Issue link: https://digital.canadianlawyermag.com/i/111402
there until late in the coming year. In Atlantic Canada, as elsewhere, we suffer from a lack of early stage venture capital and a variety of initiatives are ongoing to respond to this deficiency. Among those, the Government of New Brunswick has expressed support for further study of crowd funding, the New Brunswick Securities Commission held a public session on the topic in November 2012 and a recent gathering of interested stakeholders under the auspices of the Wallace McCain Institute for Business Leadership is continuing the discussion. Other provincial governments and regulators are responding to similar local expressions of interest and support. The challenges, it appears, will include trying to adapt a nineteenth century regulatory model based on provincial geography to twenty-first century technologies which show little interest in respecting provincial boundaries. Nonetheless, it appears that there is some impetus for a ���made in New Brunswick��� solution which will facilitate a large number of small equity investments in new ventures on a relatively expedited and informal basis. Our size may facilitate the provincial corporate, tax and securities legislative changes necessary to support such an initiative if we can navigate the challenges of geography and provincial boundaries. Stay tuned! The Atlantic Canadian entrepreneurs that I work with are, generally speaking, social media savvy and many, no doubt, would embrace the opportunity to appeal to the ���wisdom of the crowd��� for financial support. In advising them on considering this group participation, I would caution them about the challenges posed by early public disclosure of the innovation or idea which constitutes the perceived competitive advantage for their enterprise. I would ask them to consider ��� the difficulties in corporate compliance and communicating with large numbers of stakeholders and the risks associated with allegations of misunderstandings which rise to the statutory threshold of actionable ���misrepresentations��� under existing securities legislation. Entrepreneurs should reflect on the nature of their business and whether it is amenable to collective funding (because of the product, the target market, the scale) or whether strategic, informed investors who can contribute expertise and experience are a necessary first step. In addition, consideration should be given to equity versus non-equity models of crowd funding (where participant investors are given goods or services in lieu of dilutive equity). Corporate finance is, at least in part, the art of mixing a workable concoction of private capital from various sources, government assistance, conventional and unconventional debt and business specific sources and programs. Crowd funding may well be another new ingredient in the brew but, like any good cook knows, too much in the wrong proportions or the incorrect recipe will yield poor results. We should welcome the interest in crowd funding and encourage regulatory approval and action which creates an efficient and balanced framework. Because of its size, New Brunswick may make an ideal place to test crowd funding platforms and regulatory models. We shouldn���t, however, forget that in business, as in casinos, there are winners and losers on every bet. Entrepreneurs should re���ect on the nature of their business and whether it is amenable to collective funding. ��� Peter Klohn, partner Saint John, N.B. 506.632.2788 pklohn@stewartmckelvey.com DOING BUSINESS IN ATLANTIC CANADA SPRING 2013 3