46 Private Capital Markets | Spring 2015 | www.pcmacanada.com
must ensure they do not fall prey to
fraudulent investment opportunities.
Additionally, the $2,500 per
investment restriction placed on
investors creates a significant
administrative burden for companies
relying on crowdfunding as a means
to raise capital. For example, raising
$1.5 million requires a minimum
of 600 shareholders based on
the $2,500 limit. This creates an
administrative burden, which diverts company resources away
from value generating activities.
As crowdfunding rules are finalized and implemented,
expectedly in 2015, portals that rely on this exemption must be
cognizant of potential amendments to the rules. As the market
evolves and matures, regulators may amend the rules which
could have the potential to disruptthe business model that portal
operators are looking to execute.
The portals that rely on existing accredited investor
exemptions are unaffected by the proposed rules and will have
a definite advantage as they enter the crowdfunding space.
However, it must be noted that regulators are becoming more
selective on issuing exempt market dealer licenses. Many
portal operators have come forward and are seeking an EMD
registration for this purpose.
NexusCrowd – Canada’s First
Securities crowdfunding portals are uniquely positioned
to positively impact Canada’s private capital markets by
efficiently providing entrepreneurs and institutions with
access to capital and by providing investors with access to
new investment opportunities.
Among the few crowdfunding portals that cater solely to
accredited investors, NexusCrowd is the first in Canada to partner
with institutions to offer accredited investors the opportunity
to co-invest in exclusive institutional investments on the same
terms, and have their investment managed and reported on by
the institutional partner.
Currently, individual investors’ access to institutional
investment opportunities is limited by their relationships, or
by their ability to invest a prohibitively high minimum amount
required by venture capital and private
equity institutions. NexusCrowd’s
innovative model addresses this issue
by lowering the minimum investment
threshold and by partnering with
established private equity and venture
capital institutions who commit at least
50% of the capital for each investment.
As a result, accredited investors gain
access to institutionally-led investment
opportunities across multiple sectors,
stages and securities. They also gain comfort knowing that
each investment has undergone professional analysis and due
diligence by an institution that invests alongside them and
manages the investment on their behalf. The portal’s unique
investment structure also reduces the administrative burden to
investee companies by allowing them to focus on the growth of
their business as opposed to investor relations.
To date, NexusCrowd has formed partnerships with private
equity and venture capital firms across three different sectors and
is at the forefront of charting new territory in the rapidly expanding
securities crowdfunding industry. As the portal evaluates
additional partners, it continues to work towards achieving its
mission of providing investors access to exclusive institutional
investments and providing venture capital and private equity
institutions access to additional capital at no additional cost.
As competition in Canada’s securities crowdfunding
industry continues to intensify, portals that can navigate the
regulatory environment and provide value to investors, issuers
and other private capital market participants will be uniquely
positioned to succeed.
For more information contact:
The Crowdfunding Industry Report, Massolution, 2013