Disclaimer: The following information is intended only as general introductory information to address some common questions. It is not intended to be and must not be relied on as legal advice. Please refer to the specific provisions of Alberta securities laws. We encourage you to seek legal advice from legal counsel familiar with Alberta securities laws.
Level up your business with crowdfunding
Crowdfunding uses the internet to raise small amounts of money from a large number of people, typically through a website or social media.
There are three main types of crowdfunding:
- Raising money by donation.
- Pre-selling of products.
- The sale of shares or other securities.
Securities law applies to crowdfunding that involves the sale of securities (e.g. shares, loans or digital tokens). National Instrument 45-110 Start-up Crowdfunding Registration and Prospectus Exemptions allows for an inexpensive way for start-ups and small businesses to raise up to $1.5 million annually using a legal online portal.
Using crowdfunding to raise money for your small businesses
In Canada, businesses can use an online funding portal to raise up to $1.5 million annually.
- Investors can contribute up to $2,500 or, if suitability advice is obtained from a registered dealer, up to $10,000.
- The online crowdfunding portal must be operated in Canada by a registered dealer or have received an exemption from the provincial securities regulators in the jurisdictions in which it operates.
Check to see if the online funding portal you plan to use is legal in Canada by accessing the Canadian Securities Administrators National Registration Search. Enter the name of the crowdfunding portal and the search result will show the jurisdictions in Canada where that platform is allowed to operate and whether it is operated by a registered dealer or if it received a crowdfunding exemption.
To avoid your business and potential investors being defrauded, it is critical that you check the portal’s registration or exemption status through this website, or contact your local securities regulator, before using a crowdfunding portal to raise money for your business.
There are three forms you need to complete when using crowdfunding to raise money for your small business. You can access the forms from the crowdfunding regulatory instrument section of this website.
- Form 45-110F1 - A simple disclosure document must be prepared using a prescribed form and given to the funding portal to make available to potential investors. The disclosure document must specify how the business intends to used the funds raised and the minimum amount required. If the minimum amount is not raised within 90 days, the funding portal must return the money to the investors.
- Form 45-110F2 - Investors must complete a risk acknowledgement using a prescribed form and provide it to the funding portal. This document requires the investor to acknowledge the risks of the investment and confirm they have read and understood the disclosure document.
- Form 45-106F1 - Within 30 days of closing the crowdfunding capital raise, the business must file a report of exempt distribution using a prescribed form as well as the disclosure document referenced above (Form 45-110F1) using the Canadian Securities Administrators SEDAR+ system.
More information on businesses interested in using crowdfunding to raise money is available in the Guide for Businesses.
Alberta has several funding portals offering securities under the start-up crowdfunding regime:
| Portal name | Registration category |
| Atlas One Digital Securities Inc. | Exempt Market Dealer |
| Backers Securities Inc. | Start-Up Crowdfunding Portal - Exemption |
| Capiche Crowdfunding |
Start-Up Crowdfunding Portal - Exemption |
| Equivesto Canada |
Exempt Market Dealer |
| FrontFundr Financial Services |
Exempt Market Dealer |
| Go Alberta Crowdfunding (Go Alberta Connect Corp.) |
Start-Up Crowdfunding Portal - Exemption |
| GoTroo (CrowdCo Inc.) |
Start-Up Crowdfunding Portal - Exemption |
| Launch Crowdfunding |
Start-Up Crowdfunding Portal - Exemption |
| Reitium Crowdfunding (1383364 B.C. LTD) |
Start-Up Crowdfunding Portal - Exemption |
| Stockosaurus Crowdfunding | Start-Up Crowdfunding Portal - Exemption |
| Vested Technology Corp. |
Start-Up Crowdfunding Portal - Exemption |
Like the origin story of many small businesses, the Calgary-based founders of Plume Science set out to solve a problem with no intention of starting a company.
After the birth of her first child, Lauren Bilon suffered from substantial hair and eyelash loss. Discouraged after trying regrowth options that caused burning skin and eye infections, she and her husband started testing plant-based options in their kitchen, finding success with a specific combination of natural ingredients. Once the makers of the now-patented serum that promotes thicker, fuller eyelashes and brows started testing their product with friends, they started to give starting a business some thought.
“A couple of our very first testers liked the product so much they asked if they could invest in the business,” said Brett Bilon, CEO and co-founder of Plume Science. “It was then that we had a sense that we were onto something.”
Unexpected connections with key people in product development and marketing helped transform the business from product testing kits laid out on a kitchen counter, to an in-demand retail product launched into market in September 2015.
“We connected with a lawyer with small business capital raising experience and discussed options that could work for our company,” noted Bilon. He added that while he knew there were rules, he relied on the lawyer to ensure the company was compliant with securities laws.
“Originally we were bootstrapping, funding the business through savings, loans and product sales profit,” added Bilon. “We then raised initial capital from friends, using the friends, family and business associates [FFBA] prospectus exemption to scale up production and get the product into retail stores.”
After exhausting their bootstrapping capacity and the initial funding, it was time to grow again. This time Plume was aiming to raise funds to develop an online store for its growing product line.
“In 2021, crowdfunding was on the table as a capital-raising option,” said Bilon, who was looking to mobilize Plume’s customer base to support the business. “I learned about crowdfunding from a peer who had raised capital that way and thought it seemed like a decent option to explore. We had new products we wanted to launch and needed capital to get them in market.”
Crowdfunding allows businesses to raise small amounts of money from a large number of people, typically through a website or social media. Many are familiar with crowdfunding for various charitable causes, but there are specific rules that companies need to follow if they are interested in raising investment capital to ensure they protect their business and investors, including the use of an approved funding portal.
“We used a reputable funding portal and had them help us with marketing materials and the required disclosure documents,” said Bilon. “We initially raised about half of the capital we were looking for and realized our first goal was pretty ambitious, even with the loyalty of our customers.”
A second round of crowdfunding followed in 2022, securing more funds for Plume.
“We were able to reuse a lot of the documentation that had been initially developed, just updating it as required. That saved us quite a bit of money.” The ASC has the required crowdfunding documentation and forms available on its website. Small businesses are encouraged to use these resources as well as the SEDAR+ website to find examples of other companies that have raised capital using crowdfunding.
Looking back on his experience with capital-raising, Bilon noted that it can be stressful. “Things rarely go according to plan.”
Though he notes that while there is significant time, effort and marketing required for capital-raising – including crowdfunding – the process showed what it takes to keep a business going.
“It taught me to take the reins of life and business and to keep going to see how far I could take it.”
Bilon adds that he sees value in connecting with the ASC. There are resources available on asc.ca for small businesses to review to ensure they are following securities law and you can contact the ASC for more information.
“A lot of people fixate on venture capital funding as opposed to considering other capital-raising opportunities,” said Bilon. “Crowdfunding can be a great option for a small business, especially if you can be very specific with who you’re targeting. We were able to raise funds from our customer base – people who loved the product also loved the idea of being investors in the business and that was a winning combination for us.”
Crowdfunding allows start-ups and small businesses to raise small amounts of money from many investors.
Participating as an investor through crowdfunding comes with higher risks. Consider your risk tolerance before deciding to invest. Can you afford to lose all your invested money? It’s a real possibility.
However, participating in crowdfunding can be a way to support innovation and become part of a community of entrepreneurs. It’s exciting to get in on the ground floor of a growing company.
Visit CheckFirst.ca for information about crowdfunding and what you should consider before investing. You can also read the Guide for Investors.