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
ASC and Nunavut Securities Office Publish Proposed Start-up Business Exemption for Comment
ASC via CNW Newswire | October 19, 2015
The ASC
The Alberta Securities Commission (ASC) and the Nunavut Securities Office today published for comment Proposed Multilateral Instrument 45-109 Prospectus Exemption for Start-up Businesses, which sets out a proposed prospectus exemption to facilitate capital raising by start-up and early stage companies. Subject to certain conditions, the proposed exemption would allow a start-up or early stage business to raise up to $1,000,000 using a streamlined offering document together with a bluntly worded risk warning. Investors would be permitted to invest up to $1,500 in a business or $5,000 with the advice of a registered dealer.
Although not limited to crowdfunding, the proposed exemption could be used to raise funds through an online portal. If implemented, the new rule would only create a new prospectus exemption; if a financing occurs through a portal, the portal would still need to comply with the registration requirement -- e.g., be registered as an exempt market dealer or investment dealer.
The proposed exemption is designed to coordinate with the crowdfunding blanket orders adopted by the securities regulators of British Columbia, Saskatchewan, Manitoba, Québec, New Brunswick and Nova Scotia.
The comment period expires December 18, 2015.
SOURCE Alberta Securities Commission 
For further information: Alison Trollope, Alberta Securities Commission, 403-297-2664; Shamus Armstrong, Nunavut Securities Office, 867-975-6587
View the Proposed Multilateral Instrument 45-109 (Prospectus Exemption for Start-up Businesses) This is the update that replaces 45-109
ASC's Request for Comments
We welcome your comments on the Proposed Start-up Business Exemption. In addition to any general comments you may have, we also invite comments on the following specific questions.
- In setting the lifetime limit of $1,000,000 per issuer group, our goal was to set a limit after which an issuer should have sufficient funds to use the OM Exemption. Do you think this is the appropriate threshold? If not, please provide what you would consider acceptable limits given the parameters of the Proposed Start-up Business Exemption.
- The Proposed Start-up Business Exemption would prohibit an issuer from accepting an investment from an investor of more than $1,500 in a single investment under the exemption, and no more than $3,000 in respect of an issuer group in a calendar year if the distribution is conducted without a registered dealer. The Proposed Start-up Business Exemption would prohibit an investor from investing more than $5,000 in a single investment under the exemption, and no more than $10,000 in a calendar year if the distribution is conducted with a registered dealer. Do you agree with these limits? Are investors generally able to withstand the loss of a $1,500 investment? Do you agree with allowing a higher limit when a registered dealer providing suitability advice is involved? Why or why not?
- Given the potential ongoing costs associated with having a large number of security holders, do you think that the Proposed Start-up Business Exemption will be a useful tool to assist very early-stage and start-up businesses with raising capital?
- Should there be some form of ongoing disclosure e.g., financial statements or notice of proceeds, that issuers using the exemption should be required to provide to their security #5205021 -9- holders? If so, what should it be? What do you estimate as the costs of preparing such ongoing disclosure?
- In addition to filing the offering document, should issuers be required to file all other information (e.g., marketing materials) provided in conjunction with the offering with the regulator?
- Does the risk acknowledgement provide warning to investors of the major risks of investing in a very early stage or start-up business? Are there any other warnings that should be considered?
- The Proposed Start-up Business Exemption is only a prospectus exemption. There is no corresponding registration exemption; consequently, if a portal is used it must be registered as an exempt market dealer or investment dealer. Do you think that this will be a significant barrier for access to financing through the Proposed Start-up Business Exemption?
- If an Alberta-based or Nunavut-based issuer were using the Proposed Start-up Business Exemption, in what other jurisdictions would they likely also seek to raise funds?
- Do you think issuers would want to use the Proposed Start-up Business Exemption in Alberta or Nunavut in conjunction with using Multilateral Instrument 45-108 Crowdfunding (MI 45-108) in other jurisdictions? If so, would it be helpful to issuers if they were able to use, and file, the form of offering document available under MI 45-108 in connection with a distribution under MI 45-109? Are there other accommodations that should be considered for the purpose of harmonization?
- Would it be helpful to issuers to be permitted to use and file Form 45-106F2 Offering Memorandum for Non-Qualifying Issuers, the form of offering memorandum required under the OM Exemption, in lieu of Proposed Form 45-109F1 Start-up Business Offering Document in connection with a distribution under MI 45-109?
- In Alberta, we are considering whether ASC Blanket Order 45-515 Exemption from certain financial statement requirements of Form 45-106F2 Offering Memorandum for Non-Qualifying Issuers will be necessary if MI 45-109 is adopted. Do you anticipate issuers would use Blanket Order 45-515 if MI 45-109 is available?
Please submit your comments in writing on or before 18 December 2015. If you are not sending your comments by email, please send a CD containing the submissions (in Microsoft Word format).
Please note that comments received will be made publicly available and posted on the Alberta Securities Commission website (at www.albertasecurities.com). You should not include personal information directly in comments to be published. It is important that you state on whose behalf you are making the submission.
Address your submission as follows:
Alberta Securities Commission Superintendent of Securities, Nunavut
Deliver your comments only to the addresses below. Your comments will be distributed to the other participating jurisdictions.
Alberta Securities Commission
Suite 600, 250 – 5th Street SW
Calgary, AB, T2P 0R4
Attention: Jessie Gill Legal Counsel, Corporate Finance Email: Jessie.gill@asc.ca
View the Proposed Multilateral Instrument 45-109 (Prospectus Exemption for Start-up Businesses)
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 1100+ 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 About Us or visit ncfacanada.org.
Alternative Finance Update: Key Crowdfunding Trends
The Huffington Post by David Drake | October 16, 2016
Alternative Finance is on the rise, and it is set to conquer a 3.3 trillion market opportunity. It includes crowdfunding, peer to peer lending, equity crowdfunding, financial technologies, or fintech, invoice trading and more.
The rapid evolution of regulations, associated technologies and support structures that were ruled out in the past for alternative finance are now currently possible. Thus, Crowdfunding is increasingly gaining traction in the space.
Key Crowdfunding Trends
The scope for investment and access to private equity is growing by leaps and bounds. The Securities and Exchange Commission (SEC) has undertaken a number of pathfinding regulations in this arena. The new rules for investors in September 2013 under title Title II of the Jumpstart Our Business Startups (JOBS) Act has opened the doors to equity crowdfunding for accredited investors. It also enabled the creation of new financing models for angel investors, early-stage companies as well as smaller businesses local in size and scope.
Related: The University of Cambridge & University of Chicago Join Forces to Launch the 2015 Americas Alternative Finance Benchmarking Survey
The sheer variety of available opportunities for investors is expanding rapidly and this can be seen in the growing number of niche online platforms. Accredited investors can now access previously unavailable opportunities in a number of different asset classes and business sectors such as consumer products, healthcare, film, entertainment and real estate. Moreover, the increasing popularity and interest on these sectors are forcing issuers to provide levels of transparency and disclosure to private placement of equity, which was seen only for public companies raising capital from the public. Consider this potential in the space - self directed IRAs currently hold something like $146 billion in assets which can easily be shifted to other avenues of investment.
The explosion in transparency and communication means that small investors using these online platforms are able to gain information and thus, more access to institutional quality deals. They can structure debt and equity deals for their individual portfolios which would have been unthinkable in the past except for large institutional investors.
Related: Video Interview: Optimize Capital Markets Supercharges Crowdfunding with Institutional Investor focus
Changes in regulation and technology should accelerate the shift to alternative finance providers, from traditional sources of finance like banks, especially for personal and small business loans. The two largest peer-to-peer lenders, Lending Club and Prosper, grew by 65 times from $26 million in 2009 to $1.78 billion in 2014. Both investors and borrowers would be particularly interested in tapping the assets in retirement accounts which are estimated at over $7.3 trillion.
A growing Equity crowdfunding space offers investors ownership in business enterprises with the possibility of exits through an IPO or a merger or acquisition. Peer-to-peer lending, as opposed to peer-to-peer investing, puts individual borrowers in touch with investors and is expected to gain in popularity. There is another boom which is quickly gaining traction - real estate crowdfunding. Times Realty News is tracking real estate crowdfunding platforms around the globe. A more detailed information including trends in this sector is discussed in a report released by Times Realty News.
View the original article --> here
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 1100+ 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 About Us or visit ncfacanada.org.
Seedrs, KissKissBankBank Partner with ING on Crowdfunding “Fast Track”
Crowdfund Insider by JD Alois | October 14, 2015
ING Belgium has formed a partnership with two leading crowdfunding platforms. Seedrs, based in the UK, and KissKissBankBank, based in France, will power a fast-track process for clients looking to raise capital. In recognition of the fact that bank loans are not optimal for entrepreneurs and early stage companies, ING will now offer equity crowdfunding on Seedrs and rewards based crowdfunding on KissKissBankBank. This will allow SMEs to diversify sources of funding while engaging a much broader audience.
According to information provided by the bank, using the ING fast track procedure, will only take the entrepreneur a couple of clicks to get access to the selected platform. Seedrs and KissKissBankBank will then swiftly get in touch with the entrepreneur and give him a first indication on the suitability of the project for their platform and on the chances to succeed. The fast track procedure can save the entrepreneur significant time and effort. The process is designed to improve the entrepreneur’s chances on successfully completing his crowdfunding campaign. Across continental Europe there is a growing recognition that an equity culture must be fostered to help build a more innovative and dynamic pan-European economy. Crowdfunding is recognized as a much needed catalyst in this objective.
Related: Equity Crowdfunding Platform Seedrs Raises $15.6M To Launch In US
Jeff Lynn, co-founder and CEO of Seedrs, said he was quite excited to work with the global bank and Belgian business community.
“To our knowledge this is the first time that a well-respected, global financial institution like ING has partnered with a leading international equity crowdfunding platform like Seedrs, and we think this relationship is very encouraging for the future of business finance. We’re proud to have been chosen as ING’s partner for this venture, and we see our selection as further validation of our “equity crowdfunding done properly” approach,” stated Lynn.
Erik Van Den Eynden, Head of Midcorporates & Institutionals ING Belgium, viewed the partnership as allowing his bank to aid customers to “keep a step ahead in their business”.
“Our partnership with KissKissBankBank and Seedrs is an example. Our aim is to strengthen our customer’s project and to support them in the growth of their business. Our role is therefore much larger than that of your classic lender: we are a collaborative partner and advisor.”
Related: New online lenders make it easier to get small businesses loans
It is a fact that entrepreneurs who have access to several funding sources automatically find themselves in a more comfortable financial position. When assessing a loan application, banks naturally also look at the makeup of the company’s resources. Through crowdfunding, entrepreneurs can therefore reinforce their business as well as their position when applying for a loan. ING benefits by maintaining the relationship with the SME and may be well positioned to provide debt financing and other services going forward.
ING also recognizes that a benefit of crowdfunding is that it gives the entrepreneur a chance to estimate whether the market is ready for such products or services. The exposure to a broader audience of course also creates a good marketing opportunity for an enterprise.
View: The Future of Financial Services
ING states that a project will be assessed within two days at most whether or not the project is suitable for the respective platform and what the chances of success are. If the project receives a positive appraisal from the platform, the entrepreneur can immediately kick off his crowdfunding campaign, supported by the platform.
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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 1100+ 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 About Us or visit ncfacanada.org.
Part III: Is Culture Killing Equity Crowdfunding in Canada: Real Estate Spotlight
Crowdfund Insider | NCFA Ambassador
Real estate investment is a consistently hot news topic. Open any newspaper or news website in Canada and coverage of the real estate market is easy to find, particularly in Vancouver and Toronto. Fortunes are made investing in residential and commercial properties. Speculation, offshore investors, bubbles and REITs are cocktail party fodder. Enter real estate crowdfunding – offering the promise of exciting new ways for Canadians to become mini land barons.
Real estate crowdfunding is projected to climb to $2.57 billion globally in 2015 up from $1.01 billion last year and $396.4 million in 2013, according to industry researcher Massolution. This makes real estate one of the hottest sectors in the global crowdfunding industry sized at $16.2 billion overall in 2014 and projected to exceed $32 billion in 2015.
On September 9, 2015, Canadian platform NexusCrowd launched Galleria, a Mississauga shopping mall project. In less than a month, $8 million of the $8.2 million campaign target has been committed for the project. Real estate crowdfunding in Canada is still in its infancy and lags behind the other sectors identified in Part I of this series. In Part III below we break down the real estate crowdfunding story so far and offer a sneak peak of what’s just around the corner.
In this three-part series, we examine whether “conservative” Canadian business culture is having a negative effect on equity crowdfunding taking hold in Canada.
Part I in the series investigated the market metrics and traction so far in Canada: Read it here. Part II investigated causes for market underdevelopment in Canada and lessons from other markets: Read it here.
What is fueling the growth of real estate crowdfunding platforms globally?
The number of real estate funding platforms has doubled in the last year. In the United States (US) alone, there are over 175 real estate funding platforms up from 75 such platforms in 2014. Globally, there are over 250 such platforms up from 100 such platforms in 2014. As mentioned above, these platforms are well on their way to raising over $2.57 billion globally in 2015. In the US, seventy to eighty percent (75%-80%) of the funds raised under Rule 506(c), the accredited investor rule that allows advertising, has been in the real estate sector. A number of factors are fueling this growth:
Proof of Concept and Attractive Returns;
- Flexibility and Speed;
- Unique Investor Benefits; and
- Unique Benefits for Developers and Real Estate Companies.
We discuss each of these factors in more detail below.
Related: Get the 2015 Crowdfunding for Real Estate Industry Report
Proof of Concept and Attractive Returns
Real estate is an investment category the average investor believes they understand and know without assistance of an investment professional. Real estate is also a “hard asset” investment. Investors take comfort in the fact they can physically visit and see their investment in a real estate project. Real estate investments also provide a 10% average return with a 2-3% volatility. Although potential returns are lower in real estate than many other sectors, so is the risk volatility. Investors like steady returns with low risk.
Real estate projects have also had a long history of syndication worldwide. Real Estate Investment Trusts (REITs) and Real Estate Limited Partnerships (RELPs) are common syndication vehicles institutional and high-net-worth investors are familiar with in North America.
Crowdfunding is a new way to syndicate real estate investments; a sector investors are already comfortable investing in. Crowdfunding provides more transparency and openness than existing syndication models, which makes it attractive to investors and those seeking capital. Platforms like Patch of Land (USA) now claim an average blended rate of return of 12%. Traction is also evident for international platforms like Prodigy Network (USA, South America), Companisto (Europe), CoAssets (Asia) and others.
Related: The well-kept secret of high returns in real estate investment
Flexibility & Speed
Real estate funding platforms are more than a listing service of properties and projects available to potential investors. Successful platforms focus on specific geographic markets and asset classes. They offer opportunities to invest in a local contractor’s latest housing flip through to multi-million dollar resort and commercial developments. Investments may take the form of a direct or indirect investment in debt or equity participation in a real estate project. Funding platforms provide tools to enable investors to find and compare these different opportunities quickly and efficiently. Algorithms and big data analytics make the platforms smarter and enable faster workflows and approvals. They streamline the investment process by utilizing online deal rooms and subscription agreements, electronic signatures, and payment systems. They strive to make the investment process as frictionless as possible enabling quicker closings, and in theory, faster access to investment returns.
Unique Investor Benefits
Investing in real estate securities through an online funding platform provides investors with a number of other benefits beyond attractive returns, flexibility and speed. Investors are able to diversify their risk profile in this sector by choosing to make a number of smaller investments in different geographic markets and asset classes. They can chose to invest in specific individual real estate projects of their choosing or a pool of projects as part of a RELP or private REIT.
Real estate investors, who are familiar with underwriting individual properties, assessing value and modeling cash flows, can step into the next layer of real estate investment by leveraging the knowledge of a larger pool of investors or portfolio management group. The elimination or reduction of the need for road shows, registered sales representatives and legal costs reduce the cost of investment and increases returns. Investment volatility in these types of private real estate investments is limited to changes in net asset value and interest rate unlike public REITs, which are also subject to stock market volatility, which moves independently of the other two factors.
Related: Real Estate Crowdfunding: Overview
Unique Benefits for Developers and Real Estate Companies
Real estate developers and companies are constantly raising capital. Equity requirements on new projects in 2015 remain between 50% and 65% on average worldwide, with most lenders requiring some form of construction guarantee. Secondary real estate cities outside of core gateway cities such as New York, London, Tokyo, Los Angeles, San Francisco, Paris, Hong Kong, Sydney, Seoul, and Shanghai continue to provide opportunities for yields in markets and asset types that fall farther along the risk curve than those available in gateway markets that are saturated.
See: Average Toronto Housing Prices from 1967 to 2019 - Are we in a bubble: What's going to Happen Next?
Funding platforms allow developers and other real estate companies’ access to a new pool of accredited and retail investors at a much lower cost than traditional funding avenues. It also allows them to obtain community support for projects that may have otherwise faced resistance or low market acceptance. Owners become customers and vice versa in a variety of real estate sectors.
An example of this last benefit is the online funding campaign of Kitridge Hotels & Resorts of its Hard Rock Hotel Palm Springs on Realty Mogul in July 2014. A total of $1.5 million in equity was raised in the offering to refinance and renovate the property. A small amount in the real estate world. What the offering did, however, in addition to providing capital, was secure significant media attention for the hotel as the first-ever equity crowdfunded hotel deal in the US. It also provided VIP benefits to the 85 investors who participated in the offering such as free use of hotel owner poolside cabanas, a 25% discount off best room rates, free room upgrades and more.
What is the story so far in Canada?
Only two platforms are currently active in real estate crowdfunding in Canada. Optimize Capital Markets has offered access to real estate investments for several years, the last couple via its platform The OCMX marketplace. However, their current deals are for funds, development companies, or related technologies not specific properties.
NexusCrowd recently launched their platform and first project Galleria in September 2015. The platform focuses on accredited investors. Its first project is a $100 million development project for a two-story, 238,000-square-foot (23,000-square-metre) mall to be anchored by Korean grocery store Galleria Supermarket, which also has a 50 percent stake in the development. Closely held TerraCap Investments Inc. owns the remaining interest.
“We will only get involved in deals with strong partners where at least 50% of the funding target has been reached. The Galleria project was brought to us by Terra Cap with an anchor tenant in place, de-risked with 85% of tenancy sold and most approvals in place,” stated NexusCrowd CEO Hitesh Rathod. “We are accessing capital from existing relationships but looking for more partners to do the due diligence on deals in the $2M to $20M range. Individual (accredited) investors don’t get access to these kinds of deals unless they are networked in. We provide affordable access to exclusive deals.”
NexusCrowd will aggregate investors into a single purpose Limited Partnership that invests directly into the real estate providing “beneficial ownership.” The timeline for the project is to start development in January 2016 and complete by December 2017. At that point, similar to the structure on other platforms, the limited partnership vehicle created for the financing will be liquidated and dissolved and the investor returns distributed. The target internal rate of return (IRR) is 15-20%.
A third platform, Open Avenue, is also preparing to launch. “Currently the real estate investment industry is a “members-only” club, commented CFO and Co-founder Rafael Nicolas Fermin Cota of Open Avenue. “Open Avenue seeks to bridge the gap for individual investors and real estate operators across a variety of properties,” Cota added, “As little as $5,000 is required to invest and Open Avenue makes the entire process seamless and straightforward.”
Fundrise also recently announced that it was opening US real estate deal flow access to Canadian investors but not for developments in Canada.
Related: The Investor’s Guide To Real Estate Crowdfunding
Why is real estate crowdfunding so underdeveloped in Canada?
Given the advantages outlined so far, why is Canadian real estate crowdfunding progressing at baby steps when there is a full out sprint elsewhere?
The Perspective of Canadian Developers and Real Estate Companies
Perhaps it is more of an issue of ready access to financing already in place more than a cultural problem. Canadian developers and real estate companies are currently using Canada’s existing accredited investor and offering memorandum exemptions to sell their securities as an exempt market dealer (EMD) or through third party EMDs. Real estate issuers, mortgage investment corporations, and funds are the three primary users of the offering memorandum exemption in Canada, which is crowdfunding off-line. Issuers can raise capital from anyone resident in Canada, other than in Ontario, if they provide an offering memorandum in the required form. Real estate issuers are raising significant capital under these two exemptions.
In 2014, private issuers raised $8 billion in British Columbia under the accredited investor and offering memorandum exemptions. Private investment funds accounted for $5 billion of that amount. Real estate issuers and mortgage investment corporations accounted for a large percentage of the $3 billion raised by all other issuers in British Columbia. In Alberta, private issuers raised $4.2 billion in 2014 under the accredited investor and offering memorandum exemption. Real estate issuers accounted for approximately $500 million of this amount, down from $1.2 billion raised in 2013 by real estate issuers. In Ontario, approximately $3.8 billion was raised under the accredited investor exemption by real estate issuers.
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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 1100+ 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 About Us or visit ncfacanada.org.
Equity crowdfunding market no longer the preserve of start-ups
Financial Times | Brian Groom | Oct 6, 2015
For enterprises seeking seed capital or money to expand, intriguing possibilities are on offer by the fast-growing UK equity crowdfunding market, which enables individual investors to buy stakes in companies online — sometimes putting in as little as £10.
Equity crowdfunding websites such as Crowdcube, Seedrs and SyndicateRoom, enable businesses to pitch to communities of backers. They offer companies an innovative route to raising capital, often from enthusiastic customers, and open new investment areas to the public.
Questions have been raised, though, about whether inflated valuations are leaving investors at risk of failing to make a return in proportion to risks and whether in some cases they have adequate protection against dangers, such as heavy dilution of their shareholdings.
The Financial Conduct Authority, which regulates the sector, has warned that crowdfunding is risky for investors, with the message: “you are very likely to lose all your money,” because most start-ups fail.
The sector, barely five years old, is small but expanding. Last year it raised £84m, up from £3.9m in 2012, according to Nesta, an innovation charity.
That was out of a total UK alternative finance market estimated at £1.74bn. The UK is ahead of the US, which is still developing rules for retail equity crowdfunding.
“Equity crowdfunding is quite capable of raising £1bn a year, maybe more,” says Stephen Hazell-Smith, who co-founded Aim and is chairman of Business Agent, a crowdfunding aggregator.
But, he adds: “People will be eagle-eyed looking for failures.”
See: Understanding Alternative Finance: The UK Alternative Finance Industry Report 2014
There are more than 30 platforms. Nesta found the average amount raised was almost £200,000, with 125 investors putting in £1,599 each.
Augmentum Capital, a venture capital fund backed by Lord Rothschild and Neil Woodford, the fund manager, recently led a £10m investment round into Seedrs, while corporate brokers Numis bought 8.49 per cent of Crowdcube as part of a £6m funding round.
£84m Total raised last year via the UK crowdfunding sector Equity crowdfunding is also attracting established companies. Sugru, a company that makes a mouldable putty, raised more than £3.5m via Crowdcube, the largest platform, in July. ISDX-listed Chapel Down winery, a UK wine producer, raised nearly £4m via Seedrs last year. Crowdcube plans to offer retail investors the chance to invest in London stock market floats.
“It’s about having options and being able to get the money quickly,” says Luke Lang, Crowdcube’s co-founder. “It can be quicker than protracted conversations with venture capitalists and angel investors.”
Companies see a benefit in having customers as shareholders, who can turn into “brand ambassadors” for their products and services. Investors often support businesses they identify with, whether it be craft beer, solar energy or computer games. It is less clear how well that might work for, say, a machine tool manufacturer.
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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 1100+ 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 About Us or visit ncfacanada.org.
Cash-strapped B.C. startups begin tapping equity crowdfunding
Business in Vancouver | Tyler Orton | Oct 5, 2015
Securities exemptions allow small companies to issue shares without filing a prospectus
Peter-Paul Van Hoeken uses words like “diverse” and “colourful” when describing Canada’s system of securities regulations.
Instead of one agency overseeing the rules managing the buying and selling of shares, the country has a patchwork of regulators operating in different provinces.
So when the Dutch expatriate began working on a platform that would allow startups to raise money through crowdfunding, he spent two years figuring out how to fall in line with all of Canada’s different rules.
“Everybody at that time was in the dark about the whole crowdfunding thing, including the regulators,” said Van Hoeken, the founder and CEO of fundraising portal FrontFundr.
But in mid-September the Vancouver-based company facilitated B.C.’s first round of equity fundraising for a startup after regulators introduced new rules earlier this year.
While traditional crowdfunding involves soliciting donations to raise money for projects like films or devices, equity crowdfunding involves startups selling its shares directly to investors. Up until May, only traders regulated by the BC Securities Commission (BCSC) were allowed to sell shares. But new exemptions adopted by B.C., Saskatchewan, Manitoba, Quebec, New Brunswick and Nova Scotia now allow companies to sell shares through an approved funding portal such as FrontFundr.
“When the rule came out in May, that was two weeks prior to our launch,” Van Hoeken said. “It was almost like impeccable timing.”
See:
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FrontFundr expands nationwide to provide investors and companies access to a new capital market
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Equity Crowdfunding FAQs in Canada
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2015 Canadian Crowdfunding Directory
FrontFundr had been working to fall within all the existing regulations until it found itself in a position where many of the roadblocks were removed in six provinces.
Guusto, the first B.C. startup to benefit from equity crowdfunding, raised $44,000 in its first at-bat.
Co-founder Joe Facciolo said that, considering how difficult it is for some companies to raise money outside major tech centres like San Francisco or financial hubs like Toronto, the payoff potential for startups is considerable.
“The pool of resources in Canada from angel investors is pretty limited, so we believe this mechanism helps to deepen this pool.”
Facciolo added that he’s planning another round of equity crowdfunding soon.
But there are limits as far as what startups can raise through the new equity crowdfunding rules.
No single campaign is permitted to raise more than $250,000, and individual investors are capped at making $1,500 investments, according to BCSC rules. Startups can complete only two crowdfunding distributions a year, and those campaigns can’t run simultaneously.
The issuer has to prepare an offering document, but the startup is exempt from issuing a prospectus. Such a document provides investors with financial statements and detailed information about a company to give investors a strong understanding of what they’re putting their money into.
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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 1100+ 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 About Us or visit ncfacanada.org.
New UK Crowdfunding Record Set with BrewDog Equity + Beer = “World’s Biggest Round”
Crowdfund Insider by Erin Hobey | October 2, 2015
Cheers to BrewDog, one of the UK’s first craft beer brewers, for raising £10M and setting a UK record for the largest equity crowdfunded project. Listed on Crowdcube as a “first” combined debt and equity capital raise, BrewDog and Equity for Punks marketed the offer as the “World’s Biggest [funding] Round. At this writing, the additional breakdown of Equity for Punks or other private funding after Crowdcube’s still live campaign (which has secured £1.77M) has not been made available.
Equity for Punks is all about shortening the distance between us and the people who drink our beer, and enabling us to keep putting passion in people’s beer glasses without resorting to begging funding from big monolithic banks who don’t care about the beer,” James Watt, BrewDog Captain, told City A.M.“£10M is phenomenal. But we’re not stopping there.
BrewDog, which turned over £30m last year, said the latest campaign would run until April 2016 and had a final fundraising target of £25M. According to Crowdcube, investors may purchase two shares of BrewDog stock for £95 or purchase a bond for £500 with a fixed 6.5% annual rate of return.
Related: Why Successful Crowdfunding Requires a Social-Media Mind-Set
“Equity for Punks IV has now passed the £10m mark – a ground-breaking figure for equity crowdfunding,” shared BrewDog on its website. “According to MarketWatch, the previous high for an equity crowdfunded project in the world totalled $6m raised – so we have let fly a wrecking ball in that direction, to the tune of over double the amount. So make that two wrecking balls. And we are not finished yet.”
Currently in its fourth crowdfunding round for Equity for Punks, the Aberdeenshire brewer has raised £5M in the first three weeks through the issue of shares and mini-bonds with 526,316 shares offered with a minimum investment of £95 for two. According to BrewDog, 35,000 people have invested and have also become ardent brand ambassadors: “Our Equity Punks are the heart and soul of our company, and we are stoked that the number of people who have invested has now reached 35,000.”
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“In many ways,” said Crowdfund Insider’s JD Alois,”BrewDog is a perfect example of using the internet to marry fans, ownership and advocacy for a consumer-facing product.” BrewDog is a noted maverick and trailblazer in the equity crowdfunding and beer perks scene. Not so long ago…in the early days in the back of a van… before the chopper, two guys and dog enjoyed an epic journey of taking Brew Dog from null to the largest independent brewer in Scotland.
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