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It’s been a long time in the making, and we certainly hope the rest of North America will follow suit, but there’s great news from Ontario, Canada this month. Crowdfunding is the hottest new buzzword in the world of small finance today. Many microbusinesses, nonprofit organizations, and small LLCs have been relying on this method to allow investors to hop on board with financial contributions a lot more as of late, though the essential idea of crowdfunding has been around for several years.
In the early days, some of the most popular crowdfunding projects had to do with helping small time musicians raise money to get into the studio and record an album, or to help a local spay and neuter clinic raise cash for tools, medications, and supplies needed to get homeless cat and dog populations lower in their neighborhoods. But this method has taken on a sort of “light bulb moment” for both those who need the investment as opposed to small business loans and those who wish to make the financial contributions to causes and small businesses they believe in.
With Ontario’s Securities Commission giving the green light for new regulations that allow small timers to raise as much as $1.5 million by way of crowdfunding that entails a new small venture offering a range of securities purchasing for investors of any size without having to mull through the tedious chore of becoming an IPO (i.e., being able to create an initial public offering), which creates enormous roadblocks for startups that ultimately can’t survive or thrive without big or small-time investors.
Probably the coolest thing about this way for investors to contribute by utilizing crowdfunding is that the entities offering the securities have an entire year to collect as many investment dollars they can. This gives many seedling operations a great springboard to prepare better branding, better white papers, better online identity, and ultimately, set themselves up for success with the TLC and support they receive from those who believe in their business model.
The Equity Crowdfunding Alliance of Canada will hopefully prove to be a model for crowdfunding that helps the underdogs of the business world succeed in a race for cash in a world where they ultimately can’t compete against the big dogs—as they say, it takes money to make money—hopefully the Equity Crowdfunding Alliance of Canada and its progressive methodologies will prove this old idiomatic phrase to become an antiquated phrase from the days of yore (2013).
So what kinds of odds do we have for the US and other industrialized nations taking on similar financial options for the startup and small businesses in their parts of the world? Likely, the financial pundits and others who scrutinize the ways businesses raise money before becoming IPOs will be watching Ontario’s securities for crowdfunding option over the next several months to see how many companies are successful with it, and how many investors feel satisfied with what they put in coming out on the other side of the 12-month period allotted to non-IPO entities who need that special option to get their financial groove on.
This isn’t some willy-nilly regulation-free tactic for Ontario-based businesses to use, that’s one thing that must be highlighted for those who are already shaking their heads at this idea, and who are not familiar with how crowdfunding works. Any enterprise, small business, startup, or venture with big ideas and shallow pockets will have to pass background checks, must have a completely squared away board of directors, and agree that what happens in Canada stays in Canada. In other words, this new form of IPO-free option for businesses is meant to assist startups in the land of the Maple Leaf in an effort to create and maintain a strong national economy, not shift and shuffle funds off to tax shelters on the Cook Islands or outsource jobs to other countries. The Equity Crowdfunding Alliance of Canada has made it clear: regulation will rule the day, and the only way this kind of crowdfunding will work with equilibrium in mind to lower the risk for investors and hold business owners accountable. If this form of investment proves to be effective in Ontario, it will hopefully go viral, creating a more viable marketplace for smaller companies with very big ideas.
