FAQ - Pre-Launch

Who determines the valuation?

We will provide some material and guidance based on your company's industry, then you will develop your own methods for determining valuation prior to our due diligence process. All valuations are reviewed and discussed during the due diligence process to ensure a fair valuation is established for both the company and investor

Due Diligence

What does the due diligence process involve?

Our due diligence process includes:

Review of key corporate documents (e.g., shareholders’ agreement) and minute book (e.g., reviewing past corporate resolutions)
Discussions and interviews with internal and external stakeholders (e.g., CEO, regulators)
Financial analysis (e.g., stress testing projections, statement analysis, cash flow analysis)
Background checks (e.g., criminal, credit, regulatory, and reputational)
Business analysis (e.g., product-market fit)
The final step of FrontFundr’s due diligence process is a meeting between the prospective company and our Investment Review Committee (IRC).

Due Diligence

Do I need audited financial statements?

Raising capital in Canada is governed by provincial securities regulators. Every province may have different rules depending on the type of investors you are looking to bring on board, so we will work with you to structure your offering in the most efficient and cost-effective way. If you are raising under the Offering Memorandum, then you will need to have your financial statements audited. Audited statements when using 45-110 Crowdfunding are not required.

If you are raising under the Ontario Crowdfunding Exemption (and have raised over $250,000 for your business, since inception), then you will only be required to have your financial statements reviewed, not audited.

Due Diligence

How much money can my company raise?

There are no overall limits to how much your company can raise. However, there are limitations within specific exemptions you need to be aware of, as the amount each company can raise depends on the structure of your specific offering.

For example with National Instrument 45-110, also know as the Start-up Crowdfunding Rule, businesses can raise up to $1.5 million from retail investors during a 12-month period. Investment amounts from Accredited Investors and Friends, Family and Business Associates (FFBA) do not count towards the $1.5M limit from the 45-110 Crowdfunding exemption. This means it’s possible to raise more than $1.5M for your business through a combination of exemptions.

On the other hand, if a business uses the Offering Memorandum Exemption, the Accredited Investors Exemption, or the Family, Friends and Business Associates (FFBA) Exemption, there are no limits.

Due Diligence

How much money can investors invest?

Investor limits are also determined based on the exemptions you use to raise capital.

With National Instrument 45-110 everyday investors, also known as retail investors, can invest up to $2,500 per company, per crowdfunding campaign, per 12-month period. If deemed suitable by a registered dealer this limit increases to $10,000.

The limits for the Offering Memorandum Exemption depend on the provincial residence of the individual looking to make an investment. BC investors have no limit, but investors who live in the rest of Canada have a limit of $10,000, unless they satisfy certain additional criteria. You can learn more about provincial securities regulation here.

There are no investor limits for investors who are investing under the Accredited Investors or Family, Friends and Business Associates Exemptions. For example with National Instrument 45-110, also know as the Start-up Crowdfunding Rule, businesses can raise up to $1.5 million during a 12-month period.

Investor Relations

Are there any disclosures and/or compliance restrictions I need to be aware of for my campaign video?

If your video mentions anything about the capital raise you will be required to include a Forward-Looking Statements disclosure. The disclosure should be visible within the first 30 seconds of the video. The text should be legible and it should be on the screen long enough to be read by viewers (as a best practice you should be able to read through it twice before it disappears). The disclosure statement can fill the entire screen at the beginning of the video or it can be overlaid on the video at the bottom of the screen. Below is the disclosure:

This video contains forward-looking information. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, viewers should not place undue reliance on forward-looking information.

If you’re video includes a testimonial from a customer, investor, or otherwise, you will need to include a Testimonials disclosure. This can be included with the Forward-Looking Statements disclosure.

Testimonials may not be representative of the experience of other customers or investors. Testimonials are no guarantee of future performance or success.

We recommend that your campaign video focuses on your business. Investors like to hear more about your mission, product and services, and growth plans. We don’t recommend including any financials or terms of the offering. The campaign page itself will be able to cover the terms of the offering. We also want to avoid any edits in the event that information about the raise changes. Finally, you should not make any promises about a return on investment or a potential exit in the future.

Compliance

Can I include forecasts in projections on my campaign page and in my pitch deck?

Forecasts and projections are forward-looking information that can be beneficial for investors to make data-driven decisions. CSA Staff Notice 51-356 Problematic promotional activities by issuers outline that an issuer must:

Identify forward-looking information as such.
Caution users that results may vary from the forward-looking information and identify material risk factors that could use actual results to differ materially from the forward-looking information.
State the material factors or assumptions used to develop the forward-looking information.

An issuer should consider the following items if providing projection-related information in their marketing materials:

Is the forecast in line with the value drivers of the business?
What are the assumptions?
Is the income forecasted consistent with the presentation of the forecasted balance sheet and cash flow statements?
Who has prepared the forecasts and for what purpose?
Is the revenue growth realistic?
Who are the customers?
What are the results of the years prior to now?
Is revenue growth of X percentage, per annum, sustainable?
Does Gross Margin increase/decrease, and why?
How was financing reflected?
How do the forecasting models fit with any covenants?

Ensure that projections and forecasts on materials have a reasonable basis and are compliant with the guidelines below:

The Company must have earned revenue in order to include any projections in any format (graph, table, text, etc).
If projections are supported by audited financial statements, a maximum of 4 projected years are permitted.
If projections are supported by unaudited financial information, it must be clearly marked as so, and can only contain up to a maximum of 2 projected years.
Projections must contain the same number of historical results as it does projected results (i.e., 1 year of historical financials for every 1 year projected).
Projections should avoid a ‘hockey stick’ configuration.

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Compliance

Are there specific compliance requirements we should be aware of before launching our campaign?

Equity crowdfunding has allowed everyday people to invest in private companies - opportunities previously reserved only for “institutional” and “accredited” investors. With the door now open to retail investors, the spotlight is on promotional materials to ensure they are accurate and contain reasonable information to inform retail investors about their investment decision.

All external and internal marketing materials regarding your investment opportunity must comply with securities legislation and the Canadian Code of Advertising Standards. To ensure that your materials are compliant across the boards, your Campaign Manager and FrontFundr’s Compliance Officer will review all marketing materials to be used for your campaign.

Compliance will need to review your pitch deck, campaign video, and campaign overview before the campaign launches. Your Campaign Manager will gather the materials and share them with compliance for review and feedback. We recommend preparing any marketing materials prior to the launch of your campaign so that your Campaign Manager and our Compliance team can review these materials with no delays to your promotional plan.

Compliance

Do I need to include a pitch deck on my campaign page?

While including your pitch deck on your campaign page is not required, we do recommend it. Some investors prefer to read the pitch deck and offering document as they review the investment opportunity. The pitch deck also helps develop the messaging for the campaign overview.

Unlike a traditional pitch deck geared towards Angel Investors or VCs that has limited text, the pitch deck will be read on the platform as a PDF so we recommend including more text than you usually would. You need to ensure that investors can understand the full context of the offering without you presenting it.

Pitch Materials

How long does a campaign run for?

The length of a campaign can be tailored to suit your company’s specific needs. We recommend keeping it open for at least 30 days and for a maximum of 90.

Fundraising takes a lot of work on your part, and momentum is a crucial part of any successful campaign. However, campaigns are legally allowed to stay open as long as your chosen exemption allows.

Campaign Marketing

What are some examples of good campaign perks?

To give you a better idea of how to set up your campaign perks, here are some examples across different perk types:

Product Perks

StayWyld: Offered their investors a 6-month supply of their Cordyceps Capsules.
ToroMatcha: Toro offered a variety of products including energy drinks and matcha powders.
Burwood: Offered hard sode, seasonal gin, and their unique bee keeper whisky to investors.

Subscription Perks

Blossom Social: Offered a one year pro subscription for their social investing app.
Bidmii: Contractors looking to use their platform can we receive a one-year subscription.
Red Mountain Resort: Offered a season ski pass to investors and their friends.

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Company Swag Perks

Hempalta: Offered an ambassador pack that includes company swag such as their Hempalta hat.
Cascadia Seaweed: The first 100 investors in the campaign received a branded toque.
Rovers FC: Offered their supporters scarves, t-shirts, and a commemorative share certificate to support the club.

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Exclusive Experience Perks

brüst: Offered an exclusive perk to watch a Denis Shapovalov tennis match with the brüst executive team.
The Sweet Potato: Investors were eligible to join the company for an exclusive funders dinner.
Macaloney Island Distillery: Offered free tours of the distillery along with a discount on their academy.

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Remember, the right perks can make all the difference in turning your crowdfunding dream into a reality.

Pitch Materials

What types of perks can we offer to investors?

Understanding the different types of perks you can offer is essential for crafting a compelling campaign. Here are some common types of perks that can appeal to various investors:

Free Consumer Products: Offering your product for free as a perk can entice potential investors who are excited about your innovation. This not only provides them with a tangible benefit but also serves as a way to showcase the value of your product.
Discounts for Subscription-Based Models: If your business operates on a subscription model, providing discounts or promo codes can attract investors who are interested in long-term engagement with your service. This creates a sense of ongoing value and loyalty.
Merchandise/Company Swag: Branded merchandise such as t-shirts, hats, or mugs can be a fun and effective way to reward investors. These items serve as a reminder of their support and can help spread the word about your campaign.
Exclusive Meetings/Dinners with the Founder or Team: Offering exclusive experiences, such as meetings or dinners with the founder or team, can appeal to backers looking for a more personal connection with your project. This type of perk can also provide valuable networking opportunities.

When setting up your campaign perks, consider the duration or availability of the perk:

Limited-Time Offers: Create a sense of urgency by offering certain perks for a limited time or quantity. This can encourage potential investors to act quickly to take advantage of the exclusive offer.
Evergreen Perks: Some perks can be available throughout the campaign to provide consistent value to investors who might discover your project later.

With perks, it’s also important to consider the cost relative to the investment amount:

Tiered Investment Levels: Define clear investment levels required to receive each perk (ie. $500, $1000, $5000, etc.). This helps investors understand the value they are getting at different levels of support.
First tier: We recommend setting the first level above the initial minimum investment. For example, if the minimum investment is $250, set your first level to $500 to receive a perk.

Cost: Make sure you consider the cost of the perk as well as any potential shipping costs when setting the perk amount. A general recommendation is to not exceed 10%-20% of the investment value.

Pitch Materials

Are there specific compliance requirements we should be aware of before launching our campaign?

All external and internal marketing materials regarding your investment opportunity must comply with securities legislation and the Canadian Code of Advertising Standards. To ensure that your materials are compliant across the boards, your Campaign Manager and FrontFundr’s Compliance Officer will review all marketing materials to be used for your campaign.

Compliance will need to review your pitch deck, campaign video, and campaign overview before the campaign launches. Your Campaign Manager will gather the materials and share them with compliance for review and feedback. We recommend preparing any marketing materials prior to the launch of your campaign so that your Campaign Manager and our Compliance team can review these materials with no delays to your promotional plan.

Campaign Marketing

What can we learn for past successful FrontFundr campaigns?

FrontFundr has successfully processed over $200M in investments across 25,000 investment transactions for over 175 campaigns.

Pitch Materials

What materials do we need to provide to help FrontFundr build our campaign page?

Your Campaign Manager will send you a list of required materials to help build your campaign page. These include:

Pitch Deck: Please provide us with the latest version of your pitch deck after the kick-off call for our review and to begin pulling content for the campaign overview.
Campaign Narrative Q&A: Section 1 of this document is designed to source any key information for the campaign page that may not currently be included in the pitch deck.
Perks Spreadsheet: Let us know what perks you plan on offering to investors - include the amount, the description, any restrictions, and the desired images.
Team Spreadsheet: List all team members you would like to make visible to investors on the campaign page including their name, title, biography, LinkedIn profile, and image - note that their contact information will nto be made available.

The FrontFundr team will reach out to source additional information such as your campaign title, subtitle, URL, minimum investment, target raise, and any other pertinent details.

Pitch Materials

Topics

Clear Selection

FrontFundr Platform

Investor Relations

Compliance

Due Diligence

Campaign Marketing

Pitch Materials

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Pre-Launch

Top FAQs

Publishing an Article on LinkedIn

Running an Instagram/ Facebook Live Event

How to make a great campaign video

Pre-Launch

Who determines the valuation?

What does the due diligence process involve?

Do I need audited financial statements?

How much money can my company raise?

How much money can investors invest?

Are there any disclosures and/or compliance restrictions I need to be aware of for my campaign video?

Can I include forecasts in projections on my campaign page and in my pitch deck?

Are there specific compliance requirements we should be aware of before launching our campaign?

Do I need to include a pitch deck on my campaign page?

How long does a campaign run for?

What are some examples of good campaign perks?

What types of perks can we offer to investors?

Are there specific compliance requirements we should be aware of before launching our campaign?

What can we learn for past successful FrontFundr campaigns?

What materials do we need to provide to help FrontFundr build our campaign page?

Top FAQs

Publishing an Article on LinkedIn

Running an Instagram/ Facebook Live Event

How to make a great campaign video

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