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Investment Crowdfunding for Retail Investors

MoneyWise | Barry Choi | Feb 28, 2023

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Equity crowdfunding platforms are becoming more common in Canada, and it’s allowing everyday investors to own part of the action that was once reserved to accredited investors.

  • With equity crowdfunding, a large number of investors can contribute to a business via platforms like FrontFundr or Equivesto. When investors contribute to a business through an equity crowdfunding portal, they receive a stake in the business. Equity crowdfunding allows start-ups to raise funds without loans, while investors are able to gain equity in a company for a fraction of the price of a traditional buyout. With equity crowdfunding, Canadian start-ups are allowed to raise up to 1.5 million dollars during a 12-month period.
  • In Canada, the investment limit for retail investors in equity crowdfunding depends on the province where the investor resides and the type of securities being offered. Generally, the investment limits for equity crowdfunding for retail investors in Canada are as follows:
    • In British Columbia, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, and Prince Edward Island, the investment limit for retail investors is $1,500 per offering, with a maximum of $5,000 per year.
    • In Ontario, the investment limit for retail investors is $2,500 per offering, with a maximum of $10,000 per year.
    • In Alberta, the investment limit for retail investors is $5,000 per offering, with a maximum of $30,000 per year.
    • Investors can invest in multiple offerings as long as they don't exceed the annual investment limit for their province. Additionally, some provinces may have different rules for accredited investors, who have higher investment limits due to their higher net worth or income levels.

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  • Equity crowdfunding doesn’t only make it easier to contribute to individual companies, some view it as a key to giving consumers more economic power.
  • Getting funding can be essential for entrepreneurs to survive, but not all companies will qualify for crowdfunding platforms.
  • Risk Reward:  There’s always a chance that the company you invest in fails, causing you to lose your investment. This is a risk with all investing, but is more likely for start-ups and early-stage businesses.
  • Real estate Crowdfunding:  Companies such as Willow and Addy split properties into equal shares and make them available to the public. If they buy a property for $500,000 it could then be split into 500,000 units. That means you could own a part of a home for as little as $1.
    • Once you purchase a share, you get a proportionate share of rental income.
    • You can also get paid if the property is sold for profit.
    • Not only do you get fractional ownership in a property, but you don’t have to deal with lawyers, realtors, or land transfer taxes when selling your units.

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NCFA Jan 2018 resize - Investment Crowdfunding for Retail InvestorsThe 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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