Barry Choi: Ever used Kickstarter or GoFundme? Crowdfunding can now be used to invest in private companies

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Ever used Kickstarter or GoFundMe? Instead of donating to a charitable cause you can now use crowdfunding to invest in

In the past, direct investing in Canadian starts-up was limited to wealthy individuals, accredited investors and venture capital. Oh and the cast of “Dragons’ Den.” But that changed in 2021 when the provincesaround who can contribute to equity crowdfunding, and how much they can contribute.

When investors contribute to a business through an equity crowdfunding portal, they receive a stake in the business. Equity crowdfunding allows start-ups to raise funds without loans, while investors are able to gain equity in a company for a fraction of the price of a traditional buyout.Article contentFor everyday investors, you can invest up to $2,500, per start-up, per crowdfunding campaign or “crowdfunding distribution.” For example, a start-up could seek crowdfunding March 1, then Dec.

Frontfundr has three different investor levels — eligible, retail and accredited — that each have different requirements for qualification, along with different contribution limits. The contribution limits are also affected by your province of residence.Equity crowdfunding doesn’t only make it easier to contribute to individual companies, some view it as a key to giving consumers more economic power.

“We evaluate whether the type of business, products and services, and stage of development are a fit,” says Van Hoeken, who says that they vet the businesses by learning about their management teams, and gather materials to determine their current and potential future health as a business. One factor they consider is whether they believe the company is ready to raise capital, and is a viable investment opportunity.

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