The Georgia Straight | Stephen Hui | July 2, 2015
When Vancouver-based RentMoola Payment Solutions reached the stage where many technology startups would seek financing from venture capitalists, Patrick Postrehovsky and his team made the decision to try “untraditional” methods of raising money.
The CEO and cofounder of RentMoola told the Georgia Straight that, after tapping friends and family, the privately held company took advantage of securities regulations in British Columbia that permit it to sell shares to accredited and retail investors. Now, according to Postrehovsky, RentMoola is considering using new rules that allow startups to do equity crowdfunding—which is legal here but not in Ontario and the United States—to raise money in relatively small portions from a large number of people.
“Typically, if you’re going to raise capital, you go to your VC, you review term sheets,” Postrehovsky said in the Yaletown office of Silver Maple Ventures. “But the biggest reason why we didn’t want to do that, frankly, was the venture-capital term sheet is going to be very dilutive. They’re going to try to take control of your company, and we really didn’t want to do that for our team.”
Silver Maple is the company behind FrontFundr, a securities-crowdfunding portal that launched in May. RentMoola is one of three local startups hoping to raise capital on FrontFundr, which on June 18 became the first portal in Canada to use what’s known as the “startup crowdfunding exemption”.
Adopted by the B.C. Securities Commission and its counterparts in Saskatchewan, Manitoba, Quebec, New Brunswick, and Nova Scotia in May, the exemption allows early-stage companies headquartered in those jurisdictions to sell shares, convertible notes, or bonds to investors living in those six provinces via crowdfunding portals without filing a prospectus with their provincial regulator. Using the rules, a startup can raise up to $250,000 per crowdfunding campaign, with two of these permitted in a calendar year. An investor can contribute a maximum of $1,500 per campaign.
“It allows the broader investor community access to early private companies, and historically that hasn’t been the case,” Sean Burke, chief financial officer for Silver Maple, told the Straight, seated across from Postrehovsky. “There’s been exemptions available that they could use to get that access, but really what our platform does—and the new crowdfunding exemption—is it facilitates the actual process of doing an online investment.”
Guusto Gifts, one of the startups on FrontFundr, is the first company to attempt to raise capital using the startup crowdfunding exemption. The gift-giving-app maker is seeking to sell three percent of its equity for $50,000 by August 14. The minimum investment is $500, and Guusto must raise at least $20,000 for its offering to close. Guusto aims to gain a further $250,000 from accredited investors (who include people who earn at least $200,000 a year, have at least $1 million in financial assets, or possess at least $5 million in net assets) via FrontFundr using other exemptions from the prospectus requirement.
Burke said that FrontFundr, which charges startups a commission if their campaign is successful, aims to become the Kickstarter of securities crowdfunding. He remarked that the startup crowdfunding exemption gives retail investors the opportunity to be like the venture capitalists on the reality-TV show Dragons’ Den. According to Burke, “crowdfinancing”—his preferred term for securities crowdfunding—rewards startups with more than cash.
“By having broader access, you have brand champions,” he said. “People who are invested into the company are your biggest supporters who are going out there and advocating for you, talking about your product.”
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.
Crowdfund Insider | | Jun 29, 2015
SeedUps Canada, a leading equity crowdfunding platform operating out of Calgary, is joining a growing number of platforms that are leveraging their own technology to self-crowdfund their company. SeedUps is reaching out to their growing number of users, and beyond, to capitalize on their first mover status in Canada. The capital injection will help SeedUps to educate both investors, and entrepreneurs, about the opportunity of crowdfunding and drive future growth as they seek to disrupt traditional finance.
SeedUps would like to raise up to $500,000. They see this amount as necessary for their “runway” to execute and recruit solid talent over the coming months. This would be a seed crowdfunding round with an A round to follow – perhaps next year. The seed round may come in around 20% equity – a solid amount of ownership to back the future of finance in Canada.
As part of their growth strategy, SeedUps wants to engage early stage investors like Angels – not supplant them. The platform wants to collaborate with established early stage types – a phenomena that has growing traction globally. Sandi Gilbert, the CEO and co-founder of SeedUps, notes that in the last year or so traditional early stage investors like VCs and Angels have experienced a change of heart. They used to say “hey we don’t need these guys [equity crowdfunding platforms]” today they are recognizing this really makes sense.
The Canadian regulatory environment has proceeded in a bit of a convoluted fashion (not necessarily atypical – just look at the US). But last month, on May 14th, things changed in Canada as multiple provincial regulators moved in concert to improve the environment for access to capital.
Gilbert provided some insight into their world;
“For the last 18 months, we’ve been educating Canadians on the merits of equity crowdfunding and raising capital for companies profiled on our platform. It’s a new world for early stage companies seeking capital, but it has taken a while to gain main stream adoption. On May 14th, everything changed, as six Canadian provinces endorsed equity crowdfunding by implementing rules that make it easier for early stage companies to raise capital and opening up the opportunity for the ordinary investor to participate alongside seasoned investors in private capital deals. And, there is more change coming when Ontario opens up its market later this year.”
With the enactment of new rules, SeedUps believes now is the time to seize the moment and move forward aggressively. Gilbert states;
“We launched in 2014 and [have been] credited with the “First Ordinary Investor”, we believe that now is the time to raise capital to take advantage of developments in the marketplace. This is the first time SeedUps has reached out for external financing, but our peer group has been active globally.”
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.
WSJ Small Business | Leslie Josephs | June 16, 2015
Online arts and crafts marketplace begins allowing sellers to raise funds for new productionEtsy Inc. is crafting a new revenue stream: crowdfunding.
The Brooklyn-based artisan-and-vintage marketplace is planning to launch as soon as Tuesday a pilot program in which sellers can raise money on the company’s website to fund the manufacture of new products.
“We’re super passionate about our seller community,” said Joe Lallouz, an Etsy product manager. “What are the best ways to help them grow and scale? A lot of sellers identified financing as a big hurdle to growth.”
Etsy, which has 1.4 million active sellers, would take its usual 3.5% of each transaction plus a 20-cent posting fee. It says sellers likely will use the funds raised to buy new equipment and materials or cover staffing costs.
A two-month pilot for its Fund project is launching amid a boom in crowdfunding campaigns. More than 1,250 online platforms world-wide raised $16.2 billion combined last year, up 167% from 2013, according to a March report by Los Angeles-based research firm Massolution. Crowdfunding for the business and entrepreneurship categories comprised more than 41% of that amount, or $6.7 billion.
But the boom has also drawn scrutiny from regulators.
Last year, PayPal established a policy intended to avoid complications when entrepreneurs raised money through crowdfunding. The policy allows entrepreneurs to have access to the funds immediately as long as buyers are informed of risks, including the chance they will never receive the product.
“I would predict that we would see more scrutiny and more regulation coming” of crowdfunding, said Richard Swart, a researcher at the University of California, Berkeley, and an crowdfunding consultant.
Etsy said it would not charge backers’ credit cards until a seller’s funding goal is met. Some 100 vendors will participate, and the company is recommending a nine-month delivery window for products created using crowdfunding. An Etsy spokeswoman said it expects most crowdfunded products to ship within six months.
Some entrepreneurs say shallow cash reserves are a challenge to their growth, so they often turn to crowdfunding sites such as Kickstarter to cover production costs for new products.
Carolina Alvo, who founded her namesake clothing brand in early 2014, is considering a second Kickstarter campaign to help cover the costs of expanding her petite-size clothing line. Kickstarter collects 5% from the funding total and a between 3% and 5% processing fee if the campaign is successful. It charges nothing if a campaign isn’t successful, according to its website.
She said she used her own money to launch her brand’s first items. “It was definitely a strain,” said the New York-based designer, adding that a Kickstarter campaign she ran last year to raise $15,000 helped her gauge consumer interest.
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.
Yorkshire Post | June 7, 2015
TENNIS ACE Andy Murray has netted a long-term partnership arrangement with Seedrs, the UK-based equity crowdfunding platform.
The arrangement will see the multi-millionaire sportsman joining the Seedrs Advisory Board to provide advice to the firm on businesses working in the health, sport and wearable technology spaces.
This partnership represents the first time a major public figure has teamed up with an equity crowdfunding platform in this way, and it heralds a significant milestone in the development of the equity crowdfunding industry.
Murray said: “I’ve always been interested in investment, and being able to get involved in an innovative way to help support British startups really appealed to me.
“Equally as important was working with people I trusted and who fully understood the huge responsibility of handling people’s money. I’m looking forward to working with Seedrs and the entrepreneurs of tomorrow.”
Murray is said to have made more than £30m during his career in prize money and lucrative sponsorship deals.
He will not be offering advice to individual investors or recommending specific campaigns.
Murray will also be investing regularly in startups and other early-stage businesses through Seedrs and helping Seedrs to grow its brand in the UK and internationally.
Equity crowdfunding is revolutionising the way startups and other early-stage businesses are being funded.
It involves the raising of funds by obtaining many small investments from a large number of people through online platforms.
This form of business fundraising is proving increasingly popular, and it allows businesses not only to obtain the capital they need but also to build a community of supportive investors who can help them grow.
The equity crowdfunding market is growing quickly. Since its launch in July 2012, Seedrs has reported 15 per cent month-on-month growth, and within the next few years it expects to be funding hundred of millions of pounds into thousands of businesses each year.
Matt Gentry, who runs Andy’s management company, 77, said: “Andy is a keen investor, with his own management agency alongside a property portfolio, which includes a hotel.
“Crowdfunding is a space we’ve been looking at for a while, to complement his business interests, and he’s excited about being able to help startup businesses and entrepreneurs in the UK.
“Andy’s been lucky enough to have support from sponsors throughout his career, not only helping to aid him and his team financially, but also adding valuable mentoring in many cases.
“For him the opportunity to give something back to help to up and coming business men and women was very appealing.”
Jeff Lynn, chief executive and co-founder of Seedrs, said: “Andy Murray is the perfect partner for Seedrs as we drive our growth to the next level.
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 950+ 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.
Calgary Herald | Mario Toneguzzi |May 28, 2015
With more companies turning to an online tool for capital, ATB Financial plans to launch its own crowdfunding portal for Alberta entrepreneurs next month.“Anyone in the world can boost a business on Alberta BoostR but only Alberta entrepreneurs and small businesses can actually launch a campaign,” said Neetu Sidhu, manager of ATB’s Alberta BoostR.
The beta stage of the platform’s development ended in November and several businesses are poised to launch fundraising campaigns when the platform goes live, she said.
“We got a lot of positive reception from business owners saying this is not only a great platform for me to raise money to either launch or grow my business but also a great marketing tool,” said Sidhu.
She said ATB is taking a different approach to the typical crowdfunding sites which are primarily based online. Events are also being created where companies can pitch their ideas to an audience who will be given ATB BoostR dollars to distribute to companies they like. An expert panel will also offer feedback to the companies.
Brenda Mahoney, an owner of Vin Gogh Paint and Sip Studio in Calgary which offers social evenings of painting and wine, said the Alberta BoostR program could be “fabulous” opportunity for her young business.
“When we started this we didn’t know that we had to have a kitchen for a liquor licence. So we did not have that in our business plan or our budget. So we took a loan out for the kitchen equipment. We’re hoping to raise some money to cover the costs of the kitchen equipment. We’re hoping to raise between $10,000 and $15,000,” she said.
The Calgary Chamber of Commerce hosted an informational event this week for companies to learn more about the growing crowdfunding trend.
Scott Crockatt, spokesperson for the Chamber, said another event involving the Chamber and ATB is planned for later in June where companies can pitch their idea to a crowd of about 200 people.
“We’re going to give everybody in the crowd a $20 voucher to put this towards the best business you think there’s a crowd fund to sort of help boost them up,” said Crockatt. “I think crowdfunding is catching on as another tool in the entrepreneur’s tool box of ways to source capital.
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.
FrontFundr Release | Peter-Paul Van Hoeken | May 27, 2015
FrontFundr empowers regular people to act as ancillary ‘dragons’ in the private-sector investment denVANCOUVER, BC (May 27, 2015) – May 27 will mark the launch of the much-anticipated financial technology platform, FrontFundr, which will unlock a new capital market and allow regular people to invest in private companies.
FrontFundr uses technology to enable entrepreneurs to raise money from a broad investor community. This is an opportunity for the general public to directly drive innovation and entrepreneurship. With FrontFundr, both experienced and regular investors are able to exercise positive influence on businesses they would like to support.
Previously, most Canadians were locked out from investing in young companies due to absence of an accessible market place and regulatory restrictions. On the other side, most early-stage companies looking for capital to grow their businesses had limited to no access to capital markets. This model left gaps in the growth-potential of early-stage companies, and it cut average citizens out of these investment opportunities.
“We’re giving regular people a chance to sit in the pitch seat and act as ancillary dragons,” says Peter-Paul Van Hoeken, CEO at FrontFundr. “We’re providing ordinary people with access to carefully screened investment opportunities, and entrepreneurs with access to more capital to support their growth.”
In traditional investment models entrepreneurs were limited to approaching angels and venture capital firms in hopes of finding much needed capital. This process of getting access to informal networks of a relatively small investor group requires a heavy investment of time and money. What’s more, it taps only a fraction of the world’s willing investors. FrontFundr is disrupting private-sector investing and bridging that gap. “We are offering an open market connecting seasoned investors and retail investors with stringently screened companies and supporting the entire investment process from pitch to securities purchase. Delivering better capital and better deals to all parties,” says Van Hoeken.
Regulators around the world are adopting new rules to allow companies to raise funds from investors through crowdfunding. The US Securities and Exchange Commission adopted rules this year allowing companies to sell as much as US$50 million of securities via the Internet. On May 14 2015, six provinces in Canada announced that they will allow young companies to raise up to CA$500,000 a year using a funding portal. FrontFundr is leveraging existing and new capital raising rules to offer its clients a broad range of funding and investment solutions.
FrontFundr’s investment opportunities are typically early-stage, mission-driven ventures seeking $200,000 to $2 million in capital investment. They have positive social impact and are predominantly from one of three key sectors: arts & entertainment, energy & environment, and technology. FrontFundr has already registered three businesses to raise capital through its platform, including RentMoola, InterLock, and Emergent Waste Solutions.
“We’re an innovative technology company and we work at a fast pace,” says Patrick Postrehovsky, CEO of RentMoola, a company that eases the pain of paying rent with rewards. “We’re excited to work with an exempt market dealer that operates similarly to the way we do—leveraging technology and innovation to disrupt an industry to the benefit of the public.”
FrontFundr is a fully compliant, registered exempt market dealer (EMD) and conducts stringent due diligence on all business investment deals presented to its investor community, and ensures both investors and entrepreneurs understand the risks and rewards associated with entering into a transaction. Visit FrontFundr.com to browse live investment opportunities.
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For more information or to set up an interview, contact Jeannine Bartz at jeannine@frontfundr.com or 604-306-0207.
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.
At some point this summer, Sean Sears hopes Canadian startups will be raising capital on his new crowdfunding platform, ICrowdx.
Sears and his colleagues at the Halifax investment firm-cum-startup lab Ogden Pond have been working on developing the online portal in preparation for regulators approving equity crowdfunding. Now that that has been achieved, they are in discussions with regulators on the details of letting companies raise capital online.
In addition to helping companies raise money, Sears believes ICrowdx will help investors to manage a portfolio of angel investments and communicate with their portfolio companies.
“The portal will be social,” Sears said in an interview. “It will create an instrument in which the investor has a direct line of communication with the company. And that flow of communication will be constant. It is also directly up the alley of the skills these companies have.”
Crowdfunding is the process of raising money online from a broad range of people. Although it has been used for charitable fundraising and early sales of products, regulators in six provinces (including Nova Scotia and New Brunswick) only this month first approved the practice for companies raising capital. No company can raise more than $250,000 in a single campaign, and investors are limited to maximum investments of $1,500 per company.
Sears said the restrictions are “brilliant” because they will force investors to hold a portfolio of startups rather than placing a heavy bet on one or two. Startups are inherently risky investments, and the restrictions force each investor to diversify, thereby reducing the risk.
ICrowdx immediately signalled that it will be among the first — if not the first — crowdfunding portal operating in Canada. The site will operate on a province-by-province basis and have staff in each jurisdiction in which it operates.
Sears believes the equity crowdfunding will prove to be a largely local exercise in which entrepreneurs attract investment from their local communities. He wants staff on hand to help the entrepreneurs launch successful campaigns and to vet companies to ensure they’re suitable candidates for investment.
He said he’s aware of four other companies that are proposing equity crowdfunding portals in Canada, but all are either based outside the country or in Ontario or Alberta (two provinces that have yet to approve equity crowdfunding). That could open the way for ICrowdx to be the first to actually launch a functional portal.
Sears expects that he will have passed the regulatory hurdles within 60 to 90 days. The first portal may be in Saskatchewan, a province that has been leading the crowdfunding drive in Canada.
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.
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