April 21st, 2017
National Crowdfunding Survey Data Results – Summary of raw results
In January and February of 2013, NCFA Canada partnered with the Exempt Market Association of Canada (EMDA) to host the National Crowdfunding Survey in Canada to gain a better understanding of the various stakeholder opinions on legalizing Equity Crowdfunding in Canada and provide Canadian securities regulators with feedback on many of the challenges and issuers put forth by the equity crowdfunding frameworks proposed by the OSC and CSA. The original survey introduction letters can be found here (EN / FR).
Summary of raw survey results
Who's in the crowd?: Survey participants by stakeholder category
- A 144 responders all representing start-ups and/or SMEs
- 75% of responders identified as either a planned portal or service provider
- 75% of responders considered themselves non-accredited investors while 25% were accredited investors
- 12 registrants self-identified including EMDs, investment dealers and portfolio managers
General Support: Should we adopt a crowdfunding exemption?
- 95% of responders voted that Canada should adopt a crowdfunding exemption under applicable securities laws
- 75% of survey participants were moderately to extremely familiar with the term crowdfunding
- 90% of survey responders agreed or strongly agreed that there would be significant benefits for both SME issuers and investors by adopting a crowdfunding exemption
Investor Motivations to make an investment through crowdfunding (Ranked in Order):
- Innovation and entrepreneurship
- Financial incentives
- Non-financial incentives
- Direct access to entrepreneurs
The top 3 investor risks inherent in Crowdfunding
- Investors can lose all their money (85% agree or strongly agree)
- May not be able to resell or redeem their investment (85% agree or strongly agree)
- Limited disclosure at the time of purchase and on an ongoing basis (80% agree or strongly agree)
Mover Advantages: Should Canada move ahead rather than wait for the US to finalize crowdfunding rules and regulations?
- 60% agree or strongly agree (23% were undecided)
Should Canada approve a crowdfunding exemption on a trial basis?
- 75% of responders believe that Canada should move ahead now
- 45% answered that a trial basis should be based on a limited period of time
- Only 6% indicated that a crowdfunding pilot should be restricted to a particular industry or sector
Should investors be limited on the amount of capital they can invest in any 12 month period?
What is the maximum amount of capital an investor should be able to invest in any 12 month period?
- In a close margin, 51.8% indicated that investors should be limited in the amount they can invest in a 12 month calendar period.
- Over 70% of the responders voted that the investment cap should be $10-15k or more.
- 65%, a clear majority of responders indicated that there should not be any further caps on the funds that can be invested in a single crowdfunding issuer within a 12 month calendar period.
Should investors be limited on the amount of money they can invest in any one Crowdfunding issuer in any 12 month period?
What is the aggregate amount of capital that an issuer should be able to raise in any 12 month period?
- 45% of survey respondents voted that there should not be an aggregate annual cap that issuers can raise in any 12 month calendar period. Respondents are passionate about adopting a crowdfunding exemption and are voting for a culture of entrepreneurship and innovation.
Spending Restrictions: Should issuers who raise capital in Canada be required to spend the proceeds of the capital raised in Canada?
Second Market: Should Crowdfunding securities be free trading securities after a period of time?
When should they be eligible for second market trading?
- 85% of survey respondents indicated that crowdfund securities should be eligible for second market trading after 12-24 months of the original purchase.
Disclosure of Financial Statements: Should an issuer be required to provide audited financial statements in connection with any Crowdfunding offering?
Please select an appropriate threshold where audited financial statements should be required:
Should issuers be required to provide On-going Disclosure after a crowdfunding offering is completed?
Directors and management of issuers should be required to certify the following:
- 80% agreed or strongly agreed to any statement in any offering document
- 70% agreed or strongly agreed to any oral statement in a video posted on the issuer’s or portal’s website
- 60% agreed or strongly agreed to any social media and website content
Should Canada allow investments through a portal whether through a crowdfunding exemption or other prospectus exemption under applicable Canadian securities laws?
- 70% of responders agreed or strongly agreed that Canada should allow the distribution of securities over the internet (e.g., portal) while 25% were undecided.
A portal should be required to undertake full due diligence on each issuer that seeks to raise capital on the portal similar to a registered dealer (e.g., know-your-client, know-your-product, and suitability obligations)?
- 62% of responders agreed or strongly agreed that portals should be regulated to undertake full due diligence on each issuer that seeks to raise capital on the portal similar to a registered dealer. This is a surprising statistic and not feasible for many portal business models.
An issuer should be able to post an offering on the portal with minimal due diligence by the portal?
- Conversely, 40% of responders agree or strongly agree that an issuer should be able to post an offering on a portal with minimal due diligence (e.g., basic background checks and fraud protection)
- 60% agree or strongly agree that a portal should certify (and incur liability if it is wrong) that there are no misrepresentations in any document posted by an issuer or the portal’s website.
- 40% are undecided, disagree or strongly disagree that a portal should certify (and incur liability if it strong) that there are no misrepresentations in any document posted by an issuer or the portal’s website (e.g., too much of a burden and expensive to administer)
Should a portal be responsible for ensuring that an investor complies with their annual investment limit or issuer investment limit in connection with any Crowdfunding offering through that portal?
Should portals and/or issuers be allowed to compensate promoters, finders, or lead generators for directing potential issuers and/or investors to the portal?
Should portals be allowed to advertise their deals on-line using social media and search engine marketing (e.g., Yahoo or Google)?
If advertising a crowdfunding offering is limited to the portal and/or issuer's website, should the portal and/or issuer be able to use social media to direct traffic to the portal and/or issuer's website?