M3

Question 1

What is crowd funding?

Answer 1

-For businesses in early stages to collect financial resources to support growth

Question 2

Where do you get crowd funding?

Answer 2

• Through an online platform known as funding portal

- it connects investors and backers to entrepreneurs

Question 3

VC vs Crowd funding

Answer 3

• Crowdfunding is used by ventures innovating in an existing category of product or service
• VC usually finances disruptive technologies

Question 4

Types of crowd funding

Answer 4

• Donation based
• Reward based (pre-sale)
• Profit/revenue sharing
• Credit based
• Securities issued based

Question 5

Donation Based

Answer 5

-u donate them money or resources

Question 6

Reward based

Answer 6

Backers/funding providers will receive product in exchange for funding

Question 7

Profit/revenue sharing

Answer 7

Future profits are shared with backers in exchange for funding

Question 8

Credit based (debt crowdfunding)

Answer 8

• peer to peer funding
• high default risk
• interest and loan is repaid when project makes profit

Question 9

Securities issue based

Answer 9

-debt/equity securities are issued and sold to the public in exchange for funding (must comply with BC Securities Commission regulations)

Question 10

Offering Document (memorandum)

Answer 10

If firm has a startup crowdfunding exemption, they can borrow capital without filing a prospectus but they will have to file a offering document

Question 11

What’s in the offering document?

Answer 11

• mission, product/service, main executives,owners, ST/LT objectives, important milestones, capital structure
• current situation and expected future development
• features of new securities (comm shares, pref shares, dividends)
• intended use of proceeds
• investors rights
• risk associated with business (especially lack of liquidity)

Question 12

Max crowdfunding can be rained in BC

Answer 12

$250,000, 2 per year

Question 13

Securities firm can issue

Answer 13

• comm shares
• pref shares
• debt Securties
• promissory notes
• warrants, convertible shares

Question 14

What is a non-accredited investor?

Answer 14

-an individual investor

Question 15

Max investments for non-accredited investors

Answer 15

-$1500 per individual investor if web portal benefits from “market dealer exemption”

• $5000 per individual investor if following conditions are met:
  - funding portal is a registered dealer
  - funding portal determines that the investment is suitable for the investor

Question 16

Who are accredited investors?

Answer 16

• They have no investment limit
• Institutional investors
• corporations, limited partnerships with at least $5 mill in net assets
• registered advisers and dealers

Question 17

How many days do investors have to change their minds from crowdfunding campaign?

Answer 17

2 business days

Question 18

What is the main advantage for investors through crowdfunding?

Answer 18

-Due diligence done by funding portal

Question 19

Main risks for investors through crowdfunding

Answer 19

• Valuation of newly issued securities
• limited access to information (no obligation to report financial statements after crowdfunding campaign)
• lack of liquidity

Question 20

Funding portal operating under the start-up registration exemption

Answer 20

• not allowed to give investment advice
• dont receive fee/commission from investors
• state that they are not a registered dealer

Question 21

Funding portal operated by registered dealers and exempt market dealers

Answer 21

• can give investment advice
• must disclose fees charged to investors

State they are registered dealers