For all intents and purposes, May 14th was an average Thursday for the majority of Canadians. With the weather getting warmer, most people likely spent much of the day thinking about their weekend plans.
For entrepreneurs and startup companies across the country, however, it was a historic day. On this particular Thursday, long-awaited legislative changes came into effect and opened the door for equity crowdfunding in Canada; this is a practice that has been legal for over two years in a number of European countries.
With that, I’m excited to say that Guusto is officially the first Canadian company to raise funds using the Startup Crowdfunding Exemption (via FrontFundr). Finally, financing opportunities are no longer just the domain of wealthy angel investors.
Eligible startup companies are able to accept money from any resident of British Columbia, Saskatchewan, Manitoba, Quebec, New Brunswick or Nova Scotia for as little as $500 to a maximum of $1500 in exchange for shares in the company.
This is very exciting for a number of reasons. First, being able to raise funds from regular Canadians and your existing customers, who genuinely believe in your product and want to share in the journey, could be a game changer for great startups who are under-funded. It’s truly a great way to grow a network of brand champions.
Second, and to be brutally honest, raising capital in Canada is a nightmare for most startups. The pool of resources is shallow and the whole process can be a bit of a dog and pony show. A typical scene sees 10-20 companies being trotted out in front of a group of 30-100 “investors”. The actual make-up of the room is often more like 25% service providers, 25% event staff and 25% other startups. If you’re lucky, the remaining quarter might fall under the investor umbrella.
Ask any Canadian startup founder how they feel about fundraising and you’ll generally get some variation of the same answer: it sucks! It’s insanely time-consuming and takes you away from doing what’s most important – running your business. That said, we continue to do it. Why? Because it’s not all bad. The current model forces founders and CEOs to hone their messaging, improve their public speaking skills and earn some exposure in different circles.
Still, it’s an exhausting process and it eventually begs the question, “Is this the best use of my time?” It’s for these reasons that equity crowdfunding is a welcome mechanism for accessing funds from a much deeper pool that didn’t exist a few months ago.
Only time will tell how this shakes out in Canada, but if we look towards Europe, equity crowdfunding deals are regularly closing in the millions. For all the great Canadian startup companies that are undercapitalized, let’s hope Canada follows suit.
For more information about Guusto’s equity crowdfunding offer, visit FrontFundr.com
Guusto, named a Top 5 BC Tech startup, is a mobile gifting platform that allows people to send food and drinks. They have taken the idea of picking up the tab at lunch for a client or buying a friend a glass of wine on their birthday and allow you to do it from anywhere.
Unlike plastic gift cards, Guusto gifts are instant, thoughtful products (like dinner or dessert), redeemable at ANY partner restaurant (like The Keg, Moxie’s, Milestones, Cactus Club, and many more). And to really make someone’s day, Guusto donates one day of clean drinking water for every gift sent.
Editor’s Note: Since the debut of Guusto’s FrontFundr campaign, other members of Wavefront’s Venture Acceleration Program have joined the equity crowdfunding platform. Search for Tangoo, Ethelo, and Vandrico when you are on Frontfundr.com