Introduction To Crowdfunding - National Crowdfunding & Fintech .
Introduction to Crowdfunding Date: December 9, 2013 Prepared for: Employment and Social Development Canada - Phase IV, 6D359, Gatineau, Quebec Prepared by: Craig Asano
Presentation Outline Introduction to Crowdfunding Part 1: Part 2: Part 3: Part 4: Part 5: Part 6: Part 7: Slide 2 Introduction to NCFA Canada What is Crowdfunding? Benefits and Challenges Industry Overview Regulatory and Market Overview Questions and Answers Appendices Employment and Social Development Canada
PART 1 Part 1: NCFA Canada Introduction Slide 3 Employment and Social Development Canada
Who is NCFA Canada? Canada’s leading Crowdfunding Industry Association Cross-Canada non-profit with a growing National membership of over 600 industry stakeholders, SMEs and investors with a wide social media reach Broad-based representing all forms of crowdfunding Community-based, membership-driven, collaborative, transparent, inclusive and dynamic Support innovation, small businesses and entrepreneurship and advocate for a dynamic, robust, harmonious and protective Crowdfunding industry in Canada We serve industry, government, academia, small to mid-size enterprises, innovation hubs and investor communities Slide 4 Employment and Social Development Canada
NCFA Canada - NFP Structure Community-based Industry Partners Sponsors Members Ambassadors Business associations International affiliates Eco-system Partners NCFA Not-for Profit * Executive Management Federal Government Provincial / municipal – Regional Innovation centres Universities * All resources are voluntary except for executive management and any contracted services Advisory Committees Education and Research Industry News Canadian Directory Research & Analytics Online and Offline courses Advocacy Media Interviews Public Relations Voice Lobbying Legal Framework Regulations Networking and Connecting Partner development Lead generation Introductions Hosted Events Ambassador Workshops Community Building Non-voting National Membership Slide 5 Employment and Social Development Canada Programs and Services * 2014 goals Online marketplace for discounted services Programs
PART 2 Part 2: What is Crowdfunding? Slide 6 Employment and Social Development Canada
What is Crowdfunding? Definition: “Pooling of small amounts of capital from a large number of people (known as ‘the crowd’) using the internet and social media” Legally permitted Not legally permitted Permitted in Saskatchewan and via OM Exemption in some provinces Basic Models: Primary Participants: Industry Stakeholders: Portals, providers and enablers Fundraisers: Individuals or companies that are seeking funding Investors: Retail or accredited Slide 7 Employment and Social Development Canada
Does Crowdfunding Work? Source: Kickstarter Campaign page Slide 8 Rewards-based Canadian Example Employment and Social Development Canada
Key Drivers – Advancements in Technology Highly Connected World Sharing Economy Slide 9 Moores Law Virtual Startups Maker Faire Dragon’s Den Disruptive Innovation Social Enterprise Employment and Social Development Canada
Key Drivers – The Funding Gap SMEs are the backbone of the Canadian economy The Funding Gap Need capital to innovate and compete globally, yet they face HIGH BARRIERS Risk? The Brain Drain Decline in innovation, capital drain, negatively impact job creation Slide 10 Employment and Social Development Canada
Donation-based Canadian Examples Community Aide (Alberta Arts Flood Rebuild) Seeking 500,000 to rebuilt the arts sector from damaged or destroyed homes, venues, equipment and lost contracts Industry dollar-for-dollar matching incentive programs by Suncor Energy and Alberta Foundation for the Arts Finance private citizens to affect political change St. Joseph’s Fleming Long Term Care Facility, ON Campaign to raise 25-100k to change federal laws to protect seniors from abuse in long-term care homes.” Appeared on ‘The Crowd funder Show’ launching September 22, 2013 Slide 11 Employment and Social Development Canada
Social Impact Crowdfunding Examples Dutch city Rotterdam Crowdfunds a Bridge Raised 130,000 in 4 months to pay for planning, design and development “The more you donate, the longer the bridge”. Individuals and organizations sponsored planks of wood with their name on it Civic project bringing the public and city together Social Impact: Breast Cancer Detect Innovation Live campaign – raised over 50,000 towards launching first clinical partner study In collaboration with regional innovation centre, MaRS, hospital clinic and a group of universities and breast cancer patients Slide 12 Employment and Social Development Canada
Peer-2-Peer Lending Portal Example Funding Circle : Online marketplace for small business loans Launched in 2010 and is backed by large VCs (i.e., Union Square Ventures) and prominent British entrepreneurs Facilitated 183 million pounds of small loans between 60,000 members Used by UK Government as Loan Channel Investors get an average net return of 5.7%, access to their funds and can manage risk Borrowers get quick access and competitive rates independent from the bank Canadian P2P example Community Lend – P2P exemptive relief order from the Ontario Securities commission Slide 13 Employment and Social Development Canada
Canadian Equity Crowdfunding Portal Example Goals: Generate positive social and environmental impacts Build a scalable social innovation model that can operate in other provinces, states and nations Social Venture Exchange (SVX): In Sep 2013, the SVX received an exemptive order to operate as a Restricted Dealer in Ontario only. Initiative in collaboration between MaRS, TMX and SVX groups Single access point for impact ventures, funds and investors During pilot year, their goal is to register 30 issuers, 100 accredited investors, and mobilize at min 2.5 million in capital for at least 10 ventures and funds on the platform Slide 14 Employment and Social Development Canada
Canadian Equity Crowdfunding Portal Example Optimize Capital Markets Launched in Sep 2009, Optimize is a marketplace where accredited investors and institutions can trade in private investment opportunities Operate in Ontario, Quebec, Alberta and BC The Exempt Capital Network Launched in 2013, based in Calgary and in partnership with an EMD Brings together corporate issuers, exempt market accredited investors and industry professionals Slide 15 Employment and Social Development Canada
PART 3 Part 3: Benefits and Challenges Slide 16 Employment and Social Development Canada
Crowdfunding Benefits for Startups and SMEs Access to a new source of capital to fill a critical funding gap Efficient, transparent, cost effective Mobilize funds to non-traditional groups (e.g., rural areas, local) Crowdfunding helps get new businesses off the ground First customer traction and pre-order sales (reduces risk) Help raise early stage funding (VC feeder system) Market driven valuations Organizational preparedness Market research and product validation Crowdsourced feedback ‘intelligence’ (bolsters confidence, or demands that entrepreneurs pivot their business model) The power of the crowd: social media / marketing mavens Slide 17 Once committed investors become avid supporters, promoters and connectors for the project Employment and Social Development Canada
Crowdfunding Benefits for Investors Support innovation and entrepreneurism in Canada Participation in more opportunities (96% of Canadians are nonaccredited investors) Direct connection with project founders (engagement) Wide range of projects to invest in (diversification) Spread risk in a self-directed manner Choose a portal and project that suits their investment profile Organizational preparedness Standardization, tracking and transparency Technology will professionalize and streamline investor relations Standardize shareholder agreements and legal documents Direct access to other investors Angel group syndications, lead investors versus the general crowd Go beyond geographic boundaries Slide 18 Easy access to deals Employment and Social Development Canada
Crowdfunding Challenges Fraud and investor protection Crowd intelligence and due diligence Insurance Concerns of illiquid nature of crowdfunding investments Purchase risk acknowledgement Strong case to develop a secondary market Increase in business failures and investor fatigue Large number of investors Can be organized into a trust (single controlling member) Streamlined communications, voting, reporting and tracking Regulations need to match equity crowdfunding models Slide 19 In the US, SEC/FINRA slow to finalize and only recently released equity crowdfunding rules and regulations Canadian regulators are assessing the need for proposed frameworks of a specific crowdfunding exemption versus permitted under existing prospectus exemption (i.e., the OM exemption by an EMD) Employment and Social Development Canada
PART 4 Part 4: Industry Overview Slide 20 Employment and Social Development Canada
Global Funding Volume by Region (2012) Funding Volume Grew by 81% 2.7 billion in 2012 1.5 billion in 2011 Distribution 60% North America 35% Europe 5% Other Total # of Portals Grew 80% 813 in Mar 2012 452 in Apr 2011 Source: Massolution Apr 2012 Slide 21 Employment and Social Development Canada
Global Funding Volume by Model (2012) Accelerating 81% y-o-y growth In 2012 Distribution Lending - 1.2b (44%) Donation - 980m (37%) Reward 383m (14%) Equity 116m (4%) Fastest Growing Lending 111% Source: Massolution Apr 2012 Slide 22 Employment and Social Development Canada
Average Campaign Size by Model Total Campaigns 1.1 million worldwide North America (625k) Europe (470k) Total # of Portals Grew by 50% 542 portals in Apr 2011 813 portals in Mar 2012 Source: Massolution Apr 2012 Slide 23 Employment and Social Development Canada
Canadian Industry – Portal Distribution Reward-based: Equity-based via Dealer: Vibrant Growing Industry 300% growth in donation/reward portals since April 2012 Several niche portals such as student scholarships, sports athletes, not-for-profits and crowdfunding research Slide 24 Employment and Social Development Canada
Global Crowdfunding Trends Industry Growing eco-system Financial providers, consultants, placement agents European crowdfunding network and rise in Asia Iterative equity crowdfunding regulations (cost of capital vs need) Big data from ‘investment profiles’ Live Crowdfunding Enterprise Crowdfunding CSR (e.g., Microsoft’s ‘Chipin’ student laptop program) Consumer centric (Dodge Dart CF purchase of a vehicle) Crowdsourcing input, contests (Doritos revenue share) Mainstream Crowdfunding Slide 25 A&E Project Startup; CNBC Crowdrules Celebrity (Donald Trump – fund anything) Employment and Social Development Canada
Global Crowdfunding Trends Portals More dealer-broker models (EMDs, IIROC) Feeder systems and aggregation models Increase in niche, community and hybrid platforms Direct Crowdfunding (white label, widgets, plugins) Cross-border crowdfunding Issuers and Investors More competitive will need to be more prepared Accredited investor equity crowdfunding Optimize long term online strategy (engagement) Predetermined entry / exit strategies Integrated funding strategies (government CF VC) Member-driven investor syndicates Slide 26 Employment and Social Development Canada
PART 5 Part 5: Regulatory and Political Overview Slide 27 Employment and Social Development Canada
Market Overview: High Demand and Activity Events and conferences are springing up across the globe Increase in the number of start-ups (i.e., Maker Faire movement) SMEs are seeking education to learn best practices for launching a successful crowdfunding campaign Licensed Dealer-Brokers are partnering with Crowdfunding platforms in the U.S. and new portal registration category created like AngelList Online investment communities are forming syndicates The largest and most successful portals are aggressively targeting to expand globally including to Canadian markets VC funds are investing in equity crowdfunding portals, such as Union Square Ventures led 7.5m in CircleUp Title II of the JOBS Act commenced on Sep 24, 2013 allowing private companies to advertise and solicit to the general public for investments provided that ultimately only accredited investors invest Slide 28 Employment and Social Development Canada
Market Overview: Strong Political Incentives Crowdfunding is a hot topic amongst start-up, new venture, finance, technology, marketing, government and academic circles OSC has taken a leading role in engaging public discussions. Released a consultation paper in Dec 2012 and received 100 responses, as set out in its August 2013 progress report CSA viewing Offering Memorandum exemption as Canada’s equity crowdfunding exemption CSA released a blanket order that relaxed some financial reporting requirements last Dec 2012 and is reviewing OM exemption options Jun 17, 2013, OSC issued an exemptive relief order for MaRs SVX to sell securities over the internet to Ontario AI investors for ‘social impact’ deals in Ontario only ( 25-50k/year cap) – relief from Suitability Jul 9, 2013, FCAA in Saskatchewan issued a new proposal for comment, which has been called ‘Crowdfunding lite’ Canadian deal flow is going South to raise capital on US rewards-based portals such as Indiegogo and Kickstarter and equity portals such as AngelList Slide 29 Employment and Social Development Canada
Canadian Crowdfunding Regulations OSC Reference Notice Date Issued Status Jurisdiction Cap per year Restrictions Incorp Canada Office Issuer Investor Advertising Audited Certified Complex Securities POS Disclosure Risk Ackknowledge per deal per year Restrictions Cooling off period CSA National instrument 45Multilateral Blanket Order 106 Exempt Market Staff 45-311 to OM - Exemption Consultation Paper 45Proposed exemption to from certain financial assist capital raising for 710 statements small businesses Dec 2012 Dec 2012 Feb 2013 Proposal Proposal In effect Proposal Canadian Securities Ontario British Columbia Administration 1.5 million 500k Excludes reporting issuer, Excludes reporting issuer, investment fund, investment fund, mortgage or real estate mortgage or real estate entity entity Yes Portal and issuer site only 500k 500k 500k No No No Yes Yes Yes Yes Yes Yes 2,500 10,000 2,000 2,000 Accredited or Retail Accredited Accredited or Retail 2 days Portals Registered Registered (See Appendices: 1-4 for more details) Slide 30 BCSC Employment and Social Development Canada Registered FCAA Equity Crowdfunding Proposal Jul 2013 [LIVE] Dec 6th, 2013 Saskatchewan 150k Up to twice per year None Yes Yes 1,500 Unlimited Accredited or Retail No investment advice Pre-notice filing No Registration
PART 6 Part 6: Questions and Answers Slide 31 Employment and Social Development Canada
Craig Asano: Contact Information Craig Asano is the Founder and Executive Chair of the National Crowdfunding Association of Canada (NCFA Canada), a cross-Canada non-profit with the mandate to provide education, advocacy and networking opportunities in the emerging Crowdfunding industry. Craig has 15 years of experience as a marketing strategist, software technologist and start-up entrepreneur in technology, finance, manufacturing and real estate sectors. He is actively involved in developing the Canadian Crowdfunding industry at a grass-roots level connecting with industry stakeholders, leaders and key participants across the country. He regularly participates at crowdfunding events and has spearheaded multiple programs and initiatives including Canada’s largest Crowdfunding Directory, a National Ambassadors outreach program, and NCFA Canada’s advocacy efforts to advance equity-based Crowdfunding regulations in Canada. Slide 32 Employment and Social Development Canada
Brian Koscak: Contact Information Brian Koscak Partner, Cassels Brock & Blackwell LLP bkoscak@casselsbrock.com (416) 860 2955 Cassels Brock & Blackwell LLP Suite 2100, Scotia Plaza 40 King Street West Toronto, ON Canada M5H 3C2 Suite 2200, HSBC Building 885 West Georgia Street Vancouver, BC Canada V6C 3E8 Tel: 416 869 5300 Fax: 416 350 8877 Tel: 604 691 6100 Fax: 604 691 6120 Slide 33 Brian Koscak is a Partner at the law firm of Cassels Brock & Blackwell LLP located in Toronto, Ontario and practices in the area of corporate and securities law. Brian is the Chairman of the Exempt Market Dealers Association of Canada, a national non-for-profit organization representing exempt market dealers, issuers and compliance professionals across Canada. Brian is also a member of the Ontario Securities Commission’s Exempt Market Advisory Committee which is considering new ways to raise capital in Ontario, including through equity crowdfunding. Brian is actively involved in developing a viable Crowdfunding framework for Canada. He has spoken at numerous Crowdfunding conferences, events and webinars, met with securities regulators across Canada to discuss the many aspects of Crowdfunding and is actively engaged with clients in the space and more generally with the prospectus and registration issues involving selling securities over the internet. Employment and Social Development Canada
PART 7 Part 7: Appendices Slide 34 Employment and Social Development Canada
Appendix 1: OSC Exempt Market Review Dec 2012: OSC Staff Consultation Paper 45-710 1.5 million in any 12 month period 2.5k in any single deal up to 10k in any 12 month period Incorporated in Canada and head office located in Canada Advertising restriction to only the portal and issuer’s website Not available to investment funds or complex securities Investors can only re-sell securities under existing prospectus exemptions; they are illiquid investments Sign a risk acknowledgement and 2 day cooling off period Disclosure at point of sale (financing, issuer and risk factors) Deal is 500K mgt certified statements; 500k audited Portal regulation unclear but will have to register (gatekeeper) Link to OSC Exempt Market Review (Consultation Paper): ategory4/sn 20121214 45-710 exempt-market-review.pdf Link to NCFA Canada response: ion-paper-45-710/ Slide 35 Employment and Social Development Canada
Appendix 2: CSA Relief Under OM Exemption Dec 2012: Multilateral CSA Notice 45-311 Exemptions from Certain Financial Statement Requirements in the OM to Facilitate Access to Capital by Small Businesses Issuer group cap under the Blanket Order 500,000 Investor cap of 2,000 of all securities distributed under the blanket order in any 12 month period Issuer cannot be a reporting issuer, investment fund, mortgage investment entity or a Company engaged in the real estate business Issuer is not distributing complex securities Link to NBSC Blanket Order: all-business/ Slide 36 Employment and Social Development Canada
Appendix 3: Proposed BC CF Exemption Feb 2013: National Instrument 45-106 Proposed Prospectus Exemption to Assist Capital Raising by Small Businesses The issuer need only include unaudited financial statements prepared using private enterprise GAAP in the offering memorandum and comply with these conditions: Issuer group cap 500,000 Investor cap of 2,000 in any 12-month period Issuer is not a reporting issuer, investment fund, mortgage investment entity or real estate issuer Issuer cannot distribute complex securities OM contains a bold warning on the front page Link to BCSC Proposal: -raising-by-smallbusinesses-request-for-comment/ Slide 37 Employment and Social Development Canada
Appendix 4: FCAA Equity Crowdfunding Exemption Approved Dec 6, 2013: FCAA Approves Equity Crowdfunding Exemption in Saskatchewan Investors capped at 1,500 per deal but no limit on how many investments within any 12-month period Issuers can raise up to 150,000 no more than twice per year Offering period can be no longer than six months No financial statement requirements Any type of issuer can use this exemption and issue any type of security Portals are exempt from registering with the FCCA, therefore, there are no “know your client” or “suitability” requirements Portals cannot provide investment advice Portals can charge fees but no fees are required to be paid to the FCCA Link to Saskatchewan Crowdfunding ‘lite’: 13.pdf e-in-saskatchewan/ Slide 38 Employment and Social Development Canada
Direct Crowdfunding(white label, widgets, plugins) Cross-border crowdfunding Issuers and Investors More competitive will need to be more prepared Accredited investor equity crowdfunding Optimize long term online strategy (engagement) Predetermined entry / exit strategies Integrated funding strategies (government .
crowdfunding models: equity-based crowdfunding, debt-based crowdfunding, reward-based crowdfunding and . the point of approaching zero because the firm needs to keep all profit as retained .
equity crowdfunding and other types of crowdfunding such as donations. Section 2.2 then provides an overview of the equity crowdfunding market. Unless stated otherwise, the market data in section 2.2 were collected for the Crowdfunding Industry Report (2012), a general market analysis conducted in the first quarter
Lo sviluppo del crowdfunding e i modelli utilizzati 9 Il crowdfunding in Italia 12 La filiera industriale in Italia 13 Focus sul crowdinvesting 15 L'equity crowdfunding nel mondo 16 Il lending crowdfunding nel mondo 19
global crowdfunding markets reaching an annual growth of 64 % in 2011 and 81 % in 2012 (Crowdfunding Industry Report, 2013). Trends on the search engine Google.com further in-dicate the growth of crowdfunding as a search term and clearly demonstrate the recency of the phenomenon. Searches for crowdfunding did not start until mid-2008, early 2009 as
CROWDFUNDING the community, the MEDC provides a VS. INVESTMENT-BASED CROWDFUNDING General awareness of websites such as Kickstarter, Go-Fund-Me, and Indigogo are much more commonplace than they were five years ago. These websites serve as examples of what donation-based crowdfunding is. Donation-based crowdfunding raises money through
Crowdfunding platforms have successfully connected mil-lions of individual crowdfunding backers to a variety of new ventures and projects, and these backers have spent over a billion dollars on these ventures and projects [8]. From reward-based crowdfunding platforms like Kickstarter, In-diegogo, and RocketHub, to donation-based crowdfunding
It explains the different crowdfunding models, reviews the current crowdfunding market for energy access and clean cooking, and evaluates the perspectives of different crowdfunding stakeholders, including platforms, borrowers and investors. It also provides recommendations on potential donor interventions to scale up crowdfunding for clean cooking.
RP-2 ISO 14001:2015 Issued: 8/15/15 DQS Inc. Revised: 5/12/17 Introduction This Environmental Management System Assessment Checklist is a tool for understanding requirements of ISO14001:2015 “Environmental management systems – Requirements with guidance for use”. The Checklist covers Clauses 4-10 requirements with probing questions about how an organization has addressed requirements and .
