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Monday, August 21, 2017
Financial and Consumer Affairs Authority

What is Start-up Crowdfunding?

You may have heard of crowdfunding as a way for small businesses or creative projects to raise funds online from the public. Traditional (non-securities based) crowdfunding usually raises money through donations or by pre-selling products.

Start-up Crowdfunding is slightly different as it is securities-based.

Instead of giving a donation or pre-purchasing a product, Start-up Crowdfunding is where individuals invest in a start-up or early stage company that is selling securities like debt securities (such as bonds) or securities giving the right to participate in future profits (such as shares). Investments are made on-line through a funding portal website.

Remember, Start-up Crowdfunding investments are risky – don’t invest unless you can afford to lose all the money you pay for the investment.

Why Start-up Crowdfunding?

In Canada, there are many rules and obligations for businesses that want to sell securities to the public.  Start-up Crowdfunding Registration and Prospectus Exemptions have been introduced in Saskatchewan, British Columbia, Manitoba, Québec, New Brunswick and Nova Scotia (the participating jurisdictions) in order to make it less complicated and more cost effective for businesses to raise capital in those jurisdictions.  Those businesses and funding portals wanting to use Start-up Crowdfunding are subject to the Start-up Crowdfunding rules and obligations.

Overview

  • Both the business and the investor must be located in one of the participating jurisdictions.
  • Businesses can have two Start-up Crowdfunding distributions per year and raise up to a maximum of $250,000 in each distribution.
  • No person or company may invest more than $1,500 in any one Start-up Crowdfunding distribution.
  • The business cannot be a reporting issuer or an investment fund.
  • Businesses must post their Start-up Crowdfunding Offering Document on a funding portal’s website. The Start-up Crowdfunding Offering Document describes the security the business is offering to investors.
  • The funding portal facilitates the trade between the business and an investor by electronically receiving payment for the purchase of the security.

Start-up Crowdfunding Funding Portals

The following is a list of Start-up Crowdfunding funding portals operating in Saskatchewan:

  • FrontFundr
  • Consider Funding
  • CanaDragon Enterprise Equity Crowdfunding Interchange

For information regarding Start-up Crowdfunding funding portals in other participating jurisdictions, please contact those jurisdictions directly.



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