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 shows new promise: study
The Globe and Mail by Richard Blackwell | January 28, 2014
Crowdfunding could become a crucial source of funding – and business intelligence – for small Canadian ventures, but regulators will have to step up to make sure fraudsters are squeezed out.
That’s the thesis of a new study to be released Wednesday by Toronto-Dominion Bank senior economist Sonya Gulati, who argues that crowdfunding will fill a widening gap in small-business financing.
Startups and “microenterprises” are particularly starved for financial resources, Ms. Gulati said in her report, and crowdfunding could represent a “fundamental transformation” in the way they access money.
Related: Let the Crowd Raise Capital
Crowdfunding, where huge numbers of supporters make small contributions to a cause or venture through Internet sites such as Kickstarter or Indiegogo, is estimated to generate $3-billion to $5-billion a year globally right now, although that is likely to expand sharply in the coming years.
So far, most crowdfunding is in the form of donations, but if the market can be opened up for loans or equity financing for small businesses, the economy will gain, Ms. Gulati said in an interview. “People have difficulty getting off the ground,” she said, especially if they are tiny and at the very earliest stages of a startup. “A lot of these businesses are innovative and creative based, and that is where you get some really good economic benefits.”
And the benefits of crowdfunding are not just financial. Gleaning guidance and market intelligence from hundreds of contributors can broaden entrepreneurs’ support networks, Ms. Gulati said. “With a crowdfunding network, you are able to tap into people who might actually be useful from a business perspective. If you are making leather-bound books, for instance, you might be able to connect with a distributor of leather. That might be a good support person.”
Related: Crowdsourcing: Equity Crowdfunding FAQ in Canada
Regulators are now grappling with the idea of using crowdfunding to raise equity. The U.S. Securities and Exchange Commission is in the process of loosening up its rules to allow equity crowdfunding, with strict limits on the amount of money any individual can invest.
Canada’s key regulator, the Ontario Securities Commission, has also proposed new rules. These would limit the amount a company could raise through crowdfunding to $1.5-million a year, restrict an individual’s investment in a single company to $2,500 and force crowdfunding “portals” to register with the OSC.
“Fraud is really the elephant in the room,” Ms. Gulati said. “It is a real stumbling block to allowing crowdfunding to reach its potential.” People who are otherwise willing to part with their money won’t do so unless they have some recourse if an investment goes bad, she said.
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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 eBrochure |Prezi or contact us at casano@ncfacanada.org.
Why crowdfunding for start-ups could turn out to be a huge mess
CNBC by Cadie Thompson | January 24, 2014
Looking to put your life savings into an unproven start-up, and hopefully cash out when it hits big?
Rules under consideration by the Securities and Exchange Commission would allow start-ups to "crowdfund" their businesses, raising capital from people who have traditionally been barred from making such risky investments.
But while the crowdfunding phenomenon (essentially raising small amounts of money from a large pool of investors) has worked for companies like Kickstarter and Indiegogo—which fund specific projects like films and music, trying to fund start-ups this way could prove disastrous for many people, experts say.
Related: Crowdfunding: Interest Among Serious Finance Players Grows
"In its infinite stupidity, Congress told the SEC you have to allow this kind of crowdfunding. What they didn't say is that we will turn it around if you don't put the right guards around it," said Lynn Turner, a former SEC chief accountant.
In October, the SEC proposed rules to address Title III of the 2012 Jumpstart Our Business Start-Ups (JOBS) Act. Title III is the section of the legislation that will allow equity crowdfunding from nonaccredited investors: people worth less than $1 million and annual incomes below $200,000. The SEC rules and regulations that will govern this new system are expected to pass next month.
The change could potentially be a goldmine for start-ups, allowing them to forgo expensive venture capital money and fund their businesses via the vast pool of mom-and-pop investors.
Related: Dispelling Myths: “Extraordinary popular delusions and the madness of crowdfunding”
"There's a danger for everyone involved," Turner said. "Unless you have the expertise to do the necessary homework for this type of investment, you are doing nothing different than making a bet at the craps table in Vegas, and the outcome in Vegas may very well be better."
For one thing, a start-up that finances this way may not have transparent disclosures or solid financial statements, making it hard to gauge the company's value or riskiness, Turner said. Low-net worth investors are unlikely to have the necessary expertise to figure that out, he said.
Another concern: How do you sell your stake if you want to get out? Hard to tell, said Barry Silbert, founder and CEO at Secondmarket.
Related: Let’s protect investors from risky startups: NCFA Canada response
When VCs invest in start-ups they always include in the deal that the company has to buy back its investment or sell itself to get a return, Turner said. But on crowdfunding deals, there is no requirement whatsoever that these little companies will have to go public or sell themselves.
"You are basically giving your money to a management team, and they can do whatever they want. Most Americans will never realize that they need those cash provision agreements," Turner said.
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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 eBrochure |Prezi or contact us at casano@ncfacanada.org.
One country has been doing equity crowdfunding for 8 years. Here’s what they learned
VentureBeat by David Drake | January 22, 2014
Even before crowdfunding became a global phenomenon on the rise, investors in Australia had already been funding startups through equity investments that work a lot like crowdfunding.
And they’ve been doing it for almost eight years: long enough to learn quite a lot about what works.
ASSOB (Australia Small Scale Offering Board) has been funding startups through equity investments, limited to only 20 unaccredited investors. This may not be entirely the same as the equity crowdfunding that is now shaking the 80-year-old securities law in the U.S., but needless to say, ASSOB has made great and impressive strides in the last eight years since taking its approach to crowdfunding online.
Related: Equity Crowdfunding Takes Shape in Canada
I was down there early last year to speak in several conferences, and I have met with ASSOB to discuss developments in Australia. I was fortunate to catch up again this time with Paul Niederer, CEO of ASSOB. From years of offline equity funding to the digital leap made in 2005, we can learn lessons from the ASSOB experience that will be useful as the rest of the world maps out its road to equity crowdfunding success.
While you may dispute that Kylie Minogue is the best thing that ever happened to the Australian music industry, you will have to agree that the pioneering ASSOB is the best lesson that ever happened to equity-based crowdfunding.
Related: Crowdfunding Seen Providing $65 Billion Boost to the Global Economy in 2014 (Infographic)
The following interview with Paul provides rich insights on the keys to a successful equity crowdfunding platform. Experience is still the best teacher, and ASSOB has loads of it.
David Drake: You are the longest running crowdfunding for equity platform there is. What can you tell us about the history of ASSOB?
Paul Niederer: In 2005 we decided to take an offline unaccredited and accredited capital raising business online. Eight years later over 300 raises have been handled with over 2,500 investors having invested. Only equity transactions are handled, and nearly $140 million has been raised to date. The smallest raise is $55,000 and the largest $3.5 million.
David: What are three of the strengths of ASSOB?
Paul: 1) Internal legal monitors [for] people, entity and offering compliance. 2) Handholding through the process by ASSOB Partners and ASSOB. 3) Templated process to make it easier for capital raisers.
David: What were three of the weaknesses in the past?
Paul: 1) Not having oversight of the issuers share registry. 2) Thinking it could be all done online. 3) Expecting issuers could manage large parts of the process themselves.
David: How is ASSOB going to operate in the US now with your new investors, and what are the synergies you see?
Paul: ASSOB has licensed the platform to Offerboard.com. They will be using the ASSOB capital raising engine, but their implementation will be different than ASSOB’s — understandably so, as Title III (unaccredited investors) will not have access to the platform until part way through 2014
David: ASSOB platform exemption only allows 20 investors, so how do you engage the crowd and the crowdfunding in this limitation?
Paul: Every raising builds its own crowd. Some raises have hundreds in their crowd, others have thousands. In this respect it does not differ from the majority of reward crowdfunding platforms. Unlimited accredited and overseas investors can exist, but only 20 unaccredited investors per annum. This is strictly monitored. Issuers need to ensure that when they accept investment from unaccredited investors, they choose the 20 largest suitable applications and return the funds for the others.
David: What do the Aussies have that the U.S. doesn’t? You have been on this longer than we have.
Paul: There is more emphasis in the Australian legislation on putting the onus of responsibility on the investor. If they have acknowledged the warnings that they may very well lose all their money, then provided the offer has been marketed compliantly, the onus is on the investor.
David: Tell us about a success story — in your eyes — in one of the investments.
Paul: We have had mining companies go from an ASSOB raise to international stock exchanges. Other companies have exited through trade sales.
David: What are three things you advise investors to take away?
Paul: The relationship is always between the issuer and the investor. We purposely do not give advice. However, we do suggest they take independent advice. If they have doubts, they have 10 days to seek a refund, and they should thoroughly do their own research as there is a chance they could lose all their money.
David: What are three things you advise issuers to take away?
Paul: Teamwork is required to raise the capital you need. You need a good story, team, followers, and an aggregating platform that keeps your raise compliant and is proven to raise capital. Only make promises you can deliver on.
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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.
New Report: The ROI Of Crowdfunding
Forbes by Cheryl Conner | January 21, 2014
Several months ago I wrote about the cautions many traditional investors have raised about the challenges crowd fund equity could create: Do You Really Want Dumb Money? Barry Schuler Weighs In On Crowdfund Equity’s Dark Side.
But a new research report released by Capital Crowdfund Advisors (CCA) last week sheds encouraging light on how entrepreneurs who crowdfunded have actually fared. In August 2013, CCA interviewed several hundred organizations in North America, Europe and Africa that had completed successful campaigns in an effort to ascertain the answers to four of crowdfunding’s most burning questions:
Related: Crowdfunding is essential for SME innovation and job creation
- Does Crowdfunding have a marketing benefit that actually translates into sales? (As a marketing professional, I’m especially anxious to know).
- Does Crowdfunding create jobs?
- Does Crowdfunding deter follow-on investment (the focus of my earlier article), and
- What was the ROI of each successful campaign?
The new report was sponsored by Ellenoff, Grossman and Schole LLP, one of the most active IPO firms in the U.S. and an organization that’s been highly involved in the advancement of crowdfunding. Research was led by CCA principles Sherwood Niess, Dr. Richard Swart (who brought the findings to my attention this week) and Jason Best.
Related: Crowdfunding Seen Providing $65 Billion Boost to the Global Economy in 2014 (Infographic)
The team chose respondents at random from a number of popular crowdfund platforms including Kickstarter, Indiegogo, Symbid and several others. None were philanthropic—all responses are from for-profit ventures. It is important to note an inherent bias in the fact that participants voluntarily chose to respond, which would be unlikely to happen in a case that the company’s experience with the crowdfunding model was bad. Also, we should note that none of the cases of debt and equity crowdfunding (as opposed to rewards-based incentives) were U.S. companies, as crowdfund investing in the U.S. is not yet allowed.
But based on what we know so far, for companies who successfully crowdfund, what can they expect? In this report’s sampling, the average raised across all methods was $107,810 (with a mean of $40,300, as some results were exceptionally large). For an equity raise, the average was even higher, producing the U.S. equivalent of $178,790. In the process, firms sold between 5% and 50% of their companies, with an average of 15%.
Continue to the full article and answers --> here
Get the full report from Crowdfund Capital Advisors --> 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.
US Equity Crowdfunding Rules: 15 Things Every Entrepreneur Needs to Know Now
Equities.com |By Kiran Lingam | Jan 14, 2014
Equity crowdfunding promises to open up a new financing source for thousands of capital starved businesses around the country. Many entrepreneurs are wondering what this means for them and don’t have time to digest the complex 585 page rule proposal.
For those entrepreneurs without large amounts of spare time or excess legal budgets, here is a quick list of items that you should be aware of now:
1) It’s not legal yet. The rules can still change. The proposed rules were released on October 23, 2013 and are currently in a 90 day comment period. The absolutely earliest that equity crowdfunding in the US could become legal is in the Spring of 2014, but more likely it will be Fall or Winter 2014.
2) Up to $1,000,000 in Financing. Private companies may soon be able to raise up to $1M in a 12 month period from an unlimited number of investors in small amounts (as low as $50 or $100 each).
3) Individual Investor Limits. Each investor will have a cap on the amount they can crowdfund in a year, generally between $2,000 - $5,000 for those with income and net worth below $100,000.
View: Summary of Canadian Crowdfunding Regulations
View: Canadian resources for proposed U.S. equity crowdfunding rules
4) Investor Self-Certification. Unlike Rule 506(c) of Reg D, Investors will be able to self-certify their income, net worth and previous crowdfunding investments. So no worrying about checking investor tax returns or brokerage statements.
5) Everyone can participate. No longer will early access to the next Facebook or Instagram be limited to the 1%. Unaccredited investors will be able to participate in your financing up to the individual investment limits.
6) Simultaneous Reg D Offerings. You will be able to run simultaneous Reg D and crowdfunding offerings. This means that you can do a standard offering with accredited investors and use the crowdfunding offering solely for unaccredited investors.
7) Limited Advertising. You will be able to broadly distribute notices (a “Notice”) announcing your offering and including how much you are raising and directing people to your online platform. All other communications about your offering (i.e. about how great your company is) must take place on the internet platform for everyone to see.
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Australian Government review into crowdfunding: why retail investors could become the new venture capitalists
BRW |Caitlin Fitzsimmons Online editor | First released Dec 4, 2013
Australian crowdfunding platform Pozible is keen to offer equity-based fundraising to local start-ups if the government relaxes the rules on investment next year.
Public submissions to the Corporate and Markets Advisory Committee review on crowd-sourced equity funding closed last week, with most submissions calling for a liberalisation of the existing regime.
View: Canadian Crowdfunding Directory
Pozible co-founder Rick Chen, says Australia will “lose out” if it fails to seize the opportunity.
“We as a nation can’t afford to lose this - it’s about how to make Australia more investment-friendly to attract start-ups here or to attract start-ups who are here already to not go offshore,” Chen says, speaking on a panel on “innovation of money” organised by consultancy How to Impact in Sydney this week.
The current rules mean that a start-up can’t raise more than $2 million or transfer equity to more than 20 people in any given 12 months, a system that restricts risky early-stage investment to so-called ‘sophisticated investors’.
However, this is currently under review with CMAC, which includes representation from the Australian Securities and Investment Commission, due to report to government by the end of April 2014.
Related: FCAA Approves Equity Crowdfunding in Saskatchewan
The United States, Canada, United Kingdom, Italy and New Zealand have already enabled crowdfunded investment in the past year or so, albeit with different regulatory rules. Peer-to-peer debt financing is also available in many jurisdictions.
The committee received submissions from the Australian Securities Exchange; the legal community, including Norton Rose Fulbright, Minter Ellison and the Law Council of Australia; crowd-funding sites such as Pozible and iPledg; and representatives from the start-up community, social enterprise sector and investors.
There was general consensus that Australia should enable crowd-sourced equity investment in some way, but different suggestions on how to manage disclosure requirements and the risk of fraud.
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A New Model of VC in Canada: Brightspark Looks to Disintermediate Its Own Industry
TechVibes | Rob Lewis | Jan 13, 2014
Last week Techvibes reported on the stealthy seed round funding of Toronto's Hubba. While the cash injection dominated by Facebook friendly angels didn't sneak under the radar, a more interesting angle around another investor has emerged.
Toronto's Brightspark Ventures is listed as Hubba's lead investor and was responsible for more than $1 million of the round.
For those unfamilar with the 14-year-old venture capital firm, they won the CVCA's 2011 Deal of the Year Award for their joint investment in Radian6 (acquired by Salesforce for $326 million). But this time Brightspark has disintermediated its own industry and is using a new model built for a modern VC industry that is being challenged by innovative funding opportunities.
View: Borderless Investments: The Top US Venture Capitalists Investing in Canadian Startups
Techvibes got in touch with Brightspark's Managing Partner Mark Skapinker to learn more. According to Skapinker, Brightspark's new model is unique in Canada.
"We are the first Canadian VC to focus on accredited investors as fund investors instead of just relying on traditional fund-of-funds," he says. "As you likely know, the number of Canadian fund-of-funds has dramatically shrunk and is now made up of a few Government sources. So, instead of just relying on these sources, we now reach out and essentially crowdsource/crowdfund our fund investors."
Skapinker explained that Brightspark now creates a separate VC fund for every investment they make and finds angels (Canadian accredited investors) to invest in that fund. He describes it as essentially a “curated” deal model similar to efforts in the US (e.g. Fundersclub) and Israel (e.g. ourcrowd). Brightspark structures each investment as a "VC deal” and so are able to invest under the VC investment rules set by the security commissions.
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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.
