Alternative Funding: Crowdfunding and Share Offerings

Not every business should, or can, raise money from venture capital. Many raise from customers, fans, neighbours, community members and small investors instead: through crowdfunding, a private share offering, community shares or bonds, a co-operative, or a blend with loans. This guide explains the options, how to structure a company that many small investors can safely buy into, and where to find the platforms and organizations that help.

1. Your options at a glance

2. Crowdfunding explained

Platforms and their contacts are listed in the Other Funding Sources directory.

3. Rules at a glance

Canada

Not a fit for private companies: the Listed Issuer Financing Exemption (LIFE) applies only to exchange-listed issuers.

Regional note: the CSA notice names BC, Alberta, Saskatchewan, Manitoba, Ontario, Québec, New Brunswick and Nova Scotia as the provinces previously covered by start-up crowdfunding blanket orders. Which provinces have adopted NI 45-110 was not fully confirmed. Check the regulator for your province (contacts are in the directory).

United States

Rule 506(b) could not be confirmed from the SEC’s page and is not summarized here.

4. Building a share company people want to invest in

Small investors buy shares when the company is easy to understand, fairly priced, honestly presented and well governed. Set these foundations before you open an offering.

Choose the right corporation

• Incorporate federally (CBCA) or provincially. Federal incorporation gives name protection across Canada; provincial incorporation can be simpler and cheaper. See the registries in the directory.
• Use a clear name, a registered office and proper directors.
• If you want Canadian-controlled private corporation (CCPC) status, which unlocks tax advantages such as enhanced SR&ED credits, ask your accountant how issuing many shares or selling to non-residents affects it.

Design the share structure

• Common shares: simple, voting, the usual choice for small rounds.
• Non-voting common or a separate class: lets you raise from many people without losing control. Set the rights in the articles.
• Preferred shares: can give investors a dividend or priority on exit. More complex, so use only with legal advice.
• Option pool: reserve shares for future employees so later grants do not surprise investors.
• Keep the cap table clean: one register, one set of share certificates or digital records, no verbal promises.

Price the shares fairly

• Pre-money valuation divided by shares outstanding gives the price per share. Use the Share Offering Planner below.
• Justify the number with traction, comparable deals and your forecast. Overpricing hurts you later if you need a down round.
• Set a low per-share price and a minimum purchase that small investors can afford.

Protect everyone with a shareholders agreement

• Pre-emptive rights, tag-along and drag-along rights, transfer limits, and what happens when someone leaves or dies.
• Information rights: annual financials and a simple investor update.
• For hundreds of small investors, consider a nominee or special-purpose vehicle that holds their shares together, so you deal with one holder on the register. Ask a lawyer whether it suits your exemption.

Disclosure that earns trust

• A plain-language offering document: what you do, who runs it, use of proceeds, risks, how shares can be sold (usually they cannot be sold easily), and the terms.
• Honest numbers. Misleading statements can create legal liability.
• A risk section that names the real risks: no market for the shares, dilution, loss of the whole investment, key-person risk.

5. Step-by-step plan

1. Define the raise: target, minimum to close, use of funds, timeline. Test the maths with the planner.
2. Pick the route: reward, equity, OM, private placement, community shares or loan (see the table above).
3. Get legal advice early: confirm the exemption, investor limits, advertising rules and filings for your province.
4. Incorporate and clean up: articles, share classes, minute book, bank account, bookkeeping, IP assigned to the company.
5. Set valuation and terms: share price, minimum investment, any perks, rights attached to shares.
6. Prepare documents: offering document, risk disclosure, subscription agreement, shareholders agreement, financial statements as required.
7. Select a platform or run it yourself: compare fees, audience, investor onboarding and whether Canadian companies are accepted.
8. Build your audience before launch: an email list, social channels, early supporters who commit to invest on day one.
9. Launch and run the campaign: updates, answers to investor questions, media outreach (see section 6).
10. Close properly: collect funds into a trust or the platform’s escrow as required, issue shares, update the register, make required filings.
11. Report to investors: at least annual updates, with honest news about progress and setbacks.

6. Run the campaign

• Warm up first. Campaigns that start with committed early backers build momentum. Aim to have a meaningful share of your target pledged by friends, customers and advisors before public launch.
• Tell a clear story: the problem, your solution, proof it works, what the money does, what investors get.
• Use video and visuals: a short pitch video, product photos, a simple chart of how funds are used.
• Offer fair incentives: early-bird pricing, product perks for equity investors where permitted, community recognition. Check that perks are allowed under your exemption.
• Engage constantly: answer questions publicly, post updates, share milestones.
• Use PR and partners: local media, industry newsletters, associations, customers who will share the offer.
• Keep promises realistic. Over-promising is the fastest way to lose trust and invite legal trouble.

7. Tax credits that attract investors

Several provinces give individuals a tax credit for buying shares in approved local companies. A credit can make a small share offering far easier to sell, but the company usually has to register or be pre-approved before it issues shares. Programs change with each provincial budget, so confirm the current rules with the province.

Details, eligibility and contacts for the programs above are in the directory under Investor tax credits & incentives. Federal note: the lifetime capital gains exemption for qualified small business corporation shares rewards shareholders when they sell, not when they invest; CRA shows $1,250,000 for 2025 under proposed changes, and no 2026 figure was confirmed.

8. Costs and risks

Main risks

• Missing the minimum and refunding everyone; reputational cost of a failed public campaign.
• Too many small shareholders without governance: slow decisions, unhappy investors, difficult later rounds.
• Later venture investors may dislike a messy cap table. Keep records clean and consider a nominee or SPV.
• Breaking securities rules by advertising or selling to the wrong people. This can force you to give money back.
• Over-promising on product delivery in reward campaigns.

9. Tools and directory

• Other Funding Sources directory: crowdfunding platforms, community lenders, credit unions, co-operatives, regulators and registries, with contact details.
• Canadian funding programs and the funding matcher.
• Investor negotiation if you also expect venture investors later.