New regulations allow for equity crowdfunding

by | Nov 17, 2015 | Biz/Tech, News

Photo Courtesy of  www.gojumpon.com

Photo Courtesy of www.gojumpon.com

By Charlotte Morritt-Jacobs

When long-time Chartered Accountant Roger Jewett noticed that flights to Canadian oil rigs weren’t filling up on weekends, he created an unusual business solution: only fly if the airline fills.

Challenged with depleting crude prices, Jewett created Jump On Flyaways, a business which works with carriers whose planes would otherwise be sitting idle and offers weekend flights at cheaper rates.

Jump On sets a “jumping point” that shows how many seats need to be filled before a flight is confirmed. Customers can check the status of a flight before they book their ticket and clients are only charged if the plane flies.

When asked how the business has been funded, Jewett laughed and said “I looked in the mirror and asked myself for the money.”

To date, Jewett has self-funded Jump On, with the help of a $100,000 bonus from SeedUps, a crowdfunding network.

In order to help small businesses like Jewett’s, Ontario has announced it will join Saskatchewan, Manitoba Quebec and Nova Scotia and New Brunswick in an effort to relax rules surrounding companies aiming to raise money through online crowdfunding.

Changes would also allow equity crowdfunding for all investors, with limits based on net worth.

In May 2015, Ontario announced the adoption of a startup crowdfunding rule which allowed investors to fund but with small transactions. The maximum a company could source was a total of half-a-million a year.

JR Richardson, a partner at the entrepreneur network SeedsUp, says that while companies have used those regulations, new rules around equity crowdfunding will encourage efficiency for companies earning capital.

“Until now it has been difficult for companies to find capital in the gap between $200,000 and two-million. This is even more difficult, as you are trying to earn below $200,000 through crowdfunding, he said.

Equity crowdfunding could be the catalyst for the diversification of capital.

Ian Palm, Partner at Toronto office Gowlings Canadian and international business law firm, says that while some have suggested tax breaks for start ups there are still many opportunities for small businesses to save and earn money Canada.

“Smart start up companies have to spend on their social media and take advantage of the energy of the crowd through crowdfunding.”

Full equity crowdfunding opportunities will come into effect in Jan 25 2016.