Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Category Archives: Equity Crowdfunding, Alternative Funding
Crowdfunding poses benefits, risks: IOSCO
Investment Executive | James Langton | Feb 6, 2014
Crowdfunding has the potential to develop into a credible investment option says a new report from the International Organization of Securities Commissions (IOSCO) research department.
The report, which focuses on peer-to-peer lending and equity crowdfunding, provides a global overview of the phenomenon, and the various regulatory approaches to it. It says that the crowdfunding market has doubled each year for the last five years to an estimated US$6.4 billion in 2013, driven by annual growth in peer-to-peer lending. Equity crowdfunding is smaller and has grown at a slower pace, it says.
The report says that while the crowdfunding market is small, it is growing fast, and, given "the focus of policymakers and regulators on growth and funding of the real economy means that this segment of the financial industry has the potential to develop into a credible investment option for sophisticated and retail investors alike."
Indeed, it notes that there are a number of benefits associated with these funding models, including "the ability to raise capital without giving up large parcels of equity interest, the spreading of risk, higher returns for low cost capital and the boost to the economy through encouraging the growth of [small businesses]."
Get Full IOSCO Crowdfunding Report: Download 62 page PDF
However, it notes that these benefits need to be balanced with the risks to retail investors, which include the risk of default or business failure, the risk of platform closure, the risk of fraud and the risk of concentration, the risk of illiquidity and cybercrime
The research concludes that the crowdfunding market does not present a systemic risk to the global financial sector at this point, however it suggests that this could change in time, given the industry's growth rate. It says the challenge facing regulators and governments around the globe is to strike a balance between encouraging crowd-funding and mitigating the risks associated with its growth, while protecting investor interests.
"With the next evolution of this industry being in the global nature of funding sources, the challenges ahead will include cross-jurisdictional contractual and legal harmonization, dispute settlement and resolution issues," it says.
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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada crowdfunding hub providing education, advocacy and networking opportunities in the rapidly evolving crowdfunding industry. NCFA Canada is a community-based, membership-driven entity that was formed at the grass roots level to fill a national need in the market place. Join our growing network of industry stakeholders, fundraisers and investors. Increase your organization’s profile and gain access to a dynamic group of industry front runners. Learn more About Us | Prezi or contact us at casano@ncfacanada.org.
14 British Crowd-Funding Businesses Cashing In On A Boom
Forbes | David Prosser | Feb 5, 2014
Britain’s alternative finance industry continues to break new ground. The peer-to-peer lending sector more than doubled in size during 2013, new figures reveal, as the crowdfunding community stepped up its efforts to exploit the inability of the Britain’s banks to lend – and the lack of appetite among many customers to borrow from them.
In all, the UK’s peer-to-peer lending sector lent £843m last year, 121 per cent more than in 2013, according to data published this week by the Peer-to-Peer Finance Association – and the very fact the sector now has its own trade body tells its own story. More than 3,700 businesses borrowed money this way, while 70,000 consumers took loans. The supply side is equally buoyant, with 86,000 active lenders in the sector last year.
View: A defining moment for UK Crowdfunding
Moreover, peer-to-peer finance represents just one part of the crowdfunding scene, with new models springing up all the time. An increasingly diverse sector hopes that official regulation, due to be implemented in April, will boost its appeal still further. Plans to offer tax breaks to investors in alternative finance, now being actively discussed by the Treasury, would be another shot in the arm.
That will no doubt prompt further launches in a business where first-mover advantage hasn’t always guaranteed success. For now, however, here’s 14 of the best British crowdfunding companies:
Peer-to-peer lenders
Zopa pioneered the crowdfunding model – its nine-year trading record makes it one of the world’s longest-established peer-to-peer lenders and its success has seen it widely imitated. It has so far lent more than £460 million to individuals and remains popular with lenders and borrowers alike.
Compared to Zopa, Ratesetter, launched in 2010 is the new kid on the block, but it has already managed to persuade savers to extend more than £170 million worth of loans to borrowers via its matched exchange model. Ratesetter hopes the fact that it operates a contingency fund, which kicks in when a borrower defaults, is a unique selling point.
Debt-based crowdfunding
Funding Circle wasn’t the first crowdfunding business to recognise that the fact Britain’s small and medium-sized enterprises were being starved of cash represented a business opportunity, but it is the most successful in its class. So far, it has funded £215 million worth of business loans – and its new venture in the US makes it Britain’s first crowdfunding exporter.
Related: 8 Considerations for successful debt-based crowdfunding
ThinCats is one for the crowdfunding aficionados. Like Funding Circle, it matches individual investors with small businesses raising money, but suits more sophisticated types interested in delving deeper into borrowers’ backgrounds. A system of sponsors, who conduct due diligence on borrowers, has also proved popular and the site has now lent more than £50 million.
Leeds-based Rebuildingsociety.com has been up and running since September 2012. The site has some catching up to do – total advances currently stand at around £1.6 million – bit the business has a second string to its bow. It also builds crowdfunding platforms for third parties, both in the UK and abroad. It’s a useful diversification strategy.
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Small businesses eagerly await crowdfunding regulation
Star Business Club | by Vikram Barhat | Feb 3, 2014
For cash-strapped small businesses, a new funding option in the works could mean a substantial and dramatic improvement for their access to capital.
Crowdfunding, more typically a platform for raising donations, is now letting business owners offer investors a stake in their companies in exchange for capital.
The contentious solution is being hotly debated between small business owners, industry advocates, and securities regulators.
Equity crowdfunding is a boon for new startups that don’t have the size or structure to raise money by going public with an initial public offering, advocates argue. Critics warn of the risks: Investors may end up with illiquid assets, negative returns or unsuitable investments for their risk profile.
Related: Crowdfunding could play key role in startup financing
The Ontario Securities Commission is getting ready to expand equity crowdfunding in the province. Currently, only accredited investors can buy shares of new companies, in what’s called an exemption under the OSC regulations. In a move first hinted at in August, the Commission said in early December that it plans to enact a new rule to allow more investors interested in startups to get in on the ground floor via a crowdfunding portal. The new exemption will be subject to a 90-day comment period and include a registration framework for crowdfunding websites. Once enshrined, it will give more investors first crack at stakes in startups.
That could be a dramatic shift. Under the current exemption, only 3 per cent of the Canadian population qualifies as an accredited investor — high-net worth individuals deemed to be sufficiently knowledgeable of investment matters and don’t need the protection of securities legislation.
Industry stakeholders agree that it all comes down to the creation of a regulatory framework that makes equity crowdfunding possible for entrepreneurs, while minimizing the attendant risks for investors.
View: Overregulation in crowdfunding will hurt Canadian startups and small businesses
Expanding the scope of crowdfunding will help businesses get off the ground by allowing access to a new source of capital to fill a critical funding gap in an efficient, transparent and cost effective way, says Myles Harding, an advisor of the National Crowdfunding Association of Canada (NCFA Canada), a cross-Canada crowdfunding advocacy group based in Toronto.
“Small business owners seeking early stage seed capital or growth capital recognize that there is a limited availability of investment capital for those purposes,” he says.
Some of the existing alternatives to crowdfunding include debt financing, provided by banks and asset-based lenders; angel investors, who are affluent individuals or groups who provide financial backing for startups in exchange for part-ownership; and venture capital, a form of private equity that usually comes when a business has proven its potential for exponential growth. However, these options may not be available to a fledgling business unable to offer compelling proof of growth penitential or assets that lenders can use as collateral.
“As a result, they are generally in favour of crowdfunding as a potential source of capital,” Harding says.
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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada crowdfunding hub providing education, advocacy and networking opportunities in the rapidly evolving crowdfunding industry. NCFA Canada is a community-based, membership-driven entity that was formed at the grass roots level to fill a national need in the market place. Join our growing network of industry stakeholders, fundraisers and investors. Increase your organization’s profile and gain access to a dynamic group of industry front runners. Learn more About Us | Prezi or contact us at casano@ncfacanada.org.
Crowdfunding could play key role in startup financing, expert says
Guelph Mercury | By Terry Pender | February 6, 2014
KITCHENER — A new way of crowdfunding could soon come to Ontario that has huge potential for growing businesses and creating jobs, says a lawyer focused on startups and the internet.
John Wires, an Advisor at the National Crowdfunding Association of Canada, told a technology and business audience at the Communitech Hub on Wednesday that proposed new rules for equity crowdfunding are expected from the Ontario Securities Commission sometime during the first quarter of this year.
Equity crowdfunding would allow people of all backgrounds to make investments in medium-sized businesses that are not publicly traded. Currently, securities laws only allow accredited investors, or those with net assets of at least $1 million and annual incomes of $200,000 a year, to make such investments.
Equity crowdfunding would enable a company to raise capital without preparing a prospectus at a cost of at least $100,000 and issuing shares, Wires said.
"If you are an entrepreneur and you want to raise money on the public market, you are going to have a tough time," he said."There is a serious access-to-capital problem for entrepreneurs."
Equity crowdfunding should make raising money a lot easier, but it requires fundamental changes to laws and regulations.
"Laws that require you to have a prospectus, which is a grandiose disclosure document that really, at the end of the day, nobody ever reads, ironically," Wires said.
View: Crowdfunding Presentation to Employment and Social Development Canada (Dec 2013)
Crowdfunding presents challenges, too, he said. Some businesses, including many startups, would have a hard time quickly giving an investor back their money if they wanted out. It can also be a challenge for a small company to manage a large number of investors or shareholders.
In an interview after his presentation, Wires said regulators must put in place strict rules to guard against fraud, or the potential benefits of equity crowdfunding will be reduced.
"If fraud takes over as the headline, I think the potential that equity crowdfunding holds will likely be significantly diminished," he said.
Check out: Equity Crowdfunding Lessons from the Past 8 Years
There must be laws and regulations to protect investors with incomes — people who are not now considered sophisticated investors, he said.
"Two important points — there needs to be an effective dispute resolution mechanism to deal with this," Wires said. "Second, there needs to be, in my opinion, a better enforcement branch or enforcement policy in place to deal with the bad apples."
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In Crowdfunding, Who is Responsible for Preventing Fraud?
Entrepreneur by Catherine Clifford | February 5, 2014
Who is responsible in the case that an investor loses his or her money to a fraudster in equity crowdfunding? That is the question that is at the root of much of the debate over how to regulate this new financial tool.
On the last day that public comments for proposed regulation for equity crowdfunding were accepted by the Securities and Exchange Commission, almost fifty letters were submitted with recommendations on how to change the rules. (Let’s be honest, we don’t stop procrastinating after college.)
Related: One country has been doing equity crowdfunding for 8 years. Here’s what they learned
The comment letters came from a wide variety of sources, from small-business advocacy groups to equity-crowdfunding portals to various members of the legal, regulating community to professional crowdfunding trade organizations. But many of the letters brought up one common concern: that the websites administering equity crowdfunding (or the “portals”) will be saddled with so much responsibility, they won’t be able to effectively function.
The SEC, which was assigned to write rules to regulate this newly legalized equity crowdfunding, released a preliminary set of rules on Oct. 23. That initiated a 90-day comment period which ended on Monday of this week. Regulatory issues brought up earlier in the comment period included appropriate investor caps, how an investor’s wealth ought to be determined and calculated, and the appropriate amounts of financial disclosure paperwork that ought to be required.
Related: US Equity Crowdfunding Rules: 15 Things Every Entrepreneur Needs to Know Now
Here is a breakdown of the latest hot-button issue: how to regulate the portals.
The regulation squeeze: The proposed SEC rules consider crowdfunding portals “issuers,” and that means that the portals are held liable for the entrepreneurs raising money on their sites. If an entrepreneur’s campaign to raise money is fraudulent, then the portal would be held responsible. At the same time, portals are not allowed to give “investment advice.” That means portals are responsible for investors losing money, but can’t give any advice. “The proposed rules put funding portals between a rock and a hard place,” said Kiran Lingam, general counsel for Seed Invest, an equity crowdfunding platform which currently deals only with accredited investors, in a letter to the SEC.
As a result, only a few portals would survive the regulatory environment: The combination of regulatory burdens will result in a very limited pool of portals, according to letter submitted to the SEC by the Small Business and Entrepreneurship Council, an advocacy group with over 100,000 members. “The combined regulatory and liability risks are far too great under current proposed regulations to expect a vibrant funding portal marketplace. That means less choice for issuers, as well as higher costs. Fixing the proposed regulations to provide clarity when it comes to liability and discretion on the funding portal’s part will allow for innovation, competition and accountability in the portal space,” said Karen Kerrigan, president and CEO of the SBE Council in her letter to the SEC. Having fewer portals is a negative for the industry. “Greater choices of funding portals will benefit investors and the entrepreneurs who will be using these platforms,” Kerrigan says.
Related: Equity crowdfunding first launched in Saskatchewan, but with investor risks
Kerrigan says the SEC has estimated that it could cost as much as $400,000 just to meet required regulatory hurdles to open an equity crowdfunding portal. That’s a lot of money for financial platforms whose revenue streams are built by taking a cut of relatively small investments.
Continue to the full article on Entrepreneur.com --> here
The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada crowdfunding hub providing education, advocacy and networking opportunities in the rapidly evolving crowdfunding industry. NCFA Canada is a community-based, membership-driven entity that was formed at the grass roots level to fill a national need in the market place. Join our growing network of industry stakeholders, fundraisers and investors. Increase your organization’s profile and gain access to a dynamic group of industry front runners. Learn more About Us |Prezi or contact us at casano@ncfacanada.org.
First crowdfunding fund launched
Financial Times by Elaine Moore | January 31, 2014
Crowdfunding website Crowdcube has launched an actively managed fund that will pick and choose early-stage businesses for investors.
The platform, which was used by TV presenter Kevin McCloud, of Channel 4’s Grand Designs to raise money for his property business, said that the fund was designed for people who want to invest in start-up and early-stage businesses but who lack the time to research and review pitches made by new companies on the website. “Our aim is to provide everyday investors with choice,” said Darren Westlake, chief executive.
Related: Equity Crowdfunding Platform Crowdcube Enters Canada
Investors will need to put in a minimum of £2,500 in the fund, which has a “preferred rate of return” of 7 per cent and will be managed by Strathtay Ventures, part of Braveheart Investment Group, the listed Scottish SME specialist. The annual management fee is 2.5 per cent and investors will be charged an initial set-up fee of 1.5 per cent.
Crowdcube is part of a growing alternative finance sector hoping that their websites can supersede the role that banks traditionally play in funding individuals or small companies. Some websites, such as Crowdcube, allow investors to pick and choose who they want to give money to, in return for a share of the equity in that venture. Others, such as Zopa, faciliate loans.
The sector, which is less than ten years old, has been making a serious effort in the past year to encourage “mainstream” investors to put in money.
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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada crowdfunding hub providing education, advocacy and networking opportunities in the rapidly evolving crowdfunding industry. NCFA Canada is a community-based, membership-driven entity that was formed at the grass roots level to fill a national need in the market place. Join our growing network of industry stakeholders, fundraisers and investors. Increase your organization’s profile and gain access to a dynamic group of industry front runners. Learn more About Us | Prezior contact us at casano@ncfacanada.org.
Overregulation in crowdfunding will hurt Canadian startups, small biz
Canadian Manufacturing | ©The Canadian Press | January 30, 2014
TORONTO – Canadian startups are in a prime position to cash in on the growing popularity of crowdfunding, but regulators need to ensure that incoming rules do not hinder that potential, TD Economics warns.
According to the 13-page report, the global crowdfunding market is estimated to be worth $3.25 billion, with the majority of the funds coming from North America and Europe.
But as other jurisdictions, mainly the US, move to set rules on how crowdfunding can operate, Canada has only taken tentative steps towards a regulatory framework. In doing so, it runs the risk of losing investments for startups and small businesses.
“Due diligence and getting it right is likely the prudent course of action _ there is an advantage to letting others go first and refine the best practices. However, Canadian regulators cannot drag their feet too long,” wrote senior economist Sonya Gulati. “If they do, there is the potential for entrepreneurs and enterprise owners to shift to jurisdictions which embrace crowdfunding. This leads to the potential loss of economic opportunities here in Canada. It also reduces the scope for startups and entrepreneurs.”
Related: Crowdfunding is essential for SME job creation and innovation
For instance, the report noted that the US has already loosened the rules over equity funding, as have other countries such as Australia, the UK, France, Belgium, Germany and the Netherlands. Currently, in Canada, crowdfunding is used only to solicit one-time donations whereas elsewhwere ongoing equity funding is possible.
Although crowdfunding accounts for a small fraction of overall business funding, Canada needs to act quickly on rules to govern the growing industry, TD says.
Crowdfunding has gained momentum in recent years with the popularity of websites like Kickstarter, which arrived in Canada in September 2013.
Since its founding in 2009, more than 5.5 million people have made $960 million in donations on the Kickstarter site to 55,000 projects ranging from a human-powered helicopter to the upcoming Veronica Mars movie by the creators of the now defunct cult TV hit.
According to the National Crowdfunding Association of Canada (NCFA), there were 45 crowdfunding platforms in Canada as of Jan. 2013, said the report.
Gulati noted that rules are needed to address a variety of concerns related to the industry, such as the potential for fraud, patent infringement and copyright concerns. But in doing so, regulators need to ensure they do not overregulate the crowdfunding industry.
Download the TD Economics’ crowdfunding report --> here
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