Popular crowdfunding sites such as Indiegogo and Kickstarter have helped to propel several ideas into worldwide hits. The most prominent from a Canadian perspective is Pebble, who has successfully funded a couple projects and raised well over $20 million.
A new era has emerged for startups and small business owners in Canada as various securities regulators have implemented, or are expecting to implement, a process to allow them to raise capital through crowdfunding sites, and in turn offer shares. So far, the regulators of British Columbia, Saskatchewan, Manitoba, Québec, New Brunswick and Nova Scotia are the “participating jurisdictions.”
Since many Canadians find it a challenge to raise financing, this could pave the way for a new source of needed capital. According to the rules, the crowfunding route is only available to early stage companies and can only raise a maximum of $500,000 in a year and not more than $250,000 in one crowdfunding project. In addition, the maximum amount an individual will be able to fund a company is $1,500 per campaign, and backers will have the option to withdraw their investment within 48 hours.
The Ontario Securities Commission declined to participate but said it will publish a new rule this fall. OSC spokeswoman Kristen Rose stated, “In our view, the registration of portals is important for managing risks to investors and the reputation of Ontario’s capital markets.”
