Businesses are looking for opportunities to grow in order to serve more customers and extend their reach. Capital is an integral element for companies to achieve this in a faster way than simply relying on generating profits and reinvesting in their business. Thus, businesses have specific reasons for raising capital, but the most common purpose is to enhance their product, grow their team, or increase production or distribution.
The basic fees consist of an due diligence and listing fee (payable upfront) and a trade fee (payable upon successful closing of the raise). The due diligence and listing fee starts at $4,000 and the trade fee starts at 6% cash and warrants.
FrontFundr is a registered securities dealer in 8 provinces across Canada. As a result, we can support any type of financing. We facilitate all types of securities, but the most common securities include; equity, debt, convertible notes, and SAFE’s (Simple Agreement for Future Equity).
FrontFundr is an Exempt Market Dealer, meaning we have a special license that allows us to work both with private and public companies to access to all applicable prospectus exemptions across Canada.
FrontFundr is industry agnostic and reviews each business individually based on its merits. We believe in creating a mutually beneficial partnership that serves everyone in order to have the greatest success for all.
Currently, we are registered as an Exempt Market Dealer in Canada, meaning we can only work with Canadian headquartered companies. We are working on a solution to be able to provide companies in the United States solutions by the summer of 2017. Stay tuned and apply now to be one of the first US based companies to list on FrontFundr.
FrontFundr does not determine a company's valuation. Companies develop their own methods (we provide some material and guidance based on your industry) for determining their valuation prior to our due diligence process. All valuations are reviewed and discussed while in the due diligence phase in order to ensure a fair valuation is established for both the company and investors.
After establishing your goals and objectives and structuring your deal, you will be assigned a dedicated Campaign Coach for the rest of your campaign. The campaign coach will bring in our due diligence team that will require corporate, financial, management, and other supporting information to perform a thorough review of your company.
Raising capital in Canada is governed by Provincial Securities Regulators. Every province has a different set of rules depending on the type of investors you are looking to bring on board. Thus, we will work with you to structure your offering most efficiently and cost effective depending on your goals and objectives of the raise.
In general, if you are raising under the Offering Memorandum or the Ontario Crowdfunding (and raised over $750,000 since inception) exemptions, than you will be required to have your financial statements audited.
If you are raising under the Ontario Crowdfunding exemption (and raised over $250,000 since inception), then you will be required to have your financial statements reviewed.
This is entirely up to you. There are no overall limits to how much your company can raise.
However, there are specific limitations within exemptions that each company can raise depending on the structure of the offering. The BC Crowdfunding exemption has a limit of $250,000, twice per calendar year for each company. The Ontario Crowdfunding exemption has a limit of $1.5m per calendar year for each company.
There are no limits on how much you can raise using the Offering Memorandum, Accredited Investors, Family, Friends, and Business Associates exemptions.
Investor limits are determined based on the exemptions that you are using to raise capital. Here is a brief summary of the exemptions, for a full explanation please refer to our Securities Regulation Page.
Under the BC Crowdfunding exemption investors have a limit of $1,500 for each company.
The Ontario Crowdfunding exemption investors have a limit of $2,500 for each company.
The Offering Memorandum exemption investors depends on the provincial residence of the individual. BC investors have no limit, investors who live in the rest of Canada have a limit of $10,000 unless they satisfy additional investor criteria.
There are no investor limits for investors who are investing under the Accredited Investors, Family, Friends, and Business Associates exemptions.
The actual campaign itself can vary depending on your company’s specific needs. We recommend keeping your campaign open for at least 30 days, and for a maximum of 90. Fundraising takes a lot of work on your part. You want to be able to maintain momentum throughout a campaign, so while it may seem counterintuitive, a longer campaign might be less successful.
Campaigns are legally allowed to be as open as the exemptions permit. An Equity Crowdfunding campaign is allowed to be active on our platform for up to 90 days.
Your campaign should be as unique as your product or service and the message should be clearly conveyed across all mediums. To assist, FrontFundr will provide you with a dedicated Campaign Coach who will work with you to strategize the most effective way to reach your supporters. Fundraising requires time and hard work; you need to be fully prepared.
Your campaign manager will work with you to identify the key groups who are most likely to invest in your company. These often include personal networks of you and your team, current customers, and potential customers. Once you have these groups established, open a dialogue with them and invite them to become an owner in your company. The sooner you start the conversation, the more likely you are to be successful. Don’t be afraid to make the ask!
You are able to cancel the raise at any time during the campaign but you will not be refunded your onboarding fee and are subject to cancellation fees.
There is a misconception that going over 50 shareholders is a bad thing for private companies. Fact is, going over 50 shareholders doesn’t change very much at all.
Once a company has over 50 shareholders, they are required to file a two page Report of Exempt Distribution with the Securities Commision after any subsequent financing.
Working with FrontFundr, we will help guide you through this process and provide you with the completed forms to submit.
If you choose to use the Offering Memorandum, Crowdfunding exemption, or have more than 50 shareholders after a successful campaign, you will need to file a Report of Exempt Distribution.
This report will need to be filed with each province from which you accept new shareholders. FrontFundr will help guide you through this process and provide you with the completed forms to submit.
The target isn’t as important as hitting your minimum. The minimum is the amount you need to raise to be able to close your campaign successfully. If you do not hit your minimum then the campaign will not close and all funds will be returned to investors.
Your target raise is the amount that you are striving to reach in order to fully execute your growth plans. If you do not reach this amount, but raise more than your minimum, you will still be able to close your round and collect the funds.
The maximum raise is the highest amount of capital you are willing to raise. Once you hit this number, your campaign will be closed and no additional funds can be raised. Surpassing your target amount is always a great, but having setting a maximum protects your company to ensure that you don’t give up more equity then planned.
FrontFundr removes the complexity of processing your investors and closing your campaign. We prepare all of the legal closing documents for your campaign. These documents include, Subscription Agreements, Voting Trust Agreements, Directors Resolution, Share Certificates, and Report of Exempt Distribution. This will save you a significant amount of time and money from a traditional financing.
All investors and the businesses authorized signatories will sign their investment documents electronically making the closing a smooth and seamless process.
Once the closing documents have been signed and the new shareholders have been added to your Corporate Securities Register, FrontFundr will transfer the funds.
Bringing on many new brand champions can be great for your marketing efforts, but can seem overwhelming to manage on the day to day. Based on our experience, the overwhelming shareholder involvement is just not reality and investors are generally excited to invest and be owners in companies they believe in.
If you are offering shares with voting rights, we recommend you have a ‘Voting Trust Agreement’ for the smaller investors. This will transfer the voting rights to a trustee who will vote on behalf of these investors and allow you to retain control of your corporate governance without the headache. We have templates that you can use to save you time and money in preparing this agreement.
Additionally, we recommend that you communicate frequently with your new brand champions and ambassadors. Be proactive and provide them with information updates on the company to get them excited to help share and spread your messages! This isn’t time consuming, just smart marketing.