At some point this summer, Sean Sears hopes Canadian startups will be raising capital on his new crowdfunding platform, ICrowdx.
Sears and his colleagues at the Halifax investment-firm-cum-startup-lab Ogden Pond have been working on developing the online portal in preparation for regulators approving equity crowdfunding. Now that that has been achieved, they are in discussions with regulators on the details of letting companies raise capital online.
In addition to helping companies raise money, Sears believes ICrowdx will help investors to manage a portfolio of angel investments and communicate with their portfolio companies.
“The portal will be social,” Sears said in an interview. “It will create an instrument in which the investor has a direct line of communication with the company. And that flow of communication will be constant. It is also directly up the alley of the skills these companies have.”
Crowdfunding is the process of raising money online from a broad range of people. Although it has been used for charitable fundraising and early sales of products, regulators in six provinces (including Nova Scotia and New Brunswick) only this month first approved the practice for companies raising capital. No company can raise more than $250,000 in a single campaign, and investors are limited to maximum investments of $1,500 per company.
Sears said the restrictions are “brilliant” because they will force investors to hold a portfolio of startups rather than placing a heavy bet on one or two. Startups are inherently risky investments, and the restrictions force each investor to diversify, thereby reducing the risk.
ICrowdx immediately signalled that it will be among the first — if not the first — crowdfunding portal operating in Canada. The site will operate on a province-by-province basis and have staff in each jurisdiction in which it operates.
Sears believes the equity crowdfunding will prove to be a largely local exercise in which entrepreneurs attract investment from their local communities. He wants staff on hand to help the entrepreneurs launch successful campaigns and to vet companies to ensure they’re suitable candidates for investment.
He said he’s aware of four other companies that are proposing equity crowdfunding portals in Canada, but all are either based outside the country or in Ontario or Alberta (two provinces that have yet to approve equity crowdfunding). That could open the way for ICrowdx to be the first to actually launch a functional portal.
Sears expects that he will have passed the regulatory hurdles within 60 to 90 days. The first portal may be in Saskatchewan, a province that has been leading the crowdfunding drive in Canada.
Sears and Ogden Pond are best known for producing such companies as Abridean and SageCrowd, but they’re moving swiftly into the crowdfunding space. As well as ICrowdx, Sears is working on an education technology crowdfunding platform in the United States. He declined to provide details on it.
Sears said he has researched crowdfunding and there is interest from investors and entrepreneurs, including those in Atlantic Canada.
“There’s genuine interest in finding a different way to invest,” he said. “People want autonomy and they want to be engaged. When you talk to the people who have launched (crowdfunding drives), they say they are overwhelmed by the demand from investors.”