Crowdfunding Market in Canada

 

As part of our blog we talk about crowdfunding of different countries in the world. We talk about the market volume, regulations and market players. Today Canada will be the country of topic.

Regulation

The Canadian crowdfunding market is regulated by the NCFA (National CrowdFunding Association). In Canada, the equity-based crowdfunding is the only type of crowdfunding that is regulated. The reason for the NCFA to only regulate equity-based crowdfunding is because equity crowdfunding involves the issuance of securities whereas the other forms of crowdfunding do not.

The following rules apply to Manitoba, Ontario, Québec, New Brunswick and Nova Scotia (collectively, the participating jurisdictions):

The issuer of the security are required to meet the following conditions in order to issue shares to investors:

• The head office of the crowdfunding organization must be located in a participating jurisdiction.

• The issuer must distribute eligible securities of its own issue through an online funding portal.

• The issuer must distribute eligible securities using an offering document under the required form made available through the online funding portal. The offering document includes basic information about the issuer, its management and the distribution, including how the issuer intends to use the funds raised and the minimum offering amount.

• The issuer group cannot raise aggregate funds totaling more than $250,000 per distribution and is restricted to no more than two start-up crowdfunding distributions per calendar year.

• The distribution may remain open to up to a maximum of 90 days

• The distribution must be made through a funding portal that is either relying on the start-up registration exemption or operated by a registered dealer. Registered dealers that operate funding portals must meet their existing registration obligations under securities legislation and confirm to issuers that they currently meet or shall meet certain conditions provided in the start-up registration exemption

• The issuer must grant individual purchasers a contractual right to withdraw their offer to purchase securities within 48 hours of the purchaser’s subscription or notification to the purchaser that the offering document has been amended; and

• None of the issuer group’s promoters, directors, officers or control persons (collectively the principals) can be a principal of the funding portal.

 

Furthermore, the NCFA has set up some rules for the investors in terms of limits:

• Individual investment limit of $2,500 per investment for non-accredited investors, and up to $10,000 annually. Individuals earning at least $75,000, or $125,000 a household, can invest up to $30,000 – or $100,000 annually if they receive advice from a portfolio manager, investment dealer or exempt market dealer.

These are the rules that should be respected according to the NCFA. The NCFA is continuously working to improve the crowdfunding market. The main thing they focus on is investor protection, as investing in start-ups is very risky they always keep in my the protection of the investors in crowdfunding.

More detailed information can be found on the NCFA website: http://ncfacanada.org/

 

Market information

There are many crowdfunding platforms active in Canada, and this number is continuously growing. Some of the most popular crowdfunding platforms are:

• Seedups.com – Equity based crowdfunding platform
• Gofundme.com -Donation-based crowdfunding platform
• Fundrazr.com – Donation-based crowdfunding platform
  
• Fundo.ca – Reward-based crowdfunding platform
• Haricot.ca – Donation-based crowdfunding plartform
• Kickstarter.com – Donation- & Reward-based crowdfunding platform

The above mentioned platforms are the most popular ones in Canada. As you can see, donation-based crowdfunding is a very popular initiative. Many projects reach the news and get a lot of attention on social media and as a result of that, many projects get fully funded even though donators do not get profits, interests or ownership in return.

 

Payment providers 

Every country or region can have different payment methods and thus also different payment providers. The most popular payment providers in Canada for crowdfunding platforms are:

– WePay 
– PayPal
– Stripe (A Canadian payment provider)

Having the right payment provider can be of great importance as each country has their prefered way of paying online and could prevent investors from investing when the right payment method is not available.

 

If you have any questions regarding this article; need more information; or if you are interested in starting your own platform, check our website or just get in contact with us and we will be more than happy to help you!