they play an important role in the Canadian Crowdfunding and Fintech industry which I have a personal interest in.

Why crowdfunding?

It’s an excellent way for communities to come together to support causes and businesses that they believe in. It’s an invaluable strategy for startups. I have recently experienced this first hand as I had my own crowdfunding campaign on Kickstarter. Last year I co-founded a company in order to bring a travel footrest to market that required me to establish funding for the first production run. We utilized crowdfunding to enable this.

Where do you see the most value in crowdfunding events?

For a startup like mine crowdfunding has been about more than “just” establishing funding. It’s also been about creating awareness about my project and an avenue to connect with key individuals that have been willing to share their experiences and best practices with me. Especially as a newcomer, getting these connections is a key for success.

Tell us about your campaign:

My product is a travel footrest called HÄNGAR. We launched it on Kickstarter and reached our funding goal of $5000 within the two first weeks.  To date 9464 CAD has been raised from 118 backers (189% over target - we're so excited).

Where did the idea come from?

I initially came up with the concept of HÄNGAR on a flight where I was very uncomfortable. I had knee and leg pain and to relief the pain I tied my scarf around the seat in front of me and rested my legs in the hammock the scarf created. Based on this I created the first simple prototype, however it wasn’t until I reached out to my network and got involved with other entrepreneurs and startups through crowdfunding that I actually understood how to tackle this as a business venture. Without the knowledge exchange that comes along with crowdfunding, I would still be flying with a scarf. Events like the FFCON18:  VELOCITY is therefore an important forum where startups can grow in a face to face setting and of course seek the funding they need to move forward.

Will you be bringing your travel footrest to the FFCON18:  VELOCITY?

I am very excited to be participating as a volunteer and I will definitely be binging HÄNGAR along.

Volunteer Profile:
Janni Hjorth Kristensen

Origin Denmark
MSc in Events Management
Co-founder of HÄNGAR Travel

Crowdfunding experience: Kickstarter  campaign December 12th 2017 – January 12th 2018

Website: www.hangartravel.com

Check out the Campaign: http://kck.st/2jS1KvV

 


The National Crowdfunding & Fintech Association of Canada (NCFA Canada) is a national non-profit actively engaged with social and investment crowdfunding, alternative finance, fintech, peer-to-peer (P2P), initial coin offerings (ICO), and online investing stakeholders across the country. NCFA Canada provides education, research, industry stewardship, networking opportunities and services to thousands of community members and works closely with industry, government, academia and eco-system partners and affiliates to create a vibrant and innovative fintech and online financing industry in Canada.  For more information, please visit: www.ncfacanada.org

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Alan Wunsche, CEO, TokenFunder Joins National Crowdfunding Association of Canada’s Advisory Group

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NCFA Canada | Craig Asano | Jan 3, 2018

Alan Wunsche, Advisor, Blockchain and Fintech

TORONTO, JAN 3, 2018 – The National Crowdfunding Association of Canada (NCFA) today announced that Alan Wunsche, Co-founder and CEO of TokenFunder, has joined the Association`s growing Advisory Group to advise on the areas of fintech, blockchain and cryptocurrency.

Alan Wunsche, MBA, CPA, CA, CBP – Founder, TokenFunder and Co-founder/Chair, Blockchain Canada

Alan is a leading blockchain finance technologist focused on new blockchain business models and the disruptive impacts of blockchain on global wealth distribution. He is CEO & Chief Token Officer of TokenFunder, a regulatory-compliant blockchain venture funding platform with Ontario's first regulated Initial Token Offering. A Certified Bitcoin Professional (CBP), Alan is also Chair & Co-Founder of Blockchain Canada, a Canadian federal not-for-profit corporation with a mission to help Canada innovators be a leader in blockchain technology, and elected Canadian Chair of Canada’s ISO/TC307 Blockchain Standards Committee. A trusted business partner to numerous CIO’s, CFO’s CRO’s, CMO’s and CHRO’s, he brings hands-on technology experience as a finance, governance and risk transformation executive at a global bank (Scotiabank), management consulting (Deloitte, PwC), and various startups.

"Blockchain technology has ushered in a new world of digital finance, offering innovative businesses an entirely new financing mechanism and a new asset class for innovative investors.  Through a powerful new combination of cryptography, game theory, and economic incentives, businesses can now offer their investors digital tokens that live on a global public blockchain, posing a threat to traditional venture capital. These tokens can be programmed to represent equity, debt, royalty streams, or a variety of derivatives.  Launched as initial coin offerings or initial token offerings, these tokens now represent cryptoassets that token holders can securely own or will transfer amongst themselves without traditional securities exchanges.  As adoption of this financial innovation accelerates, regulators seek to promote the innovation and balance with investor protections. Associations such as NCFA and Blockchain Canada are at the forefront of this regulatory dialogue." -- Alan Wunsche, Founder and CEO, TokenFunder

“Alan has been the driving force behind TokenFunder, Ontario’s first approved ICO in the province and soon to be regulated dealer of tokens and Initial Coin Offerings.  As a new wave of financial innovation in capital markets is upon us, we welcome Alan’s expertise and collaborative efforts as the fintech infrastructure of 2018 unfolds to a massively growing audience.” – Craig Asano, Founder and CEO, NCFA Canada

# # #

About National Crowdfunding Association of Canada

The National Crowdfunding Association of Canada (NCFA Canada) is a national non-profit actively engaged with social and investment crowdfunding, alternative finance, fintech, peer-to-peer (P2P), initial coin offerings (ICO), and online investing stakeholders across the country. NCFA Canada provides education, research, industry stewardship, networking opportunities and services to thousands of community members and works closely with industry, government, academia and eco-system partners and affiliates to create a vibrant and innovative fintech and online financing industry in Canada.  For more information, please visit:  www.ncfacanada.org

MEDIA CONTACTS:
Craig Asano
Founder and CEO

NCFA Canada
416 618 0254
casano@ncfacanada.org

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[Nov 28 Wrap-up]: VanFUNDING 2017 GOING MAINSTREAM Blockchain & Capital Conference & Regtech Hackathon

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NCFA Canada | December 22, 2017

The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding, alternative finance, fintech, P2P, ICO, and online investing stakeholders across the country. NCFA Canada provides education, research, industry stewardship, and networking opportunities to over 1600+ 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.  For more information, please visit:  www.ncfacanada.org

 

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Nov 20, 2017: NCFA Canada Welcomes Competition Bureau’s recommendations to encourage competition and innovation in Canada’s financial services sector

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NCFA Canada | Robin Ford | Nov 20, 2017

Competition Bureau request for public comments on draft study:  Technology-led innovation and emerging services in the Canadian financial services sector

The Competition Bureau recently announced a draft report and issued a request for public consultation regarding technology-led innovation and emerging services in the Canadian financial services sector.  The consultation took place between November 6 and November 20, 2017 (11:59 pm Pacific time). and interested parties including NCFA Canada were invited to provide their feedback on the draft report no later than November 20, 2017.

Visit this link to learn more about the Competition Bureau and the scope and the premise of the study/report:  http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/04315.html

NCFA Canada's submitted response:

  1. NCFA welcomes this report and its recommendations to encourage competition and innovation in Canada’s financial services sector.
  2. We agree that " competition is good for both business and consumers—and regulation should be minimally intrusive on market forces". We also agree that SMEs "are key drivers of economic growth—and their success is crucial to Canada's long‑term prosperity".
  3. We agree with the barriers to entry listed in the draft report (paragraphs in the report are not numbered) but would add to the list: inadequate incentives and assistance by governments, public funders, and regulators compared to other jurisdictions (eg, tax incentives, start-up loans or guarantees, grants, collaboration on data collection and analysis, educational programs for investors and start-ups, help with regulatory compliance, etc).As the draft report mentions, the UK has been very assertive in supporting start-ups and fintech. HM Treasury recently announced that small businesses struggling to access finance from the banks have found funds via government requirements that the biggest banks pass on the details of small businesses they have rejected for finance to alternative finance platforms - Funding Xchange, Business Finance Compared, Alternative Business Funding, and Funding Option. <https://www.gov.uk/government/publications/designation-of-banks-and-finance-platforms-for-finance-platforms-regulations>4. With respect to barriers caused by regulation, we add only that regulatory burden also tends to favour larger incumbent firms.5. Regulatory arbitrage is not necessarily a bad thing, as the report appears to suggest.6. We support all the recommendations in the report, in particular the recommendation for a FinTech policy lead in this complex and fast moving area.7. We would like to see an additional recommendation for more transparency in regulatory analysis. It has been very difficult in the past to respond to regulators' proposals because the published analyses have not been clear or complete. The problem proposed to be solved by regulation is rarely defined, the reasons for concluding that a regulatory intervention is needed are rarely set out, alternative solutions are not described with the reason(s) why one solution has been chosen rather than another, and (published) cost benefit analysis or impact assessment is rare. This means that stakeholders must infer much of the analysis and often do not have the data they need to respond. We would like to see a more transparent regulatory approach to reduce the risk of unnecessary or incorrect regulation and to enhance collaboration.

    We would also like to see the encouragement of fintech advisory groups to governments and regulators with strong representation from the businesses themselves.

    8. The statements in the following paragraph are contestable - some are highly contestable.

    "The large financial institutions in this country did not fail, largely due to Canada’s strong regulatory regime and the sound business practices of those institutions. Because our financial institutions did not fail, demand for P2P lending and equity crowdfunding is significantly lower in Canada than in jurisdictions where the financial crisis had a greater impact or where regulatory regimes were insufficient to prevent widespread bank failure. In those jurisdictions, regulators responded by strengthening restraints on financial institutions, effectively causing a contraction in available SME credit. As a result, demand for P2P lending and equity crowdfunding increased significantly faster than in Canada."

    We suggest that references to support these conclusions be added.

    9. We are not sure why, in the description of the UK's regulatory framework for P2P, the word "forces" rather than simply "requires" is used.

    10. We do not agree that "in the UK, [a] renewed focus on competition has led to the establishment of the "twin peaks" of regulatory structure: the Prudential Regulation Authority (PRA) and the FCA." Rather, it was the other way round. As HM Treasury's consultation document of July 2010 states -

    "1.4 The UK’s ‘tripartite’ regulatory system made three authorities – the Bank of England (the Bank), the Financial Services Authority (FSA) and the Treasury – collectively responsible for financial stability, and, as a result, this system failed in a number of important ways."

    "1.6 Perhaps the most obvious failing of the UK system, however, is the fact that no single institution has the responsibility, authority or powers to monitor the system as a whole, identify potentially destabilising trends, and respond to them with concerted action." [https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/81389/consult_financial_regulation_condoc.pdf]

    The UK Government's decision to change the regulatory structure led to a renewed focus on (among other things) the competition objective of the regulator and (after strenuous debates in Parliament) a stronger competition objective was added to the legislation.

    11. We suggest that "risk" be defined. For most risk professionals, it simply means "uncertainty". With uncertainly comes both threat and opportunity. And of course risk does not exist in a vacuum, it is always 'risk to what?' (to competition? to regulatory objectives?).

    Thank you for the opportunity to comment.


 

The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding, alternative finance, fintech, P2P, ICO, and online investing stakeholders across the country. NCFA Canada provides education, research, industry stewardship, and networking opportunities to over 1600+ 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.  For more information, please visit:  www.ncfacanada.org

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