Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Category Archives: NCFA In The News
Why Crowdfunding is So Hot Right Now
ProfitGuide.com | Robert Gold | February 18, 2016
New regulations provide access a wider investor base, making the collective approach to raising capital even more attractive to companies looking for financing
Produced in partnership with Bennett Gold LLP Chartered Accountants and Write On The Money
Since the days of the first Kickstarter campaign, crowdfunding has grown from just another quirky form of Internet commerce to a well-established way to raise funds and generate buzz around a new product or company.
Need proof? At January’s Consumer Electronics Show in Las Vegas, more than half of the 478 companies with trade booths at the Eureka Park innovation showcase got their start through crowdfunding, says Craig Asano.
Related: 9 Key Questions About Equity Crowdfunding Answered
“I think it’s a stepping stone, or some people call it a ‘funding escalator,’” says Asano, the founder and executive director of the National Crowdfunding Association of Canada (NCFA).
The pre-sales generated by a crowdfunding campaign serve as tangible proof of concept, generating some growth momentum for your business and attracting advisors and investors. “You’ve got a proven model, you have quite great strength in terms of product as well as customer feedback,” notes Asano. “It’s a much more plausible pitch to [investors].”
On March 3, Asano’s organization will host the second annual Canadian Crowdfunding Summit in Toronto. The event comes at a pivotal moment for the financing model, with five provinces having introduced new regulatory model for equity crowdfunding in January.
The new rules allow startups and other companies to raise up to $1.5 million per year from retail investors, subject to certain conditions. Businesses looking to raise capital will need to list with an online funding portal. (Think Kickstarter, but for equity).But there’s a lot of prep work before you get to that stage, notes Asano. “You really need to have a better understanding [about] whether you’re ready to raise capital,” he says. “You’re going to want to learn about the cost to raise capital, and [to] connect with the people that can help you facilitate the actual process of raising capital.” One potential complication: managing the large number of stakeholders created by offering equity to the crowd.
Related: Equity crowdfunding will soon be legal in Canada. Should you jump in?
As an entirely new industry, there’s plenty of opportunity for new businesses and new kinds of businesses: platforms, vendors, consultants and so on. “It’s early days—there’s a lot of innovation to [come] in this space,” says Asano. “But the idea is that we’ll have wider distribution, streamlined costs, and eventually entrepreneurs could focus on their business rather than spending so much time trying to raise capital.”
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Register today for the 2016 Canadian Crowdfunding Summit | Innovation | Investors | Entrepreneurship
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 1300+ 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.
Crowdfunding rides to the rescue of many SMEs
Financial Times | Emma Dunkley | February 9, 2016
The retrenchment of banks from riskier forms of finance — such as to new companies — following the financial crisis has helped raise the status of crowdfunding platforms such as Kickstarter in the US and Seedrs in the UK.
Jeff Lynn, founder of Seedrs, says: “Crowdfunding has fuelled a tremendous transformation in the way SMEs [small and medium-sized enterprises] think about finance.”
Nesta, an innovation charity that provides research on the start-up funding industry, says crowdfunding offers “an opportunity to bypass traditional funding streams such as grant applications or bank loans”.
Related: Why more startups turning to equity crowdfunding
Crowdfunding falls into three broad categories. The simplest sees investors hand over cash in return for goods and services.
The second is debt crowdfunding, which allows investors to lend money that, in theory, they receive back with interest. Finally, in equity crowdfunding investors buy shares that they hope will be worth more in the future.
Related: Hacking the Startup Fundraising Matrix
Figures show that the value of crowdfunding expanded globally by 167 per cent to $16.2bn in 2014, up from $6.1bn raised in 2013. In 2015, the industry is on track to more than double once again, according to a report by Massolution, a US research firm.
“UK really leads the world on crowdfunding,” says Mr Lynn.
Craig Asano, founder of the National Crowdfunding Association of Canada, says the concept is struggling to get off the ground in many countries, including Canada, due to slower adoption rates and regulatory constraints.
However, investing in early stage ventures, especially as an equity investor, is high risk. Many start-ups eventually fail, often meaning investors will not be able to get their money back.
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Register today for the 2016 Canadian Crowdfunding Summit | Innovation | Investors | Entrepreneurship
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 1300+ 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.
Move over Kickstarter, equity crowdfunding lets you get a piece of the action, not just a lousy T-shirt
Financial Post | Robert Thompson | February 4, 2016
Judeh Siwady had Spacefy ready for market in February 2015, but he was looking for a non-traditional means of financing the Toronto-based company he founded in 2014, something that would connect with the current Internet zeitgeist. Spacefy is a variation on Airbnb for larger spaces, aimed at people looking to locate and price everything from rehearsal spaces for their rock band, to recording studios or performance halls. CEO Siwady and his small team spent a few months creating the software and finding the spaces that would make the company work, and by the end of last summer were looking to raise $250,000.
Siwady thought the idea of using equity crowdfunding would be a good fit for his business. In the end, it proved more successful than he and his team envisioned, raising $300,000 through Vancouver-based InvestX Capital Ltd., a platform that links entrepreneurs with access to private-equity funding. “It was big for Spacefy and that’s why we chose crowdfunding,” Siwady says. “We thought about the best way to raise money and get publicity at the same time and that’s why we went this way.”
Related: Equity crowdfunding will soon be legal in Canada. Should you jump in?
Spacefy’s method of raising capital was unusual in 2015, but that’s expected to change this year as new securities rules open equity crowdfunding to larger audiences. The equity crowdfunding market, which was pegged at about $40 million in Canada in 2015, is expected to double this year. Supporters of the concept say the new rules solve two issues at once: they open up opportunities for early stage companies to raise much-needed capital, and they also provide investors with the chance to enter the private-equity market, which helps diversify their portfolios at a time when both equities and bonds are suffering.
“The problem for early stage companies is how to find investors,” says Sandi Gilbert, CEO of SeedUps Canada, an online crowd-financing platform. “How do you find those people? That’s where the technology comes in. They can put it in [one of the funding portals] and that brings efficiencies and a lower cost of capital. You can put it online and let thousands of people see your deal.”
Related: Entrepreneurs turning to equity crowdfunding as provinces loosen rules
Crowdfunding was once considered the bailiwick of sites such as Kickstarter, places where film directors, musicians and inventors went to raise money for their projects. Fans kick in cash, often in exchange for the product that was being created, or an opportunity to get a free T-shirt or credit. But that concept has evolved over the past five years. If you really liked the concept the company was promoting, why not get more than a logoed shirt? What if you could get a piece of the action as well?
That concept of gaining equity while supporting a startup generated a great deal of attention in the U.S. after virtual reality business Oculus VR raised US$2.4 million through a crowdfunding campaign that began in August 2012, only to sell for US$2 billion to Facebook Inc. two years later. Some wondered what might have happened if those who initially backed the company’s Kickstarter campaign had been able to participate in the financial windfall that followed, instead of just getting a t-shirt or a version of the company’s headset for their contributions.
That said, the concept of equity crowdfunding has been on the rise for five years in other countries. In Canada, it has only been available since 2013, with different provinces having specific rules to regulate the practice. However, five provinces, including Ontario and Quebec, were planning to put into place new rules on Jan. 25 that will allow non-accredited investors for the first time to participate in equity crowdsourcing campaigns, albeit only to a maximum of $2,500. Accredited investors — meaning those with net assets of $1 million net related liabilities — will be able to contribute $25,000, with an annual total capped at $50,000.
Related: Regulators including OSC Publish Crowdfunding Exemption and Registration Framework for Funding Portals
“This is a fundamental change to Canadian securities law and that isn’t a space that moves very quickly,” says John Wires, a Canadian securities lawyer based in Toronto. “I think this happened quite quickly and there are a lot of unanswered questions, particularly about whether this will work. There isn’t a great global record to go on and there’s no place in the world where you can say this has been a huge success.”
Despite the risks, it will be an investment opportunity some won’t be able to pass up, especially given the moribund performance of Canadian equities. Initially, however, investors need to recognize that investing in startups through equity crowdfunding is a risky proposition. “You shouldn’t be investing if you can’t lose your money,” Gilbert says. “This is for a small percentage — 10 to 15% of your investment portfolio — to put into a company that you understand, where you like their product and that you are close to and can relate to.” Wires takes the caution a step further: “In terms of risk, the needle is in the red with these. You have to be prepared to lose here, and some are going to.”
Gilbert says the companies that successfully use equity crowdfunding aren’t pure startups, but businesses that have already created a product or service and need capital to move to the next stage. Imagine a company that has fully developed its product and now needs to hire a marketing or sales team to generate revenue — that’s what Gilbert envisions. Wires points out that investors who put money into a company through crowdsourcing may also actually reinforce that business’ model and chance of success by showing there is a potential interested market. “It is the ultimate test,” he says. “If 600 people like a product or a company and are willing to put up $2,500 each, they are really validating it at the same time.”
Related: How Crowdfunding Is Changing The Way Startups Raise Money
Investing in companies that have clear business plans and objectives should take some of the risk out, but pundits in the space admit many of these companies will not be successful. Critics of crowdfunding suggest fraud and some high-profile failures will likely take the shine off the space. “There are going to be outright failures that are poorly managed and didn’t do what they set out to achieve and there’s going to be fraud,” Wires says. “The question is whether the new rules point the needle in the right position between investor protection and promoting growth. That remains to be seen, but there’s lots of room for rethinking the process.”
Wires points out that Canadians need to look past the hype and excitement and recognize that investing in the private-equity market isn’t the same as the public markets. For one thing, the investments aren’t liquid. “The only way you’re going to get any money out of this company is through a transaction like a sale to someone else, or that the company goes public,” says Craig Asano, executive director of the National Crowdfunding Association of Canada.
But Asano envisions a secondary market being created that allows one to trade out of a crowdfunding deal as the market for these sorts of investments matures. “We expect market-making infrastructure and services to develop in 2016,” he says. “If you are looking at the crystal ball of the future, that’s the natural evolution.” So who is investing in the sector given the questions that surround it?
“These are armchair dragons,” Asano says. “These are millennial up-and-comers. They are looking at investing and are looking for a dashboard that allows them to connect directly with these companies.”
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Register today for the 2016 Canadian Crowdfunding Summit | Innovation | Investors | Entrepreneurship
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 1300+ 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.
NCFA Founder Craig Asano Rallies Canadian Crowdfunders with Alternative Finance Policy, Notes “Flourishing” Startup Scene
Crowdfund Insider by Erin Hobey | November 18, 2015
“As the crowdfunding economy grows it will spur economic prosperity, create new jobs and ultimately improve follow-on funding outcomes for scalable ventures looking to succeed in the incredibly dynamic and connected global markets we live in today.”
As readers know, The Centre for Alternative Finance at University of Cambridge Judge Business School and the Polsky Center for Entrepreneurship and Innovation team at Chicago Booth School of Business initiated the 2015 Americas Alternative Finance Benchmarking Survey last month. This landmark survey is the first comprehensive and empirical assessment of crowdfunding, peer-to-peer lending (marketplace lending) and other forms of alternative finance across North, Central and South America.
The survey is supported by the IDB, BDC, KPMG and a number of highly influential industry research partners. Major alternative finance industry associations and organizations in the United States, Canada and across Central and South America, including the LendIt/Lend Academy, Crowdfunding Professional Association (CfPA), Crowdfund Intermediary Regulatory Advocates (CFIRA), National Crowdfunding Association of Canada (NCFA), Orchard, Crowdnetic and Queen’s University and the Impact Group.
This interview’s focus highlights Canada’s involvement with the alternative finance movement.
“The development of the Canadian online alternative finance market appears to be lagging behind the US, the UK, and several other G7 countries. Our previous market benchmarking studies provided analysis that encouraged policy makers in several European countries to make their legislative frameworks more appropriate and proportionate to supporting the development of the market, and we hope to have the same impact in Canada,” commented Robert Wardrop, the Executive Director of the Cambridge Centre for Alternative Finance. “To achieve this it’s essential that we present a comprehensive picture of the Canadian market, so during the next two weeks our teams in Cambridge and Chicago, as well as our Canadian research partners, will be contacting the Canadian platforms that have not yet completed the survey.”
Integral to this research include a series of exclusive interviews with key fintech influencers and leaders of the collaborating associations and platforms. With over 15 years of experience in marketing automation, real estate, finance and new venture development globetrotting, Craig Asano holds the Executive Director position at the National Crowdfunding Association of Canada (NCFA). Asano founded the NCFA, the leading and only industry-led, non-profit organization actively engaged with both social and investment crowdfunding stakeholders in Canada.
Related: The University of Cambridge & University of Chicago Join Forces to Launch the 2015 Americas Alternative Finance Benchmarking Survey
Asano connected with me over email to share his views on the importance of the Survey, the effects of new forms of alternative finance and recent Canadian policy (including the NCFA’s integral contribution to the development and advancement of two main startup and crowdfunding exemptions).
Erin: Why has the National Crowdfunding Association of Canada (NCFA) decided to support the 2015 Cambridge-Chicago Americas Alternative Finance Benchmarking Research?
Craig: NCFA is highly supportive of data and research initiatives to enable policy makers, market regulators, and industry participants to better understand the scale, scope and reach of Crowdfunding activity in Canada. Data driven insights illuminate the direction of market activity, contribute to market confidence, capacity building, and help assess the readiness and demand for participation in these quickly emerging alternative finance crowdfunding markets. There is a growing need for more Canadian market data especially in the global context, so it makes a lot of sense to support the Cambridge-Chicago Americas Alternative Finance Benchmarking research effort with a trusted brand. We look forward to comparing Canadian metrics with international benchmarks over time.
Erin: Who does NCFA represent? Both debt and equity platforms? Service providers? Investors? Who are your constituents?
Craig: NCFA non-profit was founded in 2012 and works closely with industry, government, academic, its membership, ecosystem partners and affiliates to create a strong united voice and vibrant crowdfunding industry in Canada. The organization supports small business, innovation, technology, economic development and collaboration, and has a mandate to develop Canada into a world class crowdfunding centre by providing broad-based crowdfunding education, advocacy and networking opportunities for its growing community of over 1300+ members comprised of approximately 50% companies, 25% industry (all platform models and providers of the emerging ‘crowd economy’) and 25% investors and ecosystem supporters.
Specifically, NCFA aims to educate and connect those seeking capital through crowdfunding markets with industry participants and investors enabling these transactions to occur. The Association is inclusive and advocates a holistic approach to developing value for its broad base of constituents.
Erin: Many of the Provinces have updated their rules regarding internet finance. Please share the current status of the regulatory environment in Canada.
Craig: Canada unfortunately is without a national securities regulator similar to the SEC in the US. The Canadian Securities Administration (CSA) is a national working committee of various provincial regulators although they not have the power to mandate rulings over the 13 provinces and territories without approval. A relatively new effort called the Canadian Cooperative Markets Regulatory Authority hopes to bring the remaining provinces onside as participants to ‘agree not to disagree’ and we encourage the new Liberal government to move quickly in this regard to improve efficiencies of Canadian capital markets. With respect to crowdfunding regulations, NCFA is pleased to have contributed to the development and advancement of two main exemptions that have been adopted in Canada:
(1) Start-up Exemption: On May 14, 2015, six Canadian provinces including British Columbia, Saskatchewan, Manitoba, Quebec, New Brunswick and Nova Scotia adopted multilateral CSA notice 45-316, Startup Crowdfunding and Registration exemption that enables up to $500K to be raised per year over two $250K distributions – this financing tool is active in the market today; and
(2) Crowdfunding Exemption (led by the OSC): On Nov 5, 2015, Manitoba, Ontario, Quebec, New Brunswick and Nova Scotia adopted Multilateral Instrument 45-108 Crowdfunding, which introduces a crowdfunding prospectus exemption for issuers raising up to $1.5M in a twelve month period as well as a registration framework for funding portals.
- Provided all necessary Ministerial approvals are obtained, MI 45-108 will come into force in the participating jurisdictions on January 25, 2016.
- Important to note that Ontario also recently introduced a number of other exemptions designed to increase capital flow to private markets including the Offering Memorandum (OM) exemption to be facilitated by exempt market dealer-brokers.
- The Financial and Consumer Affairs Authority of Saskatchewan (FCAA) will be republishing MI 45-108 for a 60 day comment period.
With both exemptions there are investor caps per offering and a wide range of compliance requirements designed to protect investors. Several provinces are electing to adopt both the Start-up and Crowdfunding exemptions taking an ‘integrated approach’ that will provide more support to small businesses on the venture funding continuum.
Also, on Oct 19, 2015, the Alberta Securities Commission (ASC) and the Nunavut Securities Office published for 60 day 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. While the proposal is largely similar to the adopted multilateral CSA notice 45-316 (above), this exemption would allow a start-up or early stage business to raise up to $1,000,000 (lifetime cap) 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.
Erin: The Canadian economy is in a bit of a slump. How do you see new forms of finance and access to capital as aiding in economic growth and job creation?
Craig: New forms of alternative finance and increased access to capital will add more liquidity into markets and incubate new infrastructure and networks suitable for the new generation of millennial investors. As the crowdfunding economy grows it will spur economic prosperity, create new jobs and ultimately improve follow-on funding outcomes for scalable ventures looking to succeed in the incredibly dynamic and connected global markets we live in today. Improving access to capital will be a boon for underserviced segments, such as female or rural entrepreneurs, and can unlock tremendous potential and encourage innovation and a fail fast culture that we desperately need in Canada where complacency and safety nets often override the need to create value and strive for greater impact.
Erin: Please describe the startup scene in Canada. Where have you noted the most activity, in Toronto and Vancouver? What about fintech?
Craig: There is a flourishing start-up scene in Canada, and cities like Waterloo (near Toronto) are beginning to get the attention of US investors. Toronto has always been the financial hub of Canada so there are many fintech companies headquartered here, however, there’s a hugely vibrant tech scene in Vancouver with an awesome pool of design and technical talent to tap into. Interestingly, historical rewards-based crowdfunding market data has shown that while overall crowdfunding dollars are highest in Toronto, Vancouver has the highest per capita contributors in the country indicating an appetite for risk capital and strong support for local tech.
Erin: What do Canadian elected officials think about debt/equity based crowdfunding? Are they supportive? What about the Trudeau administration? Do you expect support from the incoming government?
Craig: NCFA is optimistic and hoping for the best from the Trudeau government although much work still needs to be done. Progress needs to be made to unify capital markets at a National level. The Association recently wrote an open letter to the Prime Minister and his team. Now that the Cabinet Ministers have been named, we hope to begin a constructive dialogue about our solution to the capital access problems here in Canada for early stage ventures, lack of unicorns and limited awareness for Canadian success stories. We’re happy to see a department of “Innovation, Science and Economic Development” emerge at the federal level and hope to get them involved at our upcoming 2nd Annual Canadian Crowdfunding Summit that will be held on March 3, 2016 at MaRS Discovery in Toronto.
Erin: In your bio, you mention that you’re a world traveller. Could you share an anecdote about a challenging, life changing or just an all and all amazing experience?
Craig: Living overseas as a full-time expat is definitely a life changing and unforgettable experience. After spending 15 years abroad visiting 30 countries and living and working in 5, the experience stoked my natural entrepreneurial instincts to continue to innovate, grow, take risks and try to solve the most challenging problems in the global context. For many would-be entrepreneurs, it’s really about taking the first step.
I remember when I first arrived in Australia in the mid-90s, while the world was my oyster I had to learn how to take risks to really get the essence out of life. In that context, I remember being alone on a rugged hidden beach somewhere between Sydney and Melbourne. Not a soul was around. I had walked some distance along a sandy pier and then suddenly a freakish storm come out of nowhere and the ocean tides closed off access preventing me from returning to the mainland. As the winds gusted like a hurricane, the only choice was to move forward along the half submerged sand bar with water up to my knees. Heart beating yet drawn to progress, I continued along the incredibly narrow sandy walk into the middle of the sea.
After several sublime moments and close to a kilometer later, I reached the end of the sand bar that jutted out into the sea and recall myself challenging nature in a defining moment. The outcome might have ended up horribly wrong, but instead, as if a lightbulb had turned on, the storm suddenly subsided, waters calmed, and the sun started to shine. The sand strip widened and access to the main shoreline reappeared. As I made my way back safely to the shoreline completely drenched, I realized that it was one of life’s grand tests and that surviving that powerful experience has better equipped me to overcome challenges that entrepreneurs face in their everyday lives. Remember that old adage, “What doesn’t kill you makes you stronger” – so live life to the fullest to believe it.
Survey link for Canadian Platforms: https://www.surveymonkey.com/r/AltFin_Canada
- Main benchmarking survey link: https://www.surveymonkey.com/r/AltFinAmericas
- For Spanish version: https://es.surveymonkey.com/r/AltFin_Spanish
- For Portuguese version: https://pt.surveymonkey.com/r/AltFin_Portuguese
The study is supported by the Inter-American Development Bank (IDB), Business Development Bank of Canada (BDC), KPMG and a number of leading industry research partners
The National Crowdfunding Association of Canada has joined with The University of Cambridge and University of Chicago Booth School of Business to be the Canadian partner on this benchmarking research.
For benchmarking research enquiries please contact:
Dr. Olena Verbenko, Chicago Booth School of Business (Olena.Verbenko@ChicagoBooth.edu)
Tania Ziegler, Cambridge Centre for Alternative Finance, Cambridge Judge Business School (tz285@cam.ac.uk)
About the University of Cambridge and the University Chicago
University of Cambridge
This research is led by the Cambridge Centre for Alternative Finance, Cambridge Judge Business School. The Cambridge Centre for Alternative Finance is an international, interdisciplinary, academic research institute, dedicated to the study of alternative finance, which includes financial channels and instruments that emerge outside of the traditional financial system (i.e. regulated banks and capital markets).
Examples of alternative finance channels are online ‘marketplaces’ such as equity and rewards-based crowdfunding, peer-to-peer consumer/business lending, and third-party payment platforms. Alternative instruments include SME mini-bonds, private placements and other ‘shadow banking’ mechanisms, as well as social impact bonds and community shares used by non-profit enterprises and alternative currencies. The mission of the University of Cambridge is to contribute to society through the pursuit of education, learning and research at the highest international levels of excellence.'
University of Chicago Booth School of Business
The University of Chicago Booth School of Business is consistently ranked among the top five business schools in the world. The school’s faculty includes renowned scholars and its graduates occupy key positions in the US and worldwide. The Chicago Approach to Management Education is distinguished by how it leverages fundamental knowledge, its rigor, and its practical application to business challenges.
The school offers full and part-time MBA programs, a PhD program, open enrollment executive education and custom corporate education with campuses in Chicago, London, and Hong Kong.
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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.
Entrepreneurs turning to equity crowdfunding as provinces loosen rules
The Province by Peter Henderson | November 13, 2015
When long-time ad agency executive Jillian Bowman needed capital to start a small business, she didn't find an angel investor — she found a crowd.
Inspired by the challenge of packing lunches for her four kids, Bowman used equity crowdfunding platform SeedUp to raise $50,000 by selling an equity in Epicured Market, an online grocery and meal-planning service for Canadians with dietary restrictions.
Bowman said the crowdfunding process was more flexible than a bank loan. She said it allowed her to raise smaller amounts while giving her the option of returning to investors if she wants more.
Raising money from people she didn't know was also a testament to their belief in her idea, she said.
Related: 6 Ways to Use Crowdfunding for Product Development
"It made more sense for the business," she said. "It gave me the confidence that this business is going to work."
Epicured Market has just entered the pilot phase with a small number of families.
While some early-stage entrepreneurs take out consumer loans or run up their credit cards to support their initial expansion, Bowman said she couldn't afford that option with one of her children in university and another enrolling next year.
Bowman is one of a growing number of entrepreneurs using equity crowdfunding to jump-start their work, and five provinces have just made it easier for the average Joe or Jane to buy equity in a business.
Unlike websites such as Kickstarter, Indiegogo and Patreon, Bowman's backers get a stake in her business.
Last week, Ontario said it would join five other provinces in a co-ordinated effort to loosen the rules for companies looking to raise money through online crowdfunding platforms and open up equity crowdfunding to all investors, with limits based on net worth.
View:
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Regulators including OSC Publish Crowdfunding Exemption and Registration Framework for Funding Portals
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ASC and Nunavut Securities Office Publish Proposed Start-up Business Exemption for Comment
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New “Start-up” Crowdfunding Exemptions Adopted in Some Canadian Jurisdictions
Saskatchewan, Manitoba, Quebec, New Brunswick and Nova Scotia have also implemented that policy.
Craig Asano, founder of the National Crowdfunding Association of Canada, said the new policy could help the many Canadian companies that fail at an early stage because of a lack of financing.
"This is about strengthening the feeder systems of small businesses and the culture of entrepreneurship in Canada, which is linked to our innovation economy," he said.
While the sums involved are still small, he said, equity crowdfunding is poised to grow exponentially. First-time investors can also use it as a way to get their feet wet, he added, making it attractive to millennials looking for more control and connection to their portfolio.
Related: SeedUps Canada is Self-Crowdfunding as Market Heats Up Around the World
Sandi Gilbert, founder and CEO of SeedUp, said equity crowdfunding is a more efficient way of matching investors with companies looking for support.
"Companies can present their deal and get broad exposure to investors that have never been able to invest in those deals before because they weren't sitting in the boardroom when the company was pitching itself," she said.
Gilbert said crowdfunding is best suited for companies that are beyond the idea stage but far from going public, and that it can serve as a bridge while entrepreneurs seek to tap the deeper pockets of professional investors.
"This is really about companies that have a good business plan and have good traction and need to take their company to the next level and can't find that next million," she said.
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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 1300+ 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.
Despite new rules, equity crowdfunding is no picnic
The Globe and Mail | Brenda Bouw | Nov 12, 2015
New equity crowdfunding rules are being hailed by proponents as good news for small businesses looking to expand. However, some experts are warning crowdfunded businesses will face a big challenge in managing a broad base of retail investors.
Unlike regular crowdfunding, where people donate cash to help get a project off the ground, equity crowdfunding allows investors to buy a stake in the venture and cross their fingers for a financial return. Until recently, only accredited investors could get in on these private deals in Canada.
The changes, which are slated to come into effect on Jan. 25, are being adopted in Ontario, Manitoba, Quebec, New Brunswick and Nova Scotia. The new rules will allow companies in these provinces to raise up to $1.5-million annually, with a $2,500 ceiling for individual investors per deal. Investors in Ontario will face an annual cap of $10,000 a year for total crowdfunding investments.
Accredited investors – those who are wealthier and have more investment holdings – will be able to invest up to $25,000 per investment, although Ontario will also impose a total annual crowdfunding limit of $50,000 for individuals.
There will be no investment limit for so-called “permitted” clients in Ontario who have net financial assets above $5-million.
But despite the new rules that create a larger pool of investors, equity crowdfunding will come will its own set of headaches for a company.
“Having that many individual investors would be very difficult for a startup to manage, especially if many of the investors are inexperienced with this type of investing,” says Michael Mahon, director, strategic investments and partnerships at BDC Capital.
To achieve the maximum $1.5-million investment, Mr. Mahon notes that a startup would have to crowdfund from a minimum of 60 individual accredited investors, or up to 600 retail investors.
For investors looking for future growth, that many investors documented in the company’s investment ownership record or “cap table” could also be off-putting to angel investors or venture capitalists looking for a more simple capital base. It could also be challenging for companies to round up investors’ approvals on the future direction of the company.
“It’s a viable funding alternative, but I would encourage founders to consider where they see their growth path taking them,” said Mr. Mahon, noting that equity crowdfunding should be considered one part of a startup’s broader fundraising strategy.
The new rules are a “nice to have,” according to Chad Bayne, a partner and co-chairman of the emerging companies practice group at Osler Hoskin & Harcourt LLP. However, he expects few companies will use it, especially in the technology space he deals in.
“Do you really want to have hundreds of shareholders you don’t even know?” Mr. Bayne says, noting that it can be a distraction, not to mention a huge administrative burden for small companies with limited resources.
See:
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NCFAs Open Letter to Prime Minister Trudeau
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Nominee structure is vital to equity crowdfunding, Seedrs in the UK
“I would look at all other options before you go down this path because this is going to be an expensive way to raise capital.”
Marcus Daniels, co-founder and chief executive officer of the venture-capitalist-backed accelerator Highline, said equity crowdfunding will likely be more attractive to smaller businesses not looking for massive scale, or those seeking to fill smaller financing needs.
“It allows them to collect some financing that maybe typical VCs or angel investors wouldn’t touch,” says Mr. Daniels.
The new crowdfunding exemption follows a similar but separate “startup exemption” that was adopted in May in B.C., Saskatchewan, Manitoba, Quebec, New Brunswick and Nova Scotia. Under the startup exemption, companies in those provinces can raise up to $500,000 per year – but no more than $250,000 in one offering. Individual investments are capped at $1,500 per deal.
Vancouver-based investment platform FrontFundr has already started supporting companies in places like B.C., but founder and CEO Peter-Paul Van Hoeken says adding Ontario to the mix will allow him ramp up the business, given the economic might of the country’s most populous province.
“Not being able to raise capital [in Ontario] has been challenging for us,” said Mr. Van Hoeken. “There are a lot of startups and investors in Ontario who have been locked out of this type of investing, until now … it fits very well with our expansion plans.”
Craig Asano, executive director of the National Crowdfunding Association of Canada, said the changes will “energize the emerging crowd economy,” in Canada, and make it more competitive.
For example, the U.S. Securities and Exchange Commission recently approved new crowdfunding rules for startups south of the border as part of its Jumpstart Our Business Startups (JOBS) Act, enacted in 2012 to help spur small-business growth.
“It about time that Ontario, which is a juggernaut in Canada in terms of a financial centre, had a position [on equity crowdfunding] and supported it,” says Mr. Asano. “We don’t want to fall behind other leading countries in this space.”
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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 1300+ 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.
The University of Cambridge & University of Chicago Join Forces to Launch the 2015 Americas Alternative Finance Benchmarking Survey
Crowdfund Insider by JD Alois | October 15, 2015
The Cambridge Centre for Alternative Finance at Cambridge Judge Business School and the Polsky Center for Entrepreneurship and Innovation at Chicago Booth School of Business are jointly launching the 2015 Americas Alternative Finance Benchmarking Survey. This survey will be the first comprehensive and empirical assessment of crowdfunding, peer-to-peer lending (marketplace lending) and other forms of alternative finance across North, Central and South America.
According to Robert Wardrop, the Executive Director of the Cambridge Centre for Alternative Finance:
“The structural changes brought about by the digitization of the finance industry has the potential to flatten the provisioning of finance to both individuals and businesses, around the world. There is wide disparity in the development of alternative finance between countries. We hope this comprehensive benchmarking study will provide us with industry insight which will lead to more informed academic research and evidence-based policy-making.”
The survey is supported by the IDB, BDC, KPMG and a number of highly influential industry research partners. Major alternative finance industry associations and organizations in the United States, Canada and across Central and South America, including the LendIt/Lend Academy, Crowdfunding Professional Association (CfPA), Crowdfund Intermediary Regulatory Advocates (CFIRA), National Crowdfunding Association of Canada (NCFA), Orchard, Crowdnetic as well as Queen’s University’s and the Impact Group are helping to make this ground-breaking research possible, with Crowdfund Insider as the research media partner. The 2015 Americas Alternative Finance Benchmarking Research will launch on the 15th of October and closes on the 16th of November.
Alternative finance encompasses innovative financial instruments and distributive channels that have emerged outside of the traditional financial system. This industry is experiencing rapid growth in the Americas. The study will assess the activities of equity- and reward-based crowdfunding, peer-to-peer consumer and business lending (i.e. Marketplace Lending) and invoice trading, which are directly connecting lenders to borrowers, raising venture capital for start-ups, funding the creative industries and creating new ways for individuals and institutions to control how and to whom money is distributed, lent and invested.
Related: The University of Cambridge Launches Europe Wide Alternative Finance Benchmarking Survey: Twelve Major Industry Associations and EY Collaborate
The University of Cambridge and its research partners have successfully produced high-impact benchmarking and industry reports that documented the rise and development of alternative finance in the UK and Continental Europe, however there remains a substantial lack of empirically-based academic research that focuses on the Americas. This study will serve to bridge that gap, and provide reliable and up-to-date market data to inform evidence-based policymaking and regulation.
“We are pleased to be Cambridge University’s Western Hemisphere partner and to contribute to the understanding of this rapidly growing source of liquidity and opportunity,” adds Bob Rosenberg, Chicago Booth School of Business, adjunct faculty and Director of the Entrepreneurship Program at the Polsky Center.
The results of the survey will be made available free to the public in the 2015 Americas Alternative Finance Benchmarking Report, due to be published in early 2016. All findings shall be presented in aggregated form either by country, region or alternative financing models and no individual platform/provider’s data will be divulged.
Related: Research: Crowdfunding Models: Keep-it-All vs. All-or-Nothing
All crowdfunding, peer-to-peer lending and other alternative finance providers, operating in North, Central and South America, are invited to contribute to the benchmarking survey below. All participating platforms will be prominently acknowledged in the benchmarking report, with their respective logos displayed.
Survey link for Canadian Platforms: https://www.surveymonkey.com/r/AltFin_Canada
Main benchmarking survey link: https://www.surveymonkey.com/r/AltFinAmericas
- For Spanish version: https://es.surveymonkey.com/r/AltFin_Spanish
- For Portuguese version: https://pt.surveymonkey.com/r/AltFin_Portuguese
The study is supported by the Inter-American Development Bank (IDB), Business Development Bank of Canada (BDC), KPMG and a number of leading industry research partners
The National Crowdfunding Association of Canada has joined with The University of Cambridge and University of Chicago Booth School of Business to be the Canadian partner on this benchmarking research.
For benchmarking research enquiries please contact:
Dr. Olena Verbenko, Chicago Booth School of Business (Olena.Verbenko@ChicagoBooth.edu)
Tania Ziegler, Cambridge Centre for Alternative Finance, Cambridge Judge Business School (tz285@cam.ac.uk)
About the University of Cambridge and the University Chicago
University of Cambridge
This research is led by the Cambridge Centre for Alternative Finance, Cambridge Judge Business School. The Cambridge Centre for Alternative Finance is an international, interdisciplinary, academic research institute, dedicated to the study of alternative finance, which includes financial channels and instruments that emerge outside of the traditional financial system (i.e. regulated banks and capital markets).
Examples of alternative finance channels are online ‘marketplaces’ such as equity and rewards-based crowdfunding, peer-to-peer consumer/business lending, and third-party payment platforms. Alternative instruments include SME mini-bonds, private placements and other ‘shadow banking’ mechanisms, as well as social impact bonds and community shares used by non-profit enterprises and alternative currencies. The mission of the University of Cambridge is to contribute to society through the pursuit of education, learning and research at the highest international levels of excellence.'
University of Chicago Booth School of Business
The University of Chicago Booth School of Business is consistently ranked among the top five business schools in the world. The school’s faculty includes renowned scholars and its graduates occupy key positions in the US and worldwide. The Chicago Approach to Management Education is distinguished by how it leverages fundamental knowledge, its rigor, and its practical application to business challenges.
The school offers full and part-time MBA programs, a PhD program, open enrollment executive education and custom corporate education with campuses in Chicago, London, and Hong Kong.
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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.
