Calgary-based SeedUps Canada uses its website to connect early stage companies with potential investors, a process known as equity crowdfunding.
Back in March, securities commissions in seven provinces announced proposed rules to regulate raising capital online. Crowdfunding, in a general sense, has been conducted in Canada to this point on portals such as Kickstarter and Indiegogo, which enable fundraising for businesses and projects in exchange for benefits rather than equity.
But the tide is turning, as small businesses look to expand potential sources of financing, and regulators scramble to define the terms.
Sandi Gilbert, co-founder of SeedUps Canada, says Elizabeth Hill is the first 'ordinary investor' in North America to use a crowdfunding portal to buy an equity stake in a private company online. Ms. Hill answered several questions in this e-mail exchange:
1. Elizabeth, could you briefly tell our readers a bit about yourself? Where you live and what you do?
I live in Calgary, I am a mother of a seven-year-old and I am expecting another daughter (as of publication). I work in projects for an engineering, procurement and construction group.
2. The team behind Seedups.ca claims you're the first ordinary investor in North America to put money in a company using an equity crowdfunding portal. How did you find out about the service, and what attracted you to the concept?
I noticed SeedUps Canada on Facebook, and it couldn't have come across my news feed at a better time. Earlier the same day I called my bank to speak to my account manager regarding my investments, and he couldn't be reached. He had switched branches and they directed me to an investment adviser through a 1-800 number.
I followed their advice despite feeling really uncomfortable making investment decisions with someone I will never speak to again and without seeing any documentation or investment trends in front of me. Every quarter they send the investment package, which is more than 100 pages of information I don't understand, with no contact from a trained professional to show me what is relevant to my investment portfolio. When I thought about choosing a company I can follow, support and invest in, I was excited to learn more.
3. You decided to help fund Jump On Flyaways, a business that helps Canadians access low-cost travel. What made it worthy of your hard-earned dollars?
I heard about Jump On over a year ago, and I was immediately excited about the concept and the opportunity to save money. My family lives in British Columbia and it used to be very affordable with WestJet to get away for the weekends. That has changed and I haven't been able to see my family as often as I would like without taking extra days off from work, either to spend the hours driving or to save money on flights.
Jump On is solving my problem, which I can only assume would benefit many other people. When I saw I was able to invest in Jump On Flyaways through SeedUps, it was a very easy decision for me. I personally will use Jump On Flyaways, I will also share their flights with family, friends and my social network as I really believe in what they are offering and I am tired of overpaying with the big airlines.
4. If you're willing to disclose, how much did you invest and what equity stake in the company did you receive? Either way, how easy was the process, and how did you make your payment?
I invested $2,000 for approximately .105-per-cent equity, which included a $500 flight credit. The money was withdrawn from my bank account within 14 days. The website was very user friendly, I was able to read all mandatory documentation and approve the contract with my signature, all online. I realize this is a new concept for us all, but I feel confident about my decision and empowered by taking control over my money.
5. SeedUps does a lot of due diligence before it will allow a business to list on its service. Knowing that, how much research into Jump On Flyaways did you do before making the decision to invest?
I found the SeedUps website very easy to review the companies looking for investors. I was able to review the basic information, opportunity, watch a short video, check out their website, even ask CEO Roger Jewett questions and review other questions and answers that have been brought up. I can learn a lot more about a company through SeedUps than I can with my other investments at a financial institution.
6. How will you follow the company's progress?
As an investor, I can sign into my user profile with SeedUps, there's a tab for "my investments," and when Jump On has something to share with its investors it will post it there. SeedUps will notify me when there is new information available. As a customer, I will follow the company through Twitter and Facebook, and I am on their mailing list to stay in the loop on coming flights.
7. There are lot of concerns about the need to put safeguards in place to protect non-accredited equity crowdfunding investors like yourself. Do you feel this investment was riskier than others you've made?
I understand this investment is riskier than others I have made. I understand I can lose my total investment. I wouldn't have made the investment if the loss would have affected my quality of life. However, like I have said before, I don't know where my investments are with the banks, I lack confidence in them, I am certainly not passionate about what I have invested in.
I find similarities to equity crowfunding with the TV show Dragons' Den; I learn about a company through its presentation, ask my questions, review the documentation and make an informed, confident decision whether I want to be a part of the opportunity or not.
8. Do you plan to invest in other businesses through equity crowdfunding? What kind of companies and offers will attract your attention?
I'm interested in investing in other businesses through equity crowdfunding, and companies that will attract my attention provide products or services that will add value to my friends or family's lives.