Advisor.ca | Staff | March 25, 2014

Last week, six provincial regulators released proposals for crowdfunding prospectus exemptions that would help early-stage companies raise capital.

The proposals represent a significant leap forward and positive progress for economic growth, as well as for crowdfunding advocates such as the National Crowdfunding Association of Canada (NCFA Canada).

“[Last year] was [about] awareness and community building for us,” says Craig Asano, executive director of NCFA Canada. Now, “2014 [will] be busier than ever” since the crowdfunding industry is full of emerging entrepreneurs and investors.

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The industry continues to grow, adds the association, with global crowdfunding markets increasing from US$1.5 billion in 2011 to US$5.1 billion in 2013, according to U.S.-based research.

Background

Proposed start-up exemptions (one has already been adopted in Saskatchewan last December) would allow start-ups and SMEs in more provinces to raise up to $300,000 per 12-month calendar year.

As well, investors could offer up to $1,500 per deal on crowdfunding portals that distribute offerings for up to 90 days online. The start-up exemption is based-on the Saskatchewan model, and provincial regulators in B.C., Manitoba, Quebec, New Brunswick and Nova Scotia are seeking public comment until June 18, 2014.

Ontario is offering a second version of the proposals, says NCFA Canada. It’s called the crowdfunding exemption and its creation has been a collaborative effort between Ontario, Manitoba, Quebec, New Brunswick and Nova Scotia, with the OSC leading the initiative by setting up a dedicated task force.

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That force has conducted research, hosted numerous town halls and reached out to various community stakeholders to engage in consultation sessions. The new crowdfunding exemption has higher caps and limits than the Saskatchewan model: start-ups and SMEs could raise up to $1,500,000 per 12-month calendar year, with investors being able to invest up to $2,500 per deal and up to $10,000 per year.

Canadian “regulators should be commended for their thoughtful and consultative approach,” says Daryl Hatton, CEO and founder of FundRazr, Canada’s leading crowdfunding portal. “The proposed regulations have some great characteristics and will help propel Canadian early-stage companies from the farm team to the big leagues.”

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