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Crowdfunding: A Welcome Addition to Canada’s Innovation Finance

Ottawa, November 14, 2017—While crowdfunding is far smaller than other available sources of risk capital in Canada, a new briefing by The Conference Board of Canada’s Centre for Business Innovation (CBI) suggests that it has the potential to address Canadian innovators’ financing needs and may help bring their products and services to market.

“By connecting investors directly with entrepreneurs, crowdfunding may actually do a better job of identifying niche funding opportunities missed through traditional venture capitalist vetting,” said Paul Preston, Director, Science, Technology and Innovation, The Conference Board of Canada. “With Canadian innovators regularly citing financing as a major barrier to their success, any initiative that brings more capital into the innovation funding system is good for business.”


  • Canadian innovators regularly cite finance as a major barrier to their success.
  • Crowdfunding uses Internet technologies to directly connect investors and entrepreneurs.
  • Debt and equity crowdfunding must overcome restrictive regulatory hurdles.
  • Crowdfunding may rival angel investing in Canada within the next decade.

Crowdfunding uses Internet technologies to directly connect investors and entrepreneurs. Prospective investees place funding proposals in online portals, where they are vetted and ultimately funded by millions of Internet users. This additional source of funding offers innovators more options to mix their funding sources. The crowdfunding project vetting process may also provide additional managerial and technical insights not otherwise available to innovative start-ups.

New regulations and portals have enabled crowdfunding to shift from donations and rewards models (favoured by not-for-profits) to securities (favoured by businesses) such as debt, equity, and royalties. Globally, business applications are now the main use of crowdfunding, yet the Canadian market remains much more oriented toward non-business crowdfunding. In fact, while non-business crowdfunding raised over $180 million in 2016, business crowdfunding raised just $50 million, most of which was in business lending.

In comparison to other available sources of risk capital, crowdfunding has a long way to go before it makes a substantive contribution to Canadian innovation finance. For example, Canadian businesses raised over $4.4 billion on the TSX-Venture exchange and venture capital deals amounted to over $3 billion in 2016. However, the report, Wisdom of the Crowd?: Crowdfunding and Canadian Innovation , suggests that given its high growth rates in other countries, crowdfunding may rival angel investing in Canada within the next decade, which raised an estimated $500 million in 2016.

Growth of the Canadian business crowdfunding market will depend on regulations and greater adoption by investors and investees. Regulations in Canada, particularly for debt and equity crowdfunding, have been somewhat complicated by provincial-level securities regulations. Although there has been some movement toward harmonization, there are numerous provincial exceptions and opt-outs which make for a fragmented regulatory environment.

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