Thursday morning, the Hon. Brad Duguid, Minister of Economic Development and Innovation was the honorary guest at Technicity, the first Equity Crowdfund Conference in Ontario. Min. Duguid spoke about the potential benefits that equity-based crowdfunding provides for entrepreneurs and said once the Ontario Securities Commission completes a review, the provincial government would look at ways to move forward with changes.
Great panel, crowd and organization and more importantly the outcome that I will highlight further. It was also a rare opportunity to meet up with the other shakers of Invest CrowdFund Canada : Dr. Cindy Gordon, national Chair of ICC and CEO of Helix Commerce Intl, Fawn Annan VP for Ontario and CEO of IT World Canada, Andrew Weir VP national communications, Debra Chander VP National marketing, and Barry Gander, i-Canada co-Founder. I also had a serendipitous moment, meeting Craig Asano, Executive Director of the National Crowdfunding Association of Canada, with whom I’ve been exchanging emails with for the past weeks and had yet to meet.
A Room Full of Believers in Equity Crowdfunding
The entire Canadian ecosystem was present and the excitement palpable. When Darren Westlake, co-founder of CrowdCube, UK’s Equity crowdfunding platform, took the stand, we had high expectations and were not disappointed. Darren walked us through the process of an equity crowdfunded business, provided key success metrics and gave us a view of what lies ahead for equity CF sites. I tweeted as I listened (see end of post). All provinces needed to catch a glimpse of the lessons learned and the opportunities, and more importantly realize that we all share the same concerns: the need for democratizing investment to close the financial gap and stir innovation.
The keynote was followed by a panel discussion including top influencers from the technology, regulatory, banking and VC sectors: CEO of ING Canada, Peter Aceto ; founder of Stratus Capital and a board director at the Toronto Angel Group, Dr. Richard Reiner; creator of Social Venture Exchange, Adam Spence and Dr. Cindy Gordon, who moderated the event. There was great talk on Ontarian initiatives to boost innovation and Canadian-specific requirements, i.e. tax incentives for equity crowdfunded businesses.
The third highlight of this matinee was the group table dialogue moderated by Chairman of the Exempt Market Dealers Association, Brian Koscak. In short, each table was asked to discuss three questions that were later shared in plenary. Our set of questions: Should issuers be subject to an annual limit on how much they can raise? Should issuers be subject to a minimum and maximum offering threshold? Should securities be limited to equity only or debt and equity?
This session gave way to much discussion and differing opinions. It’s all good. This is how change starts to take place. The value lies not in the “right” answers but in addressing the right questions, having such a large number of interested and engaged professionals.
What is the main motivator for Equity crowdfund investors?
One crucial teaching that I take with me is that equity crowdfund does not belong to one select group but to all. And to confine it to the financial or regulatory sphere is a mistake. Yes, equity CF addresses financial and regulatory concerns, i.e. how much does one invest? How much can one raise?, and for good reason. Yet it also addresses regional/municipal economic growth and innovation rate, i.e. investing in a company for reasons other than financial. Darren nailed it when he said
Financial return is not the main motivator, supporting SMEs is.
Because you may not see a return in VC terms (<5 years) but you will be contributing locally to the long term growth of businesses and job creation. And as Darren mentioned, these SMEs eventually scale and their value increases thus interesting other categories of investors. It’s a win-win.
Why accelerate the adoption of Equity Crowdfunding in Quebec?
First and foremost, start-ups are leaving Quebec for better (financial) conditions. Love money and bootstrapping are NOT accessible to every entrepreneur. Some keep their day jobs and work nights to make their great idea actionable but with a lot of collateral damage. Those that do succeed with some help of their close circles need more funding to scale and acquire new clients. Yet VCs and Angels can only fund so many start-ups in early or later stage. This leaves quite a large crowd of entrepreneurs who more often than not, call it quits (50% of SMEs have a lifespan of 5 years).
Then I ask you. How can Invest/Equity Crowdfunding not be part of the public agenda? As Ontario, this should become a concern for all: the Prime Minister, the Ministry of development and innovation, the Ministry of small business, corporations, SMEs, start-ups, VCs, angels, business associations, exempt market dealers, regulatory agencies, strategists, social media experts, IT experts, securities lawyers, academia, individual investors, Julie, John, Mr and Mrs Smith, and the generations to come.
Why wait-n-see, especially when the market is clearly sending out signals that Equity CF works? Naysayers may respond “sure, it works in Australia or UK, but it isn’t going to work here.”, “It’s going to kill our VCs” or “No one knows what Invest CF is, let’s wait it out”. I am a partisan of dialogue among stakeholders and I believe that in lieu of making assumptions amongst ourselves, we should create an open public arena. Our blog is one those places and we welcome your questions, concerns, suggestions. Last Monday’s short talk at Crowdfund Night was yet another opportunity and people came up to me with more questions. Yes, the interest is there and we must cultivate it.
Seemingly, Ontario is next up to adopt Invest Crowdfunding, and other provinces will follow suit. We do not want to see our country divided, hence running the risk of losing our Quebec entrepreneurs to other regions, where more diversified financing mechanisms will be in place sooner than later.
If you would like to accelerate the adoption of crowdfund Investing, we welcome the addition of your strengths to our cause. Contact us. Many thanks.
Twitter Feed @Technicity:
29 Nov @Yazziness #technicity Government should propose tax incentive to #Crowdfundinvestors as in UK. Agreed.
29 Nov@Yazziness #technicity Banks will see invest #crowdfunding as a wonderful opportunity, to meet entrepreneurs early on in their life cycle – Peter Aceto
29 NovBrian Jackson @brianjjackson Darren saw a supply/demand problem in the UK of too many businesses looking for capital, not enough angels. Sounds familiar#technicity Retweeted by Diana
29 Nov@Yazziness @TechnicityTO how banks can get involved in invest #crowdfundingPeter Aceto @ingdirect speaking
29 Nov @Yazziness #technicity shares b for crowd, shares a for accredited.@Crowdcube
29 Nov @Yazziness #technicity Little due diligence. ID checks and money-laundering checks done for every business @crowdcheck29
29 Nov @Yazziness#technicity @Crowdcube crowd funded their business. 300k pounds raised. 160 investors
29 Nov@Yazziness#technicity average investment 1800 pounds. 31 successful deals in 18 months. Total funds raised 4.2 m pounds #crowdcube
29 Nov@Yazziness #technicity Investor survey: financial return is not the main motivator for invest #crowdfunding. Supporting SMEs is. – Crowdcube CEO
29 Nov@Yazziness #technicity Strong vetting process @crowdcube – 25% acceptance rate invest #crowdfunding