Equity crowdfunding has opened doors for startups and small businesses to raise capital from a broad range of investors. However, the landscape for equity crowdfunding can vary significantly between the USA and Canada, especially for those looking to leverage platforms like FrontFundr or considering listing in both countriesLet's delve into the key differences and what they mean for entrepreneurs aiming to maximize their fundraising potential.
USA: Diverse and Deep Pockets
The US investor base for equity crowdfunding is diverse, ranging from seasoned angel investors to everyday people eager to support startups. The larger population - nearly 9x the size of Canada - and higher average income levels - USD$74.5K in USA vs CA$68K in Canada -mean a potentially larger pool of investors with significant capital to invest. American investors are often more accustomed to risk-taking and may be more willing to back innovative or unproven ideas.
Canada: Community-Oriented Investors
In Canada, investors tend to be community-oriented, often looking to support local businesses and projects. 32% of Canadians ranked social causes, such as health and safety, human rights and communities as most important. This strong sense of community can be advantageous for Canadian startups, as investors are typically more loyal and supportive. The Canadian investor base may be smaller, but they are highly engaged and interested in contributing to the local economy.
In the United States, the JOBS Act, passed in 2012, is the cornerstone of equity crowdfunding. It introduced several provisions, each with its own set of rules:
These provisions offer flexibility but require careful navigation to ensure compliance.
In Canada, the regulatory landscape was fragmented until the introduction of National Instrument 45-110 in 2021. This regulation harmonized crowdfunding rules across provinces, allowing companies to raise up to CAD $1.5 million annually from non-accredited investors. Before NI 45-110, companies had to navigate a patchwork of provincial regulations, which needed to be more convenient and limited the reach of crowdfunding campaigns.
In the USA, investor caps under Regulation Crowdfunding are designed to protect less-experienced investors:
Under NI 45-110, Canada has straightforward caps:
These caps are meant to safeguard investors from overextending their finances.
For companies considering listing on both US and Canadian platforms, there are several key considerations:
Equity crowdfunding offers immense opportunities, but the approach varies between the USA and Canada. By understanding these differences and strategically planning your campaign, you can effectively raise funds and bring your innovative ideas to life. Whether you’re focusing on one market or aiming to list in both countries, the key is to be informed, prepared, and adaptable. This way, you can navigate the complexities of equity crowdfunding and achieve your funding goals.
Reach out to us at FrontFundr if you are interested in discussing more about cross border deals.