Frequently Asked Questions

Answers to some frequently asked questions about investing with Brightspark. Can't find what you're looking for? Contact us and we'll be happy to help.

Investing with Brightspark

Simply use your free investor account to access our investment opportunities online. Every time we invest in a new early-stage company, you will have the opportunity to invest alongside us and our network of investors. You can review details of the investment on our online platform, click “I’m ready to invest”, enter the amount and transfer the funds online.

At this time, only those that qualify under the Canadian accredited investor exemption (see below) can invest with Brightspark. This restriction applies to both “deal-by-deal” investments, and the Brightspark Canadian Opportunities Fund.

In Canada, individuals that want to invest in private companies under the accredited investor prospectus exemption must meet one of the accredited investor definitions.

A few of the most common definitions are:

  • An individual who, alone or together with a spouse, owns financial assets worth more than C$1 million before taxes but net of related liabilities
  • An individual, who alone or together with a spouse, has net assets of at least $5,000,000
  • An individual whose net income before taxes exceeded $200,000 in both of the last two years and who expects to maintain at least the same level of income this year
  • An individual whose net income before taxes, combined with that of a spouse, exceeded $300,000 in both of the last two years and who expects to maintain at least the same level of income this year
  • An individual who currently is, or once was, a registered advisor or dealer, other than a limited market dealer.

Not sure if you qualify? Check with the Ontario Securities Commission

Yes. The company you invest through must also fit under the accredited investor exemption.

The minimum investment is $10k per company. The average individual investment size is $35k-$50k. When deciding how much to invest in a deal, take into consideration that we suggest diversifying your risk by investment in multiple deals.

Every time Brightspark invests in a new portfolio company, we create a single purpose Limited Partnership fund. Accredited investors in our network can invest in the fund, which in turn invests in a target company.

Fund: The fund invests capital in a company. In return, it and receives and owns securities (usually preferred shares) of the company. Every fund has a unique name corresponding to the name of the target company.

Company: The company in which the Brightspark fund will invest the capital.

Limited Partners: The individual investors in the fund. Brightspark’s Managing Partners also invest in the fund, and are Limited Partners of the fund.

Units in the Fund: Every dollar you invest gives you one unit of the fund, and your number of units determines the percentage of your ownership of the fund.

Securities: In exchange for capital, companies provide securities to the Fund. In our case, securities usually take the form of preferred shares in the company.

Fees: A small portion of a Limited Partner's’ investment is applied to fees. A management fee (1.5 to 2% per year for the first 3 years) goes to Brightspark and is used as a compensation for board seating, due diligence, legal paperwork. An admin reserve fee (one-time 2.5 to 4%) covers external out-of-pocket fund expenses such as legal fees, tax and accounting costs.

Usually, Brightspark negotiates rights such as tag along, drag along, and anti-dilution for every investment. Most of our investments are in preferred shares with standard VC terms. We also negotiates for pre-emptive rights – which means that as an investor, you get to invest more if you choose very successful companies in subsequent rounds.

Most of your investment is invested in the company. The rest is applied to fees:

Management fees (1.5 to 2% per year for the first 3 years): Goes to Brightspark and is used as a compensation for Board seating, due diligence, legal paperwork, etc.

Admin Reserve (one-time 2.5 to 4%): Reserved for external out-of-pocket fund expenses (legal fees, tax and accounting costs).

Note: If a company is sold, 100% of your contributed capital will be returned to you, including any fees you paid.

Brightspark receives a small fee from investors to cover some of its overhead (see above), as well as a 15% carry from profit.

This means that Brightspark only really makes money if investors make money. Brightspark is not paid for “financing a deal” like many other financial dealmakers – Brightspark is completely aligned with its investors to focus on profit from deal exits.

We currently invest approximately 5 to 7 times per year.

All companies are vetted thoroughly through the Brightspark due diligence process. We commit to only invest in what we think are the best early-stage companies in Canada. This means that the investment cadence may vary, depending on the quality of the deal flow we are seeing.

A liquidation event (such as an acquisition or IPO) can take anywhere from a few months to several years – the industry average is 7 years. Just like a fine wine, you should expect your investment to slowly age over time before achieving its full potential.

When there is a liquidation event (the company is sold or becomes public), the fund receives the proceeds of the exit, which is calculated based on its ownership in the company at that time.

Brightspark returns 100% of the limited partners’ initial contribution first, and distribute 85% of the remaining profits to them (considering pro-rata). The remaining 15% of profits goes to Brightspark as carried interest.

Disclaimer: Exits can take a long time, usually 5-7 years. Investing in early-stage companies is very risky, and returns are not guaranteed - learn more.

Venture capital is considered a high-risk investment and a return is not guaranteed. You will only get money if there is an liquidation event.

Loss of an your entire investment is possible, and can easily occur. Moreover, the timing of any return on investment is highly uncertain. Therefore, you shouldn’t invest any money that you cannot afford to lose.

A good way to manage this risk is to diversify across a few investments. A general rule of thumb is that roughly a third of the companies you will invest in will fail and return and return little to no capital, some will make a decent return and some will return 10x or more, making up for the losses on others.

For each investment, you will receive a T5013 - Statement of Partnership Income by March 31st of every year.

The tax treatment on your investment and gains will be calculated on a case-by-case basis. Typically, gains are treated as capital gains. Your investment might be eligible for the small business exemption

We recommend that you talk to your tax advisor for more information.

Yes, Brightspark’s partners invest their own money in every company, and Brightspark acts as General Partner.

Brightspark is an active VC investor. Typically, a Brightspark partner sits on the board of directors of portfolio companies, meets regularly with the management team, and works closely with the CEO.

You will not have a direct line to the company - Brightspark usually takes a Board seat and follow the company closely - meeting and speaking on at least a monthly basis. This approach benefits the company, who doesn’t have to manage multiple Limited Partners. Occasionally, the Brightspark team will make connections that they think will be beneficial to the company.

You will receive detailed Quarterly reports that include update on the company as well as Brightspark’s insider outlook.

Brightspark usually takes a Board seat and follow the company closely - meeting and speaking on at least a monthly basis. We issue quarterly reports to LP investors so they can track the company’s progress. Your reports will be available online.

Brightspark often shares its investments with top VCs in Canada and the US, and is often part of a larger VC syndicate. This gives our individual accredited investors access to deals that were previously only available to institutional VCs.

Because Brightspark usually invests at an early-stage, companies will often raise additional funds in their lifetime - these are referred to as follow-on rounds. A new round of funding increases the value of the company.

As a Limited Partner in the fund, you will have the opportunity to invest additional capital before any new investor if Brightspark participates in a follow-on round. That’s because when we initially negotiate the terms of the investment, Brightspark ensures that the fund has protective and preemptive protections to allow them to do so.

...investing in a company as an angel investor?

  • You will not own any direct equity in the company. Rather, you will own units in a Limited Partnership Fund.
  • Your investment will benefit from venture capital terms, giving you preferred terms and protective provisions.
  • Your investment is professionally managed by venture capitalists. Brightspark usually take a board seat, and we dedicate our time to ensure that the company–and your investment– grows to its maximum potential.
  • There is no membership fee to join our network, and we never charge the company.
  • We provide professionally crafted quarterly reports to investors.

...investing through an equity crowdfunding platform?

  • Brightspark investments are available to accredited investors only.
  • You will not own any direct equity in the company. Rather, you will own units in a Limited Partnership Fund.
  • Your investment will benefit from venture capital terms, giving you preferred terms and protective provisions.
  • Your investment is professionally managed by venture capitalists. Brightspark usually take a board seat, and we dedicate our time to ensure that the company–and your investment– grows to its maximum potential.
  • There is no membership fee to join our network, and we never charge the company.
  • We provide professionally crafted quarterly reports to investors.

Get funded by Brightspark

We specialize in software, mobile, and Internet companies with a strong focus on repeat entrepreneurs. We look for portfolio companies with significant upside – meaning market leaders that have the potential to have a 5-20X return on money if they are very successful.

To ensure only the best exit potentials for our investors, we stick to our very high standards of selection. In fact, less than 1% of the companies we meet make it to our portfolio

And while, our investments tend to cluster around tech, consumer, hardware, and SaaS, that’s not where our curiosity ends. Get in touch if you’re building something different - we still want to hear about you and your vision!

We usually invest at the pre-series A stage. Our perfect middle ground is a company that has already delivered a product to market and has some customer feedback. We don’t want to always take a risk in whether the market will like the idea, and at the same time, we prefer not to pay the higher price associated with scale-up financing.

Our investments are at a stage where companies have very positive market feedback, and need to finalize a few things: exact pricing, finesse the sales process, determine the exact cost of sales etc.

Typically, our investments range anywhere between $500k to $1.5m.

Not at this time.

Due diligence and term sheet

Brightspark’s investment team source deals, conduct due diligence, and negotiate term sheets with entrepreneurs in the same process traditional venture capital funds do.

Our network is not involved nor aware of that part of the process. No one in our network is informed that we are looking at an investment opportunity before the term sheet is signed.

The closing

Once the term sheet is finalized and agreed upon with the company and other co-investors, we open the opportunity to our network.

This happens at the same time as the Brightspark investment team finishes the financial, legal, and technical due diligence. While the legal documents are being drafted, investors in our network are given a predetermined timeframe to confirm their participation in the investment.

During this process, we collect the funds from investors and close the Limited Partnership prior to closing the single-purpose fund with the company. The shareholder of your company will be “Brightspark MM-YY L.P”.

Once the investment is closed, Brightspark will wire the funds to you as per agreed in the term sheet.

Brightspark shares information about your company and the investment round in order to explain the opportunity to our network. You should discuss what information you feel comfortable sharing with your us in advance. The information is organized in three levels depending on its nature:

Level 1: Public information

This information will be used to notify our network of the investment and can be posted in the notification email, in our newsletter, and on the homepage of our website.

This information includes your logo, a short description of the company, as well as the names and pictures of the management team.

Level 2: Investment information

This information is used to educate our investors on the investment opportunity. It resides on the password-protected area of our website, in private email communication with select investors in our network, and includes the pitch video posted on our private YouTube account.

This information is similar to the one used in pitch meetings (your product, market opportunity, competition, strategy, use of funds), and details on the investment (why Brightspark is investing, high-level terms, who the co-investors are in the round). Every piece of information at this level is accompanied by a confidentiality disclaimer. At this level, no detailed financial information or “secret sauce” is shared.

Once the round is closed, the details of the investment will be stripped from our website and only high-level, public information will stay published.

Level 3: Highly confidential information

Information such as financial metrics, competitive data, results of our due diligence process, etc. will not be openly shared with our investor network.

In special circumstances, Brightspark investors might request more information about the company to inform their investment decision. On a case-by-case basis and with your permission, we share certain due diligence information with select investors after they have signed an NDA.

These documents are hosted on a secure, private network in an application called OneHub. The documents are watermarked, set to “view only” (meaning that no one can download or print the documents), and the ability to take electronic screenshots is disabled.

Our network of investors is comprised of Canadian high-net-worth individuals. Most of these individuals have a background in business or tech, and an interest in investing in early-stage companies. Some are sophisticated startup investors, and most are somewhat new to startup investing.

All investors are vetted by Brightspark for accreditation at the time of investment.

In general, individuals in our network are simply driven by a return on their investment, and are not looking to be actively involved in growing the company. We have found that this benefits our portfolio companies, who appreciate having a network of investors they don’t necessarily need to manage.

Exceptionally, when we see value and all parties agree, we will connect our investors with our portfolio companies. For example,  some of the investors in our network are executives in large CGP companies who can provide guidance and meaningful connections to entrepreneurs selling in that space.

You will also have the opportunity to connect with the network and the LPs in your company at exclusive Brightspark events such as our annual AGM and investor meetups.

Start by reviewing our manifesto to see if there’s a fit. We highly recommend that you find a reference in your network that we know so they can introduce you directly - we value referrals from people we know and trust. A direct referral will get a quicker response, but don’t be afraid to email us yourself by contacting Eleonore at eleonore@brightspark.com