What is your plan to expand and scale up your business? Perhaps, you consider equity crowdfunding as a way to raise capital. Before you jump into that, there are a few things to know about:
The types of capital raising
The type of investors you should consider
The legalities surrounding crowdfunding
In this episode, Julie Bogle from the Canadian law firm BLG joins us to discuss the different ways of raising capital. She notes the various exemptions and capital raising that will suit different kinds of investors. Julie encourages mission-driven female entrepreneurs and business owners to hire experts to fill in knowledge gaps in your team and lawyers to handle the legal side of your equity crowdfunding campaign. Learn to solve problems even before they appear!
If you want to know more about the benefits of hiring experts and lawyers to ensure the success of your equity crowdfunding, then this episode is for you!
Here are three reasons why you should listen to the full episode:
Discover the different ways you can raise funds and the different kinds of investors available.
Learn the importance of rules and jurisdictions before you start your equity crowdfunding campaign.
Understand why it’s essential to hire experts and find a lawyer who’ll help you with your equity crowdfunding campaign’s legalities.
Resources:
Join in on the Choose to Challenge campaign for this year’s International Women’s day
Visit Christina Sjahli’s website to learn about managing your balance sheet on the Her CEO Journey podcast series.
Download this Action Guide to help you navigate the legal side of raising capital through equity crowdfunding.
Learn more about equity crowdfunding from a marketing, business finance, and due diligence perspective by tuning into our previous interviews with Jaime McNally and Trieste Reading.
Borden Ladner Gervais LLP: BLG’s website
For founders in the United States - The SEC New Equity Crowdfunding Rules
Episode Highlights
[06:34] Julie’s Background
Julie works with BLG, a national law firm that does litigation and corporate work.
She works with public and private companies to raise money, buy and sell company assets, and help in governance matters.
Through a BLG initiative, Julie can help women entrepreneurs run successful businesses.
[09:35] Raising Capital as Women Entrepreneurs
Julie observes that women entrepreneurs tend to be more risk-averse in business.
They tend to make the company their own and resist involving additional investors, take on debt, and not take on equity.
However, Julie notes that there is no one clear-cut way to become successful.
She encourages women to look outside the box and stretch their boundaries.
“So now we help women get into leadership positions, full stop, we're not focusing just on women lead entrepreneurs, but rather just women in leadership.”
[12:22] Expand Your Focus
Women entrepreneurs are commonly very focused on their purpose.
This focus is good, and they also need to amplify the business profitability and capital.
We need to learn to hire experts. When we refuse to solve problems immediately, they grow and become more expensive to fix in the long run.
Learn to project the kind of support your business needs.
There are many ways you can structure your business to become successful.
[14:31] Types of Investors and Ways to Grow Your Business Finances
The prospectus is a detailed document about the company, particularly its risks for purchasing securities.
This document is commonly expensive, and private companies can avoid them, which are called prospectus exemptions.
However, not all exemptions are going to be open to every investor. Several other exemptions include accredited investor exemption and offering memorandum.
Offering memorandums are perfect for companies that want to raise from the public market continually.
Tune in to the full episode to hear the in-depth discussion on different ways of raising funds.
“So offering memorandums are really great for companies that want to continually raise from the public market. So if you know year over year that you're going to raise a million dollars every year for the growth of your company, and you want to do it outside of your friends and family and outside of accredited investors, that's a good option for you, or that's an option to explore.”
[18:37] When Raising Capital through Equity Crowdfunding Makes Sense for Your Business
Crowdfunding gives you broad access to people who don't have a high net worth. However, it typically has a limit.
This type of fundraising is helpful to enter the community and to get a broad investor base.
“I definitely appreciate where people are coming from with equity crowdfunding and really wanting to surround themselves with a community and a support network.”
However, it's not suitable for companies that need large capital upfront. In 2019, the average individual investment was only $734.
Look at the different options for fundraising and learn to watch out for things to avoid. Listen to the episode for some insights from Julie.
[21:47] Why Rules and Jurisdiction Matter in Equity Crowdfunding
In Canada, some provinces have adopted start-up crowdfunding. However, places like Alberta and Ontario haven't yet.
“I think we have an issue in Canada and beyond with the number of female founders that we have full stop and I don't think that it's reflective of whether female founders are using the crowdfunding opportunity specifically, but whether a) we have enough female founders, and b) are they accessing capital?”
Some provinces have their own rules on crowdfunding campaign limits instead.
Securities regulators are currently trying to have a harmonized law, but they've yet to approve it.
You need to be on the lookout for the rules and jurisdiction of where you're offering.
[25:07] Know Your Exit Strategy and Cap Table
Often, people decide without understanding their implications and impacts in the future.
Equity crowdfunding can make it harder to get approval from all shareholders in an exit situation.
Knowing your cap table and how to structure it can save you from future issues.
[28:25] Things You Need to Know When Researching on Funding Platforms
Many private companies stay private because they want to maintain control instead of having a large-cap table.
You need to make sure your documents are substantive and are not misleading.
“Want to make sure that everything that goes into that document can be substantiated, that it's not, “Oh, we're the best in the industry. And we're going to go over and take over the world.” Like that. That's not very helpful.”
The different funding platforms offer different options in raising capital outside equity crowdfunding.
The different funding platforms have access to different potential investors. Research the specific type of investors that your company wants to have as a partner.
[33:44] Qualities of a Good Lawyer
The three main qualities to look for in a lawyer are value, experience, and responsiveness.
Lawyers typically charge per hour. A lawyer with a lower hourly charge may cost more than an expensive lawyer who takes fewer hours to work.
Make sure the lawyer has experience in your particular situation.
The lawyer should also be responsive. It's difficult to constantly follow up on issues and get long and over-delayed updates.
Lawyers can also potentially expand your network. You can check this kind of information on their website to see their clients and industry involvement.
Powerful Quotes
“You don't need to be the expert that does it all. And far too often I see small businesses trying to save funds by doing it on their own or not doing it all and just kind of burying their head in the sand like an ostrich.”
“I just find with the female investors that are the female companies I speak to, is there's just less of an appetite to go big.”
“But a lot of times with the companies that we deal with, when they look at the different options, they don't get enough bang for their buck with the crowdfunding exemptions as they're settled right now.”
“Now, keep your eyes open for if additional rules come out, because the additional rules will change things like what amount can you raise.”
“I would say the biggest issue I've seen is not understanding their options up front. So making a decision before they really understand the implications of that decision.”
About Julie
Julie Bogle is a senior associate in the Securities and Capital Markets Group in BLG’s Vancouver office. Her expertise is on general corporate matters, corporate governance, mergers and acquisitions, compliance matters, and mining.
Within BLG initiatives, Julie co-founded the mentorship circle program in 2015 and the Driven By Women™ program in 2016. The latter initiative aims to support female-led and female-founded companies by tailoring to their needs. This initiative supports companies with a well-developed business plan, existing funding or annual income, and scale-up strategies.
Julie is also involved in another BLG initiative called StartUp & Grow™, which provides legal solutions for entrepreneurs, start-ups, and growth-stage companies.
You can also check BLG's website for more information about their services.
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To fueling the life you want to live,
Christina