Kickstarter meets Bay Street: Selling shares through crowdfunding

Seven provincial securities regulators want to let Canadian companies sell shares to investors using online crowdfunding portals. It's meant to help small start-ups but critics say it could open the door to fraud. (Reuters/Charles Platiau)


Online pleas to crowdfund money comes from thousands looking to make a film or start a business. Now, seven Canadian securities commissions want to take that idea, to let companies sell shares to potential investors through crowdfunding portals.

About a year ago, the people behind the cult TV show Veronica Mars put forward a modest proposal. Since they didn't have the money for a Veronica Mars movie, they'd head to Kickstarter and let their wildly devoted fanbase come up with it for them. And it worked. The campaign raised nearly six-million-dollars and Veronica Mars: The Movie opened earlier this month ... to mixed reviews.

Crowdfunding platforms such as Kickstarter and Indie-Go-Go have revolutionized the way artists, inventors and entrepreneurs get their ideas off the ground. And now, there's a push to take that model and apply it to Bay Street.

Earlier this month, seven provincial securities regulators released coordinated proposals that would allow companies to use crowd-funding platforms to sell shares in their companies. The idea is to give small start-ups, which often face challenges trying to raise money on stock exchanges, a chance to go directly to their potential share-holders.

And as part of our series Project Money, we're looking at how that might work.

"Last month, the Ontario Securities Commission published a set of four proposals for public comment. These proposals cover tools that basically make it easier for businesses to raise capital in Ontario. And crowdfunding is one of those tools. It allows individuals to say I want to invest in small businesses using the internet and using social media and as a result, I am now able under these proposals to take an equity stake in a company that is going to use that money to grow its business".

Huston Loke, Director of Corporate Finance, Ontario Securities Commission

Roger Jewett is the founder of JumpOn, a Calgary-based start-up that offers cheap flights for weekend get-aways. Earlier this month, it became the first company in Canada to offer shares through a crowdfunding portal. It is operating under an existing rule that applies in Alberta, but not yet in Ontario.

Here's how JumpOn works:

"There are a number of charter airlines in Alberta that work moving workers from Calgary and Edmonton up to Fort McMurray and back. And it turns out that these charter airlines are busy from Monday to Thursday because that's when most of the worker movements are. But they sit idle on the weekends. So what JumpOn has done is we've negotiated discounted rates with the charter airlines to access their fleets when they're otherwise slow. And we offer weekend get-away flights from Friday night to Sunday night."

Roger Jewett, founder of Jump-On

So JumpOn negotiates a price with the charter airline, posts the offer on its web site and if enough people sign on, the flight goes. So far, the company has completed six flights.

  • Sandi Gilbert is the founder of SeedUps Canada. It's the crowdfunding portal Roger Jewett is working with. Sandi Gilbert is based in Calgary, but we reached her today in Palo Alto, California.

  • Neil Gross is the Executive Director of FAIR Canada, the Canadian Foundation for the Advancement of Investor Rights.

Have thoughts you want to share on crowdfunding shares?

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This segment was produced by The Current's Gord Westmacott.

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