Before investing you should always understand the risks involved and be sure that the investment aligns with your personal and financial circumstances, your overall tolerance for risk and your goals. FrontFundr will always conduct a suitability analysis of your proposed investment based on your investor profile, which you will be asked to complete for your first investment and confirm that it is up-to-date for any subsequent investments. This is done in accordance with Canadian securities regulation. If your investment is deemed suitable, FrontFundr will send you the investment documents for you to sign. If your investment is deemed unsuitable, FrontFundr will contact you to outline the options available to you.
Residents of BC, AB, SK, MB, ON, QC, NS and NB, over the age of 18, may currently be eligible to invest through FrontFundr. Your ability to invest in a specific company depends on the location of the company’s headquarters, and the securities law in each province.
Each campaign will indicate which provinces the company may accept investments from - in the information bar on the right hand side of their campaign page. For more information on investor eligibility, please visit our Regulation page.
FrontFundr conducts due diligence on a company before allowing them to start a capital raising campaign on the FrontFundr platform and distribute securities. FrontFundr's due diligence approach includes document analysis, management interviews, financial statement analysis, background checks, expert input where deemed necessary and an assessment of the investment product and associated risks. The final step of the analysis process is a formal review by FrontFundr's Investment Review Committee that consists of internal and external members of the financial industry. Subject matter experts may be consulted by the investment Review Committee.
Investment limits are dependant on your province of residence, financial standing and relationship with the company. Your investment limit is calculated on the first page of the investment process, after clicking ‘Invest Now’ on a company in Live Campaigns.
It is important to make an informed investment decision. That is why each company provides an introductory video, their business and investment highlights, and an introduction to their team. Often, a company will also make an offering document available in the ‘Documents’ tab of the campaign page. The offering document is an in depth look into the business; including a look at the applicable risks and the use of funds raised. It is also wise to do your own internet research on the company’s business and industry.
For the purchase of any investment, there is no tax event - therefore, there is no filing requirement or tax implication. Only in the event that you receive income or a capital gain from your investment will you need to file anything with your taxes. In this event, the company that you hold the shares in will distribute the necessary T3 or T5 forms to it’s shareholders.
It is important to stay up-to-date on a company you invest in, not only to monitor their growth and success, but also to promote their developments throughout your network and help to fuel their success. Besides following the company on social media, each shareholder will be invited to the company’s mandatory Annual General Meeting. Companies are also encouraged to keep shareholders updated with at least a quarterly newsletter.
The availability and details of any tax credit on an investment will be outlined in the company’s Offering Document. If you are eligible for a tax credit on your investment, the company you invest in will file your signed Share Purchase Report (included in the investment documents) with the appropriate provincial government, on your behalf. Once the forms have been processed, the provincial government will provide a tax form to the company to pass along to their shareholders. Once received, this form should be filed along with the rest of your taxes. It is important to note that the tax credit is taken from a budgeted pool of capital, which means that the tax credit is not guaranteed and is dependant on the funds available in the government’s pool of capital.
Once a campaign closes successfully, the company will conduct their closing responsibilities to finalize the investments and accept their new shareholders. As the investor, you will receive an email from FrontFundr once the investment has been finalized. A copy of the Trade Confirmation, the investment Share Certificate and the fully executed investment documents will be accessible through the ‘Investments’ tab of your account page on FrontFundr, under each completed investment.
A company’s campaign will still be successful as long as they surpass their minimum fundraising goal. If this does not happen before the closing date, all funds will be returned to investors without penalty or fee.
Typically there are three ways in which you may see a return on your investment: 1) The company is acquired by another company, at which point you would sell your shares; 2) The company goes public on a stock exchange, at which point you may sell your shares on the open market; Or 3) The company generates excess cash and decides to issue dividends to their shareholders.The companies 'Offering Document' and 'Shareholders Agreement' will outline any specific sale restrictions on your shares.
- Risk of Loss - Investments in private companies are generally high risk investments, there is the chance that you may lose your entire investment.
- Liquidity Risk - There is currently no marketplace in which to sell shares in private companies freely. There is the possibility that you will never be able to sell your shares.
- Lack of Information - Although we urge companies to keep their shareholders updated on a regular basis, there is no legal requirement for companies to provide ongoing information about their company to shareholders.
- Investment Risk - Risks that are specific to the securities being offered. These will be outlined in the Offering Document if one is available.
- Issuer Risk - Risks that are specific to the private company.
- Industry Risk - Risks faced by the private company because of the industry in which it operates.
In order for companies to accept investments from residents of Quebec, they must make any applicable Offering Document available in French.
Traditional Crowdfunding uses a donation, pre-order or rewards model to raise capital from the ‘crowd’. Equity Crowdfunding differs slightly, by giving the investor an ownership percentage of the company - to share in any profits and success of the company as it grows. FrontFundr has now introduced the option of a hybrid between the equity and rewards models of crowdfunding, where you can become an owner of a company and also receive a gift in exchange for your investment. FrontFundr is also exploring other types of ‘Investment Crowdfunding’ to help investors diversify their portfolio.
The private capital market allows companies to raise capital without going through the lengthy and expensive process of preparing a prospectus (A prospectus is an extensive offering document used by public companies to provide details about their business, financial situation and the investment opportunity). This allows early-stage and growth companies to expand their business with quick and easy access to capital, and it gives investors the opportunity to become an owner in the business while the valuation of the company is still relatively low. Unlike the public markets, shares in private companies can not easily be sold or exchanged for cash. Therefore, long holding periods are expected before an investor can sell their investment. Due to the volatile nature of early-stage businesses, their shares are considered high risk investments. It is important to note the relationship between risk and return - ‘the higher the risk of an investment, the higher the potential return’.
Equity Crowdfunding campaigns have up to 90 days to raise at least their minimum funding goal. If the company is not using Equity Crowdfunding to raise capital, they are free to choose their preferred closing date, which will be indicated in their campaign profile. It is important to note that a company can choose to close the campaign anytime after surpassing their minimum funding goal.
When a company chooses to set no closing minimum, any amount of money invested will be closed regardless of the overall amount achieved. The amount used to determine the percentage on the tracker is the target amount, which is the amount set by the company to indicate the desired amount they are looking to raise. Please note that this does not require the company to meet this amount in order for your investment to be processed.
Once a company surpasses their minimum fundraising goal, they have the option of closing individual investors and converting them into shareholders. This can be done multiple times before the end of the overall campaign. Every time new investors are accepted this is called a close and companies that have several closings are considered to have rolling closes.
Once funds have been received and accepted by FrontFundr, a confirmation will be sent to the investor via email. Payments may take up to one business day to process once received.
If Trulioo is unable to verify your identity, you will be asked to upload a downloaded version of a utility bill and of a financial statement. These documents can not be screenshots or photos and must clearly show your name and address on one and name and financial instituion on the other.
If the investment opportunity has been approved to accept investments through registered accounts, it will be indicated in the ‘Investment Highlights’ under a company’s overview and the option will be made available when making an investment. An investor that wishes to use a registered account to make the investment needs to have or open an account with Western Pacific Trust Company (WPTC). FrontFundr will facilitate the opening of an account at WPTC. The costs involved with opening an account at WPTC are a $135 annual (recurring) fee and a $75 transactional fee. All investments through registered accounts must be submitted no less than 3 weeks before the scheduled closing date of the company’s campaign.
Funds are transferred to FrontFundr to hold in escrow by means of e-cheque through the FrontFundr Platform for Canadian investors, or Wire Transfer, Direct Deposit, or by Sending a Cheque for non-Canadian investors. E-cheque has no banking limits and so allows you to transfer the full amount of your investment in one transaction. Payment instructions will be provided after the investment documents have been signed for your investment. Credit cards are currently not accepted for making an investment through FrontFundr.
All questions regarding an investment or specific company should be directed to FrontFundr during an active campaign. A FrontFundr representative can be reached through the chat feature on the FrontFundr platform, by sending an email to email@example.com or by calling 1-800-804-1524.
We are required by the Canadian Securities Commission to verify the identity of each investor that uses the FrontFundr platform. This is done for the security of each investor and the companies that they invest in. You will only be asked to upload these statements if your information can not be verified automatically through our online process.
As an exempt market dealer we are required to verify the identity of each investor for the protection of both the companies and investors. For this process we use Trulioo to verify your identity against two reliable sources. Don't worry, this has nothing to do with your credit score and this will not be impacted.
We at FrontFundr look to build a trusted brand, rooted in our core values of innovation, education, simplicity, empowerment, trust and transparency. FrontFundr is registered as an Exempt Market Dealer with the Provincial Securities Commissions in Canada. We are proud that Canadian securities legislation maintains the highest level of integrity in its governing and monitoring of Canadian businesses, which helps protect those investing in these companies.
All FrontFundr traffic is sent over an encrypted, ‘https’ connection. All personal information is encrypted before being stored on our secure server. We are legally required to adhere to the latest security standards.
No! The amount you invest will go solely to purchasing shares. FrontFundr receives compensation from the companies raising capital through the FrontFundr platform.
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.
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.
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.
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.
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.
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.
Once the closing documents have been signed and the new shareholders have been added to your Corporate Securities Register, FrontFundr will transfer the funds.
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.
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.
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.
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.
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.
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.
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!
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.
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.