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How crowdfunding can help burgeoning start-up companies

A new method of raising capital is gaining traction in Canada.

In an interview with HiFi Radio on AM640, Private Capital Markets Association director Richard Remillard said early-stage companies are now able to raise funding from the public through the concept of crowdfunding.

“One of the new ways to raise money is by using social media. If you are a small start-up business and you are looking to raise capital on either the debt side or the equity side, crowdfunding is for you,” he said.

He explained that crowdfunding platforms allow firms to garner support from the crowd, either in the form of donations, equities, debt, or securities. Additionally, such portals bring investors and borrowers together.

“If you have a concept an idea that’s worth pursuing, you get to test with a wider public rather than going out there and raising money from traditional sources,” he noted.

However, looking at how Canadian crowdfunding scene is performing relative to the markets of the United States and the United Kingdom, it still has a long way to go.

Citing a survey conducted in 2016, firms in Canada raised an overall capital of $200 million, relatively smaller than the overall funds raised through crowdfunding in the United States at $36 billion.

Remillard said among of the challenges surrounding the crowdfunding space in the country are the different regulatory regimes by different provincial regulators. He stressed that there is still lack of clarity in terms of how much investors can invest, how much companies can raise, and how firms can advertise and market their crowdfunding efforts. Listen to the full interview by clicking on this link.