It is illegal in Canada to set up or use a service like Kickstarter that allows people to fund projects that they believe in. Some small sites such as StartupFuel or Ideavibes are getting around the rules but they are very limited in scope and really struggling under the regulatory shadow. There are dozens of these services just waiting for the Canadian financial regulators to let them go to work letting us get to work.

What will be even more damaging going forward is that we are even further behind on the crowd investing that was the most important part of the JOBS Act that was passed last month on April 5th, 2012.

Under the JOBS Act, small business and start ups can raise a limited amount of money from investors through a registered crowd funding webservice. There are a lot of rules and regulations around it but it is far less than it has been. It can allow a good idea get that initial seed capital that has stymied so many. It could be anywhere from thousands of dollars to the low millions of dollars.

There are some complaints against the JOBS Act but they are almost exclusively coming from those with vested interests in the status quo and controlling the small investor while ensuring small companies have to go through them if they want funding. There are some areas of caution but those can be addressed without caving to those who want to subjugate regulations to their own interests.

The crux of it is that the Canadian Ruling Class is stifling the start up and the small investor in favour of big business and big finance.

There are three broad aspects to the "crowd" as creators, facilitators and investors. This isn’t carved in stone and there can be plenty of overlap here.

1. Crowd Sourcing where the crowd does the direct creating. An open source game where the crowd itself does the programming, graphics and audio is an example of this.
2. Crowd Funding is where the costs are covered by the crowd by way of donations or pre-purchasing of the game so that the creative team can afford to do the programming, graphics and audio themselves. At the end, the funders have the satisfaction of helping and/or a copy of the game with perhaps some limited extras for having funded earlier or to a higher amount.
3. Crowd Investing is when the crowd actually invests money in the game so that the costs of developing the game are covered and in turn they get a share of the profits from selling the completed game.

Where the above example is for a game, this works for any endeavour that can capture the imagination and support of a "crowd" that is sufficiently large and/or dedicated enough to finance it. It could be a book, a movie, a micro lending institute, a brewery, a better mouse trap, a lunar micro-rover, an artificial intelligence financial advisor app- or to directly address a specific and finite need like building a desalination plant for Haiti where the profit is as much social as financial.

Without the enabling power of crowd funding, millions of great little ideas brewing in the minds of Canadians will never see the light of day or have the chance to grow into amazing big ideas. Billions of dollars and thousands of jobs are going unrealized every day that the government keeps this road-blocked.

The primary stumbling block to this is the professional worrying class and their pathological obsession with the fairy tale of eliminating all risks and downsides. There will be fraud and theft… deal with it. Yes, I mean that literally- deal with the fraud and theft that is inevitable whenever money changes hands. Punishing fraud is a legitimate role of the state BUT it needs to be as rigorous as necessary and not one rule or regulation more. Regulate it so that it can be tracked and when fraud does arise THEN the police step in to investigate and if appropriate they lay criminal charges.

Regulating to placate the worrying class is harmful and immoral as you are actively harming the many for the illusory benefit of the few. It is less damaging to under regulate than to over regulate. The financial mess in the US is not from under regulating but from the fraud being able to hide in the tens of thousands of pages of regulations that the financial institutes themselves "helped" write.

The rules and regulations for crowd funding in the US has set an example we can observe and see where they’ve done things right and where they have gone too far. It is almost axiomatic that they have gone too far since the regulatory bureaucracy devolves to cover their own ass. The regulators won’t get in trouble for the billions that won’t be made but they will get in trouble for letting even the most minor of frauds to take place. It is hard to overstate how important it is that these bureaucratic tendencies be held in check.

One plus in the Canada column is that each province has its own financial regulatory body which means you don’t have to convince both Alberta and Quebec that working hard, taking chances while creating wealth and jobs is a good thing. With different approaches to the opportunity we can have the best ideas rising to the top and be adopted by the other provinces… or the politicians will play politics and stick to their ideology no matter how many times it is proven wrong.