SeedUps Canada platform evolves to increase deal quality and investor interest
The collaborative funding model emerges as best fit for entrepreneurs and investors
For the past three years, we’ve been at the forefront of advocating for change in the way Canada’s early stage companies access capital and engaged venture investors find investment. Credited as the technology that supported the “First Ordinary Investor” to take an online stake in a private company, the team at SeedUps has been encouraged by the innovation movement taking hold in Canada and the regulators’ efforts to expand capital formation for early stage companies.
We’ve also been engaging with other stakeholders in the funding arena, specifically the Angels and early stage Venture Capital firms (“VCs”) that supply much needed growth capital to our passionate entrepreneurs. We’ve continued to advocate that SeedUps is not a competitor, rather a technology-enabled resource to help them fund their chosen companies faster and more efficiently. Although quick to recognize and invest in disruptive technologies in their portfolios, they have been slow to embrace technology for their own financing processes.
We’re now two years down the road and much has changed. The securities regulators have implemented complicated “crowdfunding” rules that create confusion for both the company raising capital and the investors wanting to invest. Three different regulations and three different registrant models adopted by select provinces have resulted in much confusion and low adoption by the industry as a whole. These new regulations may even result in companies taking on funding from hundreds of new investors without realizing the post raise obligations of managing those investors or more importantly, the ongoing reporting requirements built into the new regulations. These two issues alone, may prevent a crowdfunded company from accessing their next round of capital. Not the intended outcome.
While the regulators seem to have missed the mark, the industry seems to be getting it right. I recently attended and spoke at Startupfest in Montreal and was encouraged to see participation from all players in the capital raising eco-system. Ryan Eakin, our peer at CircleUp says it best, “If you are supportive of helping entrepreneurs thrive, creating more opportunity for more small businesses across the country and spurring economic innovation, you want to bring all parties to the table. You just want to do it in a more transparent, open way, not a historical old boy’s network that has led to disproportionately fewer new ideas being funded.”
The SeedUps technology platform allows this to happen. Early stage private capital has traditionally been funded by a small group of high net worth individuals ready to take a risk. By using our technology, companies can access a broader group of individuals that may want to invest smaller amounts alongside these investors. Angels that want to fund a company, yet don’t have enough cheque writers at the right time, can present their companies to an engaged investor community to fill the round. VCs can find additional capital for their portfolio companies – all in an efficient, transparent manner where documents are executed online. And better yet, individual investors are pooled together into one shareholder, keeping the cap table clean for the next round of investment.
For companies trying to access Angel or VC capital, SeedUps provides the tools to prepare and present their opportunities to this important source of funding. We can also direct companies to our partners like banks, online lending platforms and government funding programs for those that can support this type of financing. With over 700 companies applying for funding on SeedUps, we know that many of them are not ready to face these investors. As a result, we have developed an Investor Readiness Program (“IRP”) that helps these companies prepare to face investors that ask the tough questions. The result, an increased chance of a successful capital raise – a win-win for the investors and the entrepreneurs alike.
So, we’re leaving the Crowd behind us – for now. We’ll continue to advocate for positive change that makes it easier for companies to access capital and for investors to have the freedom to invest in companies they believe in. We even have a few ideas in the works. As of now, it’s simply our opinion that the crowdfunding rules implemented by the various securities regulators to date do not work. They are in fact, as some might say, Dead in the Water.