Peter-Paul Van Hoeken, FrontFundr CEO, commented:
“We are offering an open market connecting seasoned investors and retail investors with stringently screened companies and supporting the entire investment process from pitch to securities purchase. Delivering better capital and better deals to all parties.”
He described how the platform wants to level the playing field for all types of investors:
“We’re giving regular people a chance to sit in the pitch seat and act as ancillary dragons. We’re providing ordinary people with access to carefully screened investment opportunities, and entrepreneurs with access to more capital to support their growth.”
Typically the companies looking to raise money on FrontFundr will be early stage, mission driven ventures seeking $200,000 to $2 million in capital investment. The platform has specified that it wants the companies on its platform to have a positive social impact and will be from one of three key sectors: arts & entertainment, energy & environment, and technology.
The initial deals on the site have a minimum investment of $5,000 or $6,000 as they are offered under other existing exemptions and FrontFundr will operate as a fully compliant Exempt Market dealer.
The first businesses on the platform include RentMoola, a rewards platform for renters; Interlock, a lock that hides inside your bike and Guusto, a gifting platform with 1000+ partner locations to date.
Patrick Postrehovsky, CEO of RentMoola, one of the first companies to raise money through the site:
“We’re an innovative technology company and we work at a fast pace. We’re excited to work with an exempt market dealer that operates similarly to the way we do—leveraging technology and innovation to disrupt an industry to the benefit of the public.”
We previously spoke to Gil Michel Garcia, CEO of WAFU, a company that used the Canadian platform Optimize Capital Markets as well as the American platform CircleUp to raise money. He was outspoken about the need for the regulation around crowdfunding to change. At the end of March the SEC voted to implement new rules for crowdfunding in the US. One of the significant changes that Regulation A+ makes is that it allows retail investors to invest in equity crowdfunding projects but they are limited to 10% of their net worth or income, and there are no such limits for accredited investors.
On the 14th May the crowdfunding legislation was changed in Canada. Six provinces (British Columbia, Saskatchewan, Manitoba, Québec, New Brunswick and Nova Scotia) announced that they will allow startups to raise up to CA$500,000 a year using a funding portal. FrontFundr is leveraging existing and new capital raising rules to offer its clients a broad range of funding and investment solutions. However, the significant difference with the regulation in Canada is that retail investors are only able to invest $1,500 per project.
This is clearly a very small investment for an investor to make. It will make it very difficult for a retail investor to get a meaningful return on their money and it will also make it hard for companies to raise large sums of money from retail investors as they will need so many of them to participate in the round. It perhaps takes the idea of protecting the unsophisticated retail investor too far.
The crowdfunding space is Canada is still relatively small. Other platforms include SeedUps, Optimize Capital Markets and InvestX. It will be interesting to see whether the involvement of retail investors helps to scale the market and the impact it can have for Canada’s small businesses.