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Angel investors can’t sit on crowdfunding sidelines

Screen Shot 2013-11-14 at 11.43.11 AMBy Francis Moran

The biggest mistake Canadian angel investors could make if and when equity crowdfunding is made more widely available in Canada “is to sit on the sidelines and do nothing and let crowdfunding pass them by,” says one of this country’s leading legal experts on the subject.

Lawyer Brian Koscak, who will be part of a crowdfunding panel discussion at next week’s National Angel Capital Organization national summit in Banff, said in an interview that the potential broadening of equity crowdfunding in parts of Canada “is a wonderful opportunity for angels to step up and show what they’ve got.” Angels, he said, have a wealth of expertise both in the specific sectors in which they invest and in the investment process itself, making them invaluable participants in any crowdfunding portals that are established.

Angel investors are often the first external source of funding that startups and young companies receive. (A survey of 20 out of NACO’s 24 angel group members reported that angels made 139 investments worth $40.5-million in 2012.) In Canada, as in most other countries, angels must have a minimum income or net worth before being allowed to invest, criteria that shuts out most investors. Securities regulators in Ontario and Saskatchewan have proposed expanding the opportunity for early-stage private investment by allowing companies to solicit small investments from larger pools of individual investors. Even if these proposals never become law, ordinary investors can already, under certain circumstances, participate in early-stage investing everywhere in Canada except Ontario.

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