There has been some debate amongst the North American investment community about whether the legalization of equity crowdfunding would unleash a new wave of clever fraudsters on an unsuspecting public. Recently, the Ontario Securities Commission (OSC) published newly proposed exemptions to become available to certain investors, including a proposed crowdfunding exemption. The proposed framework, which is likely to become law after a 90 day consultation period, seeks to strike a balance between protecting the public and embracing the inevitable investment paradigm shift to crowdfunding. The OSC has found a convenient middleman on which to place the burden of ensuring that offerings are in fact Continue reading
Equity crowdfunding to mainstreet will result in a new challenge for private companies, namely effective shareholder relations. Admittedly, crowdfunded privately held companies will not bear the same continuous disclosure burden as is imposed on publicly traded corporations. However, a larger constituent of arm’s length investors will inevitably make greater demands for information on management than was otherwise the case with such closely-held companies. So as part of the crowdfunding preparations, management would be wise to consider how to effectively communicate with an onslaught of new investors.
Crowdfunding statistics are eye-popping. In less than 5 years, Kickstarter raised more than $1 Billion in pledges from more than 5 million contributors; that’s just one portal of over 600 portals worldwide! As an industry, crowdfunding has grown 1000% in 5 years and is predicted to grow 92% in 2014. But those numbers are primarily comprised of rewards-based crowdfunding models.
So how does equity crowdfunding fit in?Continue reading