Canadian startups now have direct access to capital through equity crowdfunding under Canada’s Start-Up Crowdfunding Exemption (NI 45–110), introduced in September 2021. This exemption enables innovative businesses to raise funds from the public, allowing everyday Canadians to participate in early-stage investments once limited to high-net-worth individuals and venture capitalists.
What is Equity Crowdfunding?
Equity crowdfunding allows companies to raise funds by offering shares or other securities directly to the public through an online funding portal. Unlike donation-based or rewards-based crowdfunding, which offer non-financial perks, equity crowdfunding provides investors with an ownership stake in the company. This aligns investor and company interests, giving investors a real stake in the business’s future success.
Why Equity Crowdfunding Works for Certain Companies
Equity crowdfunding is particularly beneficial for companies aiming to engage their community and build a customer base that doubles as an investor base. It’s ideal for companies where investors can also be customers, such as consumer-facing products, tech solutions, or mission-driven services. This model can attract loyal supporters who believe in the brand and may be invested in more ways than one.
Equity crowdfunding is also effective for companies planning to go public in the future. Building a broad base of shareholders through crowdfunding can lay the groundwork for a stronger public listing. It allows early-stage companies to engage more directly with a diverse group of supporters who may carry brand loyalty into the company’s public life.
Investor Benefits: Access to New Opportunities
For investors, equity crowdfunding is an exciting new way to participate in opportunities traditionally available only to high-net-worth individuals and institutions. Through NI 45–110, retail investors can now invest in innovative Canadian businesses, supporting companies they believe in and potentially benefiting from the company’s growth.
Eligibility and Investment Caps
NI 45–110 allows eligible Canadian companies to raise up to $1.5 million over a 12-month period, while setting investment caps to protect individuals:
- Investment Caps: Investors can contribute up to $2,500 per campaign, or up to $10,000 if they receive suitability advice from a registered dealer.
- Issuer Eligibility: Eligible companies must be headquartered in Canada, privately held, and non-reporting (not listed on a stock exchange). Companies that are solely investment vehicles, blind pools, or primarily acquisition-focused are not eligible. These standards ensure that funds go toward active Canadian businesses with defined operations and growth plans.
The Role of Capiche as a Funding Portal
Equity crowdfunding under NI 45–110 must be conducted via a compliant funding portal like Capiche Crowdfunding (capiche.fund), an exempt portal permitted to operate across all Canadian jurisdictions. Capiche serves as a trusted platform for companies to present their offerings and securely holds funds in trust until the offering closes.
As an exempt portal, Capiche is optimized for the needs of smaller capital raises typical of crowdfunding. Unlike registered portals, exempt portals are not required to perform Know Your Product (KYP), Know Your Client (KYC), or Suitability assessments, which are often unnecessary for smaller, community-focused raises. By reducing friction in the process, Capiche empowers investors to make decisions based on their own research, preserving the accessibility and efficiency that are central to equity crowdfunding.
Investor Protections and Process
NI 45–110 includes key protections for investors, such as requiring companies to provide a detailed offering document with information on the business plan, use of funds, and potential risks. Investors also have a 48-hour cooling-off period after making a commitment, allowing them to reconsider. If a campaign does not meet its funding goal within 90 days, or if the issuer withdraws the offering, investors receive a full refund.
Closing and Compliance Obligations
When a crowdfunding campaign successfully closes, issuers have 30 days to confirm the investment details with each participant, including the quantity and price of securities purchased. They must also file offering documents and a report of exempt distribution with relevant regulators, ensuring transparency and compliance.
A Transformative Opportunity for Canadian Startups and Investors
Equity crowdfunding under NI 45–110 is transforming access to capital for Canadian startups, especially those that may not attract large venture investments yet. By enabling small investments from everyday Canadians, companies can attract investors who believe in their mission and may also be their customers. For investors, it’s an opportunity to engage with new businesses and potentially benefit from the success of companies they believe in.
Capiche’s Platform for Equity Crowdfunding
Capiche Crowdfunding (capiche.fund) provides a streamlined, user-friendly platform for Canadian startups to leverage NI 45–110. From preparing offering documents to managing subscriptions, Capiche simplifies each step of the crowdfunding process, ensuring a smooth experience for both issuers and investors. Ready to explore equity crowdfunding? Capiche Crowdfunding at capiche.fund connects you with investors who believe in your vision and helps turn them into partners in your growth journey.