Equity crowdfunding

Equity crowdfunding is a type of equity financing whereby people (‘the crowd’) invest in an early-stage unlisted company, in exchange for shares (equity) in that company. Is your business ready to take on investors?

Amount

$25,000 - $1.5M

Term

Depends on any subsequent fundraising

Cost

A minority stake in your business plus fees

Speed

Varies from weeks to months

Purpose

Startup costs & growth

Suitable for

Suitable for Pre-revenue startups through to established, profitable businesses

Equity crowdfunding is a type of equity finance whereby people (‘the crowd’) invest in an early-stage unlisted company, in exchange for shares (equity) in that company. Individual investors thus become shareholders and stand to profit if the business does well – they might also lose some or all of their investment. Equity crowdfunding usually takes place over an online platform.

Geared towards B2C based businesses given the viral effect of a crowd campaign. Normally targeted at Seed Stage businesses, Canadian businesses can raise up to $1.5m which is an upper limit enforced federally by The Canadian Securities Administrators (CSA).

FrontFundr is Canada's leading online investment platform. They use technology to provide Canadians with access to investment opportunities in private companies, and offer companies an online channel to efficiently raise capital from seasoned investors and the general public.

Think Dragon’s Den, but for everyone! To date they’ve helped more than 85 companies raise over $80 million collectively and built up a community of 30,000 users across Canada.

Equivesto connects innovative, driven, inspired Canadian businesses with the capital they need to grow & succeed through our community-sourced investment platform.

Advantages of equity crowdfunding

Your pitch goes to a large audience who are often your target customer, particularly if your business is B2C

You get polished and professional pitch documents that help connect your vision with an investment audience

Once the pitch goes live, there is a known timeline to fund which is a rare thing in an equity raise

Access to an ongoing community of investors who packed your business to help with spreading your business

Downsides of equity crowdfunding

You have to bring at least 20% of the money to the table before you can raise on a crowdfunding platform

You get charged on the money you bring to a crowdfunding platform

You have to share a lot of documents and information publicly, so easy for competitors to get hold of

From small businesses it is a large upfront cost in time and money in creating all the video and image assets needed for the campaign

Application documents checklist

What should I look out for when choosing an equity crowdfunding platform?

The main thing to assess when analysing a crowdfunding platform is the size of the their funding network, their funding roadshow roadmap, case studies of businesses like yours, what % they're going to charge you, what $ they're going to charge you on the money you've already raised, the minimum amount of money you need to have raised before going on the platform, confirm the use of a nominee structure, and campaign commitments before launch in terms of time and investment.