In what marks the beginning of a new form of fundraising in Canada, Vancouver-based social gifting company Guusto has just successfully raised $50,000, twice their target amount, through the equity crowdfunding portal Frontfundr.
Frontfundr is a financing platform that gives startups and investors access to investment opportunities, through an array of fundraising options.
In May of this year, the securities regulators of British Columbia, Saskatchewan, Manitoba, Quebec, New Brunswick and Nova Scotia gave startups exemption from registration and prospectus filing when crowdfunding. The exemption is intended to streamline and facilitate the financing of startups.
The regulations dictate that as long as the head office of the issuer or company is located in a participating jurisdiction, a startup can distribute securities through an online funding platform such as Frontfundr, raising for a maximum of 90 days for up to $250,000. A startup can do this type of financing twice per year, and the maximum an individual can invest is $1500.
“The start-up crowdfunding exemption gives regular people with limited investment capital the opportunity to invest in businesses they care about, and presents a low barrier to entry into investing,” says Peter‐Paul Van Hoeken, CEO of FrontFundr.
“At the same time, FrontFundr is an exempt market dealer that leverages numerous fundraising techniques, helping private companies secure investment from accredited investors as well,” he continued. Through the platform, startups can secure capital from a mix of individuals and accredited investors, the latter of whom aren’t subject to the $1500 investment cap.
For Guusto, the financing was a straightforward process, and one which they feel brings them closer to their users.
“It means we have a variety of investors who care about our company. The seasoned investors have experience helping other tech businesses succeed, and the regular investors are typically people who use and love our product,” says Skai Dalziel, co-founder of Guusto. “The money raised from this equity crowdfunding campaign will go toward expanding our customer base over the next six months with the goal of breaking into the U.S. market by the first quarter of 2016.”
The Guusto deal was the first of its kind in Canada, according to Frontfundr.
FrontFundr is a fully compliant exempt market dealer, with two other major methods of investment available. The Offering Memorandum Exemption allows residents of British Columbia to purchase securities from any issuer so long as the issuer obtains a signed risk acknowledgment form from the purchaser, and delivers an offering memorandum. The Accredited Investor Exemption is an option available to those with above a certain net income and asset-ownership amount.
Approximately twenty other companies, including Vancouver’s RentMoola, are also raising on Frontfundr.