Paul Schulte, Advisor, Banking and Financial Services
August 22nd, 2019
Paul Schulte is the Founder and Managing Editor of Shulte Research based in Singapore. Paul's roles[...]
Category Archives: Online Funding Portals
MoneyMates: Slaying predatory lending
NCFA | Samuel He, Market Research Analyst Intern | July 3, 2020
Source: P2PMarketData
Today, millions live paycheck to paycheck, struggling to get by financially. This lack of resources and a poor credit score makes getting a loan difficult. And the options that are available, make the problem worse with high rates and aggressive rules.
Traditional payday loans use aggressive deadlines and lump sum payments that often results in the customer spiraling into a debt trap.
The challenge for the customer is accessibility to resources and the opportunity to improve their credit capacity for future, cheaper loans.
Founded by Samir Issa, MoneyMates is an alternative lender that prioritizes the welfare of its customers by offering expert guidance not just on getting the loan, but how to improve their credit situation.
See: Shopify expands capital lending program to help Canadian merchants weather COVID-19
They do this by offering customers an extended repayment period of up to two months rather than the typical two weeks. In the event of a missed payment, MoneyMates will work with the customer on a solution to avoid additional fees and penalties.
MoneyMates has also added a unique savings feature to help borrowers accrue savings. Customers are given the option to choose a savings amount when borrowing, which is set aside and deposited into the account along with any bonuses once the loan has been paid off. The approach helps borrowers understand both what they are borrowing and what savings can be accrued to help them avoid future emergency loans.
The objective is to provide vulnerable borrowers with better financial health, expanding access to financial services and a sense of empowerment.
Interested in seeing MoneyMates pitch at FFCON20 DIGITAL's Fintech Draft Competition?
Inspired by sports league drafts, the inaugural FFCON20 annual Fintech Draft is designed to identify and feature emerging and high growth fintech startups and scaleups. Qualifying Fintech Draft participants will be profiled online and reviewed by expert fintech scouts, and will compete in one of two (2) Fintech Draft competitions. Draft finalists compete at FFCON20 DIGITAL: RISE between Jul 9 – Aug 27, 2020 for exposure and prizes including promotion to investors, media, and partners and a 1 year industry partnership with NCFA.
Be sure to give them a vote and show your support! Check out their profile and competition here: https://fintechandfunding.com/shortlisted-draft-companies/
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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FundThrough Commits $10 Million to Help SMBs Overcome Shutdown
FundThrough Blog | Jun 26, 2020
TORONTO – FundThrough, North America’s leading invoice funding solution for small businesses, has announced it will provide $10 million in free funding for clients as the economy reopens from COVID-19. The company announced it as part of a broader initiative to help small businesses, who invoice their customers and wait to for invoice payments, get back on their feet in the wake of the COVID-19 economic shutdown and has expedited this capital commitment for SMBs looking for a practical source of funding.
The Toronto-based Fintech company will provide working capital to small businesses in exchange for outstanding customer invoices, based on the creditworthiness of the payor. Clients that sell goods and services to larger customers and need working capital quickly are encouraged to apply.
“We are proud to announce this initiative to help kick start the North American economy and ensure that companies get paid immediately for the work they have completed and the products they have delivered,” said FundThrough Co-Founder and CEO Steven Uster. “Large companies often stretch out their payment terms for their suppliers. We are levelling the playing field so that suppliers no longer have to act as a bank for their customers.”
FundThrough will provide the funding through its next-generation invoice factoring platform, Velocity. Once onboard, clients can upload their outstanding customer invoices, update their account and payor information, and quickly receive their funding request. The quick influx of cash could provide companies with the working capital they need during a period of uncertainty. Factoring also provides a unique alternative to traditional funding methods.
See:
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The Intersection of Small Business, Tech and Our Financial Ecosystem is More Important Than Ever
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NCFA Open Letter: Government should collaborate with Fintechs
“One of the biggest challenges for small businesses will be to get paid for the first projects that they complete as the economy reopens,” said Deepak Ramachandran, FundThrough co-founder and Chief Technology Officer. “We’ve already seen large companies extend their payment terms from 30 or 60 days to 90-120 days. So, if a supplier completes an order and has to wait four months to get paid, it may feel a lot like they are shut down once again. FundThrough can get them their money within 48 hours of invoicing, so they can keep working on the next order.”
Small businesses seeking funding for their outstanding invoices can visit FundThrough.com for more information.
About FundThrough
FundThrough is a leading player in the fintech small business working capital space. Its tech-enabled invoice funding platform has re-imagined invoicing so that businesses who sell to larger customers can get paid instantly. FundThrough enables business owners to eliminate “the wait” associated with payment terms. For more information, go to www.fundthrough.com.
View: original release
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Cambridge launches the Global Alternative Finance Industry Benchmark & Covid-19 Rapid Assessment Survey in Partnership with World Bank Group and World Economic Forum
Cambridge Centre for Alternative Finance | Tania Zielgar | Jun 17, 2020
NCFA Intro: NCFA is please to provide continued support as a National industry partner of the Cambridge Centre for Alternative Finance research initiatives in Canada. It's absolutely essential that data and research be collected and anlayzed to help identify trends, inform policy and understand the state of industry during these times of global risk and innovative change. We strongly advise all fintech firms, research partners and anyone who is able to help this important survey collection initiative by completing the survey and sharing it widely among your network.
Overview of the Global Alternative Finance Industry Benchmark & Covid-19 Rapid Assessment Survey
For the past several years, the CCAF has produced comprehensive industry-focused research on the evolution of alternative finance; documenting and analysing the development of Crowdfunding, P2P/Marketplace Lending and other FinTech markets from across 190 countries.
This year’s benchmarking survey will also include the recently launched The Global Covid-19 Fintech Market Rapid Assessment Study, in partnership with the World Bank Group and the World Economic Forum. The empirical data collected will be used to understand Covid-19’s impact on the FinTech markets, how the global FinTech industry has responded and some of the immediate regulatory and policy implications. This research program has resulted in 20 reports, which are disseminated freely to inform policy and raise public awareness of alternative finance. This research has provided unique detail and insight into the changing FinTech landscape, creating a valuable evidence-base for policymakers, regulators, and industry stakeholders to utilize when evaluating the FinTech ecosystem within their local context or from a globally comparative perspective.
The Fintech landscape is changing rapidly as a result of Covid-19. This report, and the historical data on this industry more broadly, provide signposts as to the general development trajectories of firms when faced with this pandemic, and where strengths and weakness may lie.
The survey will hence include two key components:
1. Time-series data required to continue the CCAF long-standing tradition of benchmarking and scoping the industry (referring to your 2019 activities), and
2. Covid-19 focused time-sensitive data on a) market performance, b) regulatory needs & policy asks, and c) operational changes & implications.
The long-term impact of Covid-19 is yet to be known. By coupling longitudinal data with this research initiative, we can begin to test the resiliency of this market and provide clear, evidence-based assessments on how the sector will continue to develop.
As with all our reports, the Global Covid-19 Fintech Market Rapid Assessment (anticipated publication Q3) and the Annual Global Alternative Finance Industry Report (Q4) will be made available to the public and actively disseminated to provide key insights to regulators, policymakers and key industry stakeholders.
Thanks in advance for your contribution to the study: Take the Survey Now
https://jbs.eu.qualtrics.com/jfe/form/SV_7PRyNSA3B5IKIrX
The Covid-19 pandemic presents both serious challenges and potential opportunities for the global FinTech industry to grow and scale, with the long-term effects yet unknown. By coupling the CCAF’s longitudinal data with this exciting research initiative, we can begin to test the resiliency of this market and provide clear, evidence-based assessments on how the sector will continue to develop.
This Study will provide a global assessment of the FinTech ecosystem’s responses to the Covid-19 pandemic, with particular attention to the industry’s response to challenges and their regulatory and policy concerns. This survey will result in a jointly published report between the CCAF, World Bank and World Economic Forum, and will be made available online. You can find further information on the Study in the accompanying press-release.
The survey will close on July 31st. If you have any questions or comments, please feel free to contact the CCAF research team directly: Tania Ziegler (t.ziegler@jbs.cam.ac.uk).
Take the survey now --> here
Other links you may like:
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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NCFA Response to CSA on NI 45-110 Harmonized Securities Crowdfunding Rules
NCFA Canada | Craig Asano | May 27, 2020
NCFA SUBMISSION TO CSA ON PROPOSED HARMONIZED RULES FOR START-UP SECURITIES CROWDFUNDING (NI 45-110)
The Canadian Securities Administrators (CSA) are seeking comments on proposed harmonized rules for start-up securities crowdfunding by 27 May 2020.
The National Crowdfunding and Fintech Association of Canada (NCFA) welcomes this initiative. The following addresses the specifics of the proposed rules, but please see our previous submissions on crowdfunding in Canada on our website in the advocacy section for more details – https://ncfacanada.org/advocacy/.
1. Harmonization
NCFA has argued for many years that CSA crowdfunding rules are unduly constraining, and this enhanced harmonization will enable a greater use of crowdfunding across Canada, help to fill a funding gap, and allow more retail investors to invest in businesses whose purpose they support.
2. Impact of the pandemic on fundraising
Today, early stage Ventures are the most likely not to get funded as they lack established relationships with banks (including BDC) and they have been amongst the hardest hit by the pandemic. Many VC funds are moving towards growth equity (later stage) investing and foreign investors mainly invest at later stages.
3. Funding cap
While the maximum total amount that could be raised by a business under the crowdfunding prospectus exemption per year would increase from $500,000 to $1 million, we continue to support a much higher amount of $5 million (and that a broader range of companies be able to participate). In the US, where Reg CF has shown reasonable success, proposed SEC changes to Reg CF include increasing the maximum raise from $1 million US to $5 million. In the result, “the industry is poised to take off”. See – https://crowdfundcapitaladvisors.com/downloads/regulation-crowdfunding-4-years-in-review/ and https://www.sec.gov/news/press-release/2020-55.
We note the 60% success rate in 2019 mentioned in the above US report, and the failure of the researchers to find any evidence of fraud. Unfortunately, so far as we are aware, similar data is not collected in Canada.
We also note that the US is joining other jurisdictions to enable a higher raise, for example:
- in Australia: companies can raise AUD 5M (https://ncfacanada.org/5-million-equity-crowdfunding-extended-to-private-companies/)
- in the UK and Germany: companies can raise €8M (https://www.crowdfundinsider.com/2018/07/135781-uk-government-ups-crowdfunding-without-prospectus-to-e8-million-matching-germany/).
4. Investor cap
While we welcome the proposal to increase the maximum investment an investor can make in a distribution to $2,500 (from $1,500), with a higher limit of $5,000 if the purchaser obtains advice from a registered dealer, again we think the limit should be higher.
The investor cap should be raised to at least $5,000 per distribution, or $10,000 a positive suitability determination by a registered dealer. The commission may also consider implementing a maximum investment value per calendar year across all distributions such as $50,000 maximum per calendar year for an eligible investor.
What little data we have in Canada shows that the success rate of crowdfunded start-ups is relatively high (compared to all start-ups) and that investors, if educated about crowdfunding, welcome the opportunity to invest directly in ideas that they can connect with. In other jurisdictions, crowdfunding is an important source of start-up capital.
We need to make start-up capital easier to access in Canada and to make the system more competitive with other jurisdictions:
- UK does not have an investor cap
- In Australia, retail investors can invest up to 10,000 AUD per year
- In Germany, there is a limit of 10,000 EUR per investment for private individuals, but they cannot invest more than double their monthly net income
- 90% of the US States which have adopted or are considering adopting an intrastate crowdfunding exemption have chosen either $5,000 or $10,000 per single investment, unless the investor is accredited.
Eligible investors should be able to invest up to $100,000 with a positive suitability determination by a registered dealer
Accredited investors should be able to invest without caps (as they may already invest an unlimited amount under the accredited investor exemption).
The commission should consider expanding the accredited investor exemption definition to allow a category of ‘qualified accredited investors’ that any individual can qualify if they pass a formal test, such as the Canadian Securities Course (CSC) or equivalently demonstrate the knowledge and ability to accept risks involved. This would encourage more qualified Canadians to participate in private capital markets and be inline with similar initiatives in the U.S..
5. Working capital certification
A funding portal relying on the start-up crowdfunding registration exemption must deliver to the regulator in each jurisdiction a completed Form 45 110F5 Annual Working Capital Certification within 10 days of each calendar year-end. The portal must certify that it has sufficient working capital to continue its operations for at least the next 12 months. If the funding portal becomes insolvent or discontinues operations, it must promptly notify the securities regulatory authority or the regulator, and any purchasers for which it holds assets, of the process the portal will use to return the assets to these purchasers.
While a portal must be and remain solvent to operate, we believe that maintaining a 12 month capital requirement for crowdfunding dealers and funding portal registrants would be challenging especially given the pressure of small margins and the impact of COVID-19 now and for the foreseeable future.
6. Statutory liability
Under the Instrument, issuers, and in some jurisdictions, the directors and executives signing the offering document will be subject to statutory liability if the offering document provided to the investor contains a misrepresentation.
Due to the more limited resources of smaller issuers, this provision should only apply where the aggregate proceeds exceed $1.5 Million.
7. Eligible securities
These are: a common share; a non-convertible preference share; a security convertible into a common or a preference share; a non-convertible debt security linked to a fixed or floating interest rate; and a unit of a limited partnership.
- We would like to suggest that convertible preference shares be considered eligible securities within this instrument.
- Units of a trust should also be included as eligible securities.
8. Sunset clause
The absence of an expiry date in the instrument will enhance certainty for market participants.
9. Repeal of MI 45-108
MI 45-108 should be repealed.
10. Reports of Exempt Distribution
The regulator should consider fee reduction for filing reports of exempt distributions - these can add up to around $1,500 per raise which is a significant fee particularly for a smaller issuer. One potential way to manage this would be to allow registered dealers and funding portals to file reports of exempt distributions in batches (ie. once a quarter) and only pay a single fee per batch of transactions.
11. Peer-to-Peer Lending
The securities regime should contemplate a separate set of requirements for non-convertible loans made between a borrower and lenders. In other jurisdictions, such a transaction comes with a much lighter regulatory burden which is important for it to be feasible for a peer-to-peer lending market to exist.
Specifically, no offering document should be required to be prepared by a borrower where the transaction taking place is a simple loan made between lenders and a borrower - rather the loans should be made under a standard form loan agreement facilitated by a platform. In order to minimize burden on the borrower, the platform should be required to undertake certain due diligence on the borrower and determine an interest rate, loan amount and repayment structure - the borrower would thereby only be required to execute a loan agreement in order to transact in this capacity.
The current proposed regime would result in adverse selection bias as only borrowers that are less creditworthy would be likely to go to the lengths required under the crowdfunding regime as there are currently other options in the market to raise capital that are less burdensome for the borrower such as private lenders.
12. General comments
NCFA continues to ask for government support to ensure the Canadian fintech sector is not being held back and remains competitive with international comparators such as in the UK and US including:
- Improved data collection-analysis and reporting transparency. The lack of basic data (mirroring what is happening with respect to Coronavirus) is a recurring theme that requires a solution. NCFA is willing to collaborate with any government to help develop and provide a solution;
- Allow advertising and general solicitation;
- Consider bad actor check on management and beneficial shareholders (shared database);
- Provide (funding for) ongoing education;
- Take advantage of proven tax and other incentives;
- Be proactive and champion innovation;
- And maintain a public list of only active operating funding portals and registrants with a regular check of their operating status combined with a definition of ‘active’ portals (ie., >1 capital raise in the proceeding 12 months).
See select NCFA submissions:
NCFA meeting with OSC - briefing notes on Aug 24, 2017
NCFA submission to Ontario Minister of Finance: Urgent Need for Regulatory Change (report | summary) on Oct 18 2017
NCFA meeting with BCSC - briefing notes on Aug 15, 2017
NCFA Response to ASC Request for comments 45-108 on Sep 9, 2018
Download a PDF Copy of the Submission --> here
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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The Impact of Coronavirus on Funding Innovation
Crowdfund Insider | | Apr 22, 2020
The Impact of Coronavirus on VC Funding
It’s no secret that times of economic instability are the ones that create the greatest opportunity for innovation and innovators. When everyone is content, the incumbents tend to win – while when there is injury, the innovators happily fill the open wound. As Baron Rothschild once said:
“the time to buy is when there’s blood in the streets.”
It’s certainly no secret that the instability and need that was created by the last cataclysmic economic event – the stock market crash of 2008 – gave birth to the most groundbreaking companies and business models that we call Unicorns today, and a whole new breed of entrepreneurs with radical ideas were born. That chaos is what brought us Slack, Instagram, Pinterest, Cloudera, Airbnb, Venmo, Square, Uber, Yelp, WhatsApp, Groupon, and tons more.
See: How Regulation Crowdfunding Stood up to the First Weeks of Coronavirus – Almost Opposite of the Public Markets
The question is, what happens this time?
We’re at the height of the revolution; innovation is blowing up, the next breed of Unicorns is being hatched – all the while the old guard (the VC) are retreating. They should be diving in as this is the most fertile ground that startup investors will likely ever see. So how come according to a survey released April 9 by PitchBook, VCs “are riding out the coronavirus outbreak with a wait-and-see stance, but a significant portion of them already are expecting to scale back their bets this year”.
Or as Jonny Price, the Director of Fundraising at Wefunder (a leading Equity Crowdfunding platform) recently put it:
“March 2020 has been our best month ever already…..You can make a case that when the stock market is crashing, investors will seek alternative investment opportunities. And when conventional sources of capital dry up (e.g. VC), more founders might turn to their fans and customers for capital… High level — if there was ever a historical moment for a democratic and people-powered financial system, this would seem to be it.”
But what lays behind this drying up of VC funding? Well, it’s in large part due to the fact that most of the world has been ordered to avoid all gatherings. And for VCs, these measures mean there’s no opportunity to travel to events and have face-to-face interactions, which is still the predominant means by which they connect with startups and with their own investors. Then there’s the new risk environment we’re all now living in, with VCs managing this with the aforementioned “wait-and-see” stance. Whatsmore, the innovation coming out of this crisis will be truly new, not just iterative – meaning that VCs have no experts on hand to evaluate it – and if they can’t evaluate it, they can’t invest in it.
This is where Equity Crowdfunding (EC) steps in. Its online mechanism of matching investors with startups continues uninterrupted during this crisis. And the access afforded to any would-be investor means capital is easier to come by via this investment channel, while VCs remain sat on the sidelines waiting for the crisis to abate.
See:
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Canadian securities regulators propose new nationally harmonized crowdfunding rules for comment by May 27
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NCFA Open Letter: Government should collaborate with Fintechs
If more startups raise funding through EC during and after the crisis, then the effects on the ecosystem will undoubtedly be positive. We’ll start to see far greater diversity among founders and leadership teams, seeing that 44% of current EC funding goes to female founders or mixed-gender teams. Given that the startup space is routinely criticized for its male-dominated leadership, this will be an extremely positive force for change. And on the investor side, small and medium-sized investors will also find a far greater supply of promising startups to take a bet on, which will further democratise access to investments formerly reserved for the elites.
Impact of Coronavirus on Funding Innovation
The VC vs EC war has been building over the last few years and nowhere is it more prevalent than in the world of early-stage financing. Many VC and Angel Groups explicitly state that they do not invest in companies that have raised money from the crowd. Even those that have a mission of promoting diversity in the startup world often oppose Equity Crowdfunding.
This sounds counterintuitive – how can organizations that pride themselves on promoting diversity be opposed to the top mechanism that unlocks investment for female and minority founders? There are many reasons for this opposition that we won’t get into here, but the bottom line is that any funding innovation is profoundly disruptive to the VC business model and to how the VCs themselves make a living.
What we have, in essence, is a battle between the VCs who use next to no technology to automate, market, evaluate or otherwise augment their offerings and make decisions based on personal connections and “gut feelings” – who’s fiduciary responsibility is to only represent the interests of millionaires (not startups). And, EC – a marketplace that bypasses the traditional “relationship building” (and its built-in biases and inefficiencies), fully use modern internet-based tools to reduce friction, reduce cost, attract, manage, and drive investors and startups online – whose sole responsibility is to connect all sort of startups with all sorts of regular folks and help them invest.
See: Facing disaster, corporate venture capital to undergo key stress test
While the coronavirus crisis by itself won’t spell the end for VC funding, it may find itself having to adapt when the dust settles. If they’re largely absent from the market throughout the crisis, there will be a whole cohort of startups that had to raise capital through alternative means. And if VCs want to invest in any of them, they’ll be forced to relax their approach around investing in startups that have raised capital through EC. What’s more, this could be the beginning of a larger culture shift within the startup ecosystem, with more and more entering EC funding channels and discovering first hand the benefits of this model.
Ultimately, the battle between VC and EC will continue raging. This is not unlike the battles that we’ve seen before in other industries over the last 20 years – between modern internet-based technology and the “old way of doing things.” It’s a battle that we’ve seen in Netflix vs. Blockbuster, Priceline vs. Travel Agents, Uber v Taxis, and on and on. While these battles are often long drawn out affairs, they have all ended decisively in the end.
Continue to the full article --> here
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Exponential Launches $100MM Digital Asset Fund on DealSquare Leaning Into The Post-COVID-19 Future
Exponential Group | Sunny Durante | Apr 8, 2020
Toronto, April 8, 2020 Despite current market conditions, it is business as usual for a new digital fund. Exponential, a global financial services company focused on digital asset investing, fundraising and trading, has made its new, actively managed Digital Asset Fund available on investment crowdfunding platform FrontFundr and private markets dealer platform DealSquare. The $100 million fund gives retail and accredited investors access to this emerging digital asset class through a venture capital-style fund. This marks one of the first times retail public investors will have access to these investments which have traditionally only been available to accredited investors. Exponential’s Digital Asset Fund invests in companies of the future that bet on the promise of emerging and distributed ledger technologies to transition the market to a new, open, and enhanced digital economy.
Canadian retail investors can now participate in the Digital Asset Fund directly, subject to applicable securities law requirements, giving them access to classes of assets that are typically only accessible to accredited investors who represent only 4% of Canadian households. Exponential aims to make the fund available to US retail investors by the second half of 2020. In Exponential’s experience, digital assets are cost-efficient and generally have lower transaction costs than traditional assets. The Digital Asset Fund will only contain digital assets that comply with securities regulations in Canada.
“At Exponential, we are on a mission to migrate the old world to the new digital economy. The vision of our fund positions our investors for market disruptions. This could not be more relevant to us today than ever before as we face global disruptions due to COVID-19. The world is racing toward an unknown future, but what we do know is that Wall Street and Bay Street will look very different. We have known this for a long time and that’s why we created the Digital Asset Fund,” stated James Wallace, co-founder and co-CEO of Exponential. “We’re building a secure and efficient venture capital-style fund that supports the future economy. Together, we’re giving retail investors and investment advisors access to the digital economy, democratizing the playing field and promoting financial inclusion.”
How Technology Shapes Investor Access to Markets
The Digital Asset Fund will be available to retail investors through FrontFundr–– Canada’s leading equity crowdfunding platform and exempt market dealer. FrontFundr gives Canadian-resident retail and accredited investors the ability to review and invest in private companies on one digital platform. Accredited investors can also participate directly through Exponential, and those that wish to invest via their investment advisor or dealer can participate through DealSquare – a partnership between NEO and Silver Maple Ventures.
“Exponential’s mission to help build companies that will drive the future of our digital economy fits extremely well with raising capital online through platforms like FrontFundr and DealSquare. By working together, we are able to give the wider investor community the chance to participate in a unique opportunity, one that aligns with our mission of democratizing Canada’s private markets,” says Peter-Paul Van Hoeken, Founder and CEO of Silver Maple Ventures.
“We stand aligned with Exponential,” added Jos Schmitt, President and CEO, NEO. “In this rapidly emerging digital economy, their Digital Asset Fund allows for the smart thing and the good thing to be the same thing. We are proud to service a fund that targets exceptionally promising companies of the future who are advancing technologies that will drive our economy forward.”
To commemorate the launch of the Digital Asset Fund and educate investors on the capabilities and potential of the digital economy, Exponential hosted a live webcast on Wednesday, April 8, 12:00 pm ET. A secondary in-person launch is likely to be planned after social distancing restrictions lift.
For media inquiries, please contact:
Exponential: Sunny Durante sunny@exponential.io
Forkast.Studio: Joe Pan joe.pan@forkast.studio
About Exponential
Exponential consists of four teams: Ventures (seed capital), Capital (advisory and growth capital) and Markets (issuance and secondary trading), and Funds (venture and digital asset funds). Exponential also created a diversified digital asset fund that invests in several types of fractionalized assets including real estate, currencies, precious metals and venture capital. The venture portion of the fund invests in visionary founders, with a focus on exponential technology solutions, digital securities, and distributed ledger technology. Exponential believes that these technologies have the potential to alleviate human suffering, expand human potential, and enable access to a more meaningful life for everyone, everywhere. Exponential was the sole seed investor in the world’s first federally approved digital security, FIRE by tribeOS, and through that, has developed a blueprint that helps founders move from seed-stage to digital security offering rapidly and compliantly.
Connect with Exponential: Website | Twitter | Linkedin | Facebook | Medium
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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United States: FDIC Proposes Roadmap For Fintechs To Become Insured Banks
Lewis Brisbois Bisgaard & Smith LLP (via Mondaq) | Thomas Brooks and Jane Luxton | Apr 4, 2020
The term “fintech” is used to describe the application of new technology to improve the delivery and use of financial services and products in a more cost-effective way than is available in the traditional financial marketplace. The fintech industry is growing by leaps and bounds with an explosion of new products and services. While most fintechs are regulated by a variety of state and federal regulators, increasingly fintechs are considering the advantages of regulation by traditional banking authorities, a simplifying approach that consolidates regulatory oversight in one agency.
See: Bank/Fintech Partnerships: The Fad Is Over
This emerging trend offers opportunities and potential pitfalls for fintechs and requires careful planning and implementation. However, the Federal Deposit Insurance Corporation (FDIC) took a big step toward providing some clarity for fintechs that are considering this path with its March 17, 2020 “Proposed Rule: Parent Companies of Industrial Banks and Industrial Loan Companies.”
If adopted, this proposal would provide a transparent roadmap for a non-depository financial entity to either acquire an existing industrial loan company (ILC) or to apply for deposit insurance for a newly chartered ILC, ensuring federal regulation by the FDIC.
What is an ILC?
An ILC is a type of state-chartered bank that is insured by the FDIC, but its parent holding company is statutorily excluded from supervision and regulation by the Federal Reserve Board. ILCs generally have the same lending powers as traditional commercial banks. However, the parent of an ILC has an advantage over traditional banks because it can engage in commercial activities, while the parent of a traditional bank -- a bank holding company regulated by the Federal Reserve -- is prohibited from doing so. Over half of the current ILCs are chartered in Utah, but they also exist in California, Hawaii, Minnesota, and Nevada. No ILCs have been established since 2008, largely due to moratoria imposed by the FDIC and Congress. Now, however, the situation is changing.
Why is an ILC Charter Useful for an Online Lender?
An ILC is regulated by one federal entity (the FDIC) and one state regulator that granted its charter. Consolidating regulatory oversight saves time and money by avoiding the need to comply with several state licensing laws and regulations, as banks must do. Also, the ILC does not have to submit to multi-state examinations of its operations. Another significant advantage is that insured deposits provide a much lower cost of funds than other sources of funding. A lower funding cost would still allow reasonable profits, but would make lending more competitive with traditional bank lending rates. A further benefit is that an FDIC insured ILC can rely on interest rates of the state in which it is chartered instead of having to comply with the usury laws of several states.
What are the Requirements to Become an FDIC Approved ILC?
The purpose of the proposed rule is to codify existing practices utilized by the FDIC to supervise ILCs and their parent companies. It is designed (1) to mitigate undue risk to the FDIC insurance fund that may otherwise be present due to the absence of consolidated supervision of an industrial bank and its parent company, and (2) to ensure that the parent company that owns or controls an industrial bank serves as a source of financial strength for the industrial bank.
See: Fintech’s fast pass to traditional banking is now cut off
For typical state-chartered banks, the FDIC would be the primary federal regulator of the bank and the Federal Reserve would be the primary federal regulator of its parent holding company. Because the Federal Reserve does not regulate the activities of the parent of an ILC, the proposed rule provides that the FDIC, the ILC, and its parent enter into a written agreement to ensure that the ILC and the parent are operating in a safe and sound manner.
The proposed rule requires that written agreements must contain specific elements. However, depending on the type of applicant and its business plan, the elements contained in the agreement can be expanded. These requirements are in addition to the standard information that an ILC applicant for deposit insurance must provide to the FDIC.
The approvals for deposit insurance submitted by Square and Nelnet were implemented under existing FDIC policies and procedures. These were important breakthroughs because for the first time in 12 years, the FDIC approved deposit insurance for ILCs. The FDIC’s move to codify these procedures in the proposed rule means that other fintechs will have clearer guidelines for obtaining the same results, which is an important takeaway.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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