The architect of the crowdfunding model that was recently legalized in the United States is being brought into Ontario for a day in a bid to achieve the same thing here.
Startup Grind Toronto and volunteer organizer Michael Cayley are bringing Sherwood Neiss to Toronto on July 16 for a day of meetups and media opportunities. Neiss is one of the authors of Startup Exemption, the crowdfund investing framework that allows startups and small businesses to raise a limited amount of money from their social networks using Web sites registered by the securities exchange commission (SEC). The framework was adopted by U.S. Congress and endorsed by President Barack Obama and passed the senate as the JOBS Act.
Now some Ontario business observers, like Cayley, think Canada is at risk of competitive disadvantage unless something similar happens here.
“The emergence of crowdfunding in the United States is a game changing event, it’s a watershed moment,” says Cayley, also the founder of Cdling Capital Services Inc. “It’s well established in Ontario and across Canada that we have low productivity on innovation. One of the reasons is there’s a number of different funding gaps.”
Crowdfunding has been effective around the world, not just in the United States, say its advocates. A whitepaper issued by Helix Commerce International Inc. in partnership with IT World Canada and the Canadian Advanced Technology Alliance (CATA) says $112 million in equity was raised globally in 2011. Half of that came from Europe through sites like CrowdCube and Holland’s Symbid. An Australian platform has been operating for nearly seven years, where equity-based crowdfunding is growing 114 per cent annually.
Canada is falling behind, warns Cindy Gordon, the founder and CEO of Helix, who is also spearheading the crowdfunding agenda for CATA.
“Because we don’t have a national governing body, every province has to do legislative change,” she says. “Which means our speed to market is a slower process. We have entrepreneurs reaching out to other markets to secure funding.”
Finance Minister Jim Flaherty was pursuing plans for a national securities regulator in Canada, but the Supreme Court of Canada ruled in December that provinces are responsible for the regulation of financial markets. Unlike in the U.S. where the JOBS Act was made national policy with the stroke of Barack Obama’s pen, the path towards crowdfunding in Canada will be done one province at a time.
That will take new laws passed in the provincial legislature, according to Andrea Johnson, an Ottawa-based lawyer with Fraser Milner Casgrain.
“We’re really inspired by the U.S. situation. It was supported by both Republicans and Democrats overwhelmingly,” she says. “We’re hoping to replicate that all-party support in Ontario.”
Johnson is working with the CATA group to push forward the crowdfunding agenda. The group has been meeting with regulators, including the Ontario Securities Commission (OSC) on June 4, to educate them on what crowdfunding could look like north of the border. The regulators will provide the politicians with guidance should the legislation get drafted, so they need to be informed, Johnson says. But a member of the legislature is still needed to get on board and introduce a bill that could get passed.
Startup Grind and Neiss also plan to meet with the OSC on July 16, and are inviting representatives of both the federal government and Ontario government to receive a briefing. It could be the first step towards putting Canadians in a more startup-friendly mindset, Cayley says.
“As often as you get e-mails to support charity, you’ll get one to consider investing in a startup,” he says. “You’re reorienting everyone to a startup culture, and that’s more important than more money being poured into the system.”
ITBusiness.ca will be working with Startup Grind Toronto to provide live Web cast and live blog coverage of the event with Neiss.
With notes from Christine Wong and Brian Jackson.