Launch Capital
July 16, 2026
The short answer: A private placement is a sale of shares or other securities directly to selected investors instead of to the general public through a prospectus. Most startup funding rounds are private placements. They are faster and cheaper than going public, but Canadian securities rules still apply, so you need to follow them carefully.
A public offering requires extensive disclosure, regulatory review and ongoing reporting. A private placement lets a company raise money from a defined group of investors with far less process. That is why seed rounds, venture rounds and most growth capital financings are structured this way. Founders keep more control over who joins the cap table and can often close in weeks rather than months.
Private placements usually involve investors who can evaluate the risk or who qualify under securities rules, such as institutions, venture capital firms, family offices, and certain individuals. The rules that determine who may invest, and how you may approach them, are specific and they change over time. Do not assume that an investor's enthusiasm means they are eligible to participate.
Because the offering is private, how you market it matters. Broad public advertising of the round can create problems. Founders generally rely on direct conversations, introductions and targeted outreach to investors who fit. Keep a record of who you spoke with and what you sent them. Good records protect you later.
Even without a prospectus, you are responsible for what you tell investors. Statements that are misleading or leave out important facts can create liability. Describe risks plainly, avoid promising returns, and label forecasts as estimates. Many founders find that candour also builds trust, which helps when they return for the next round.
Closing is not the end of the paperwork. Companies often have to make filings after a distribution, keep the share register current and meet obligations to shareholders. Missing a filing can be awkward at the next financing, when a new investor's lawyer reviews your history.
Canadian securities rules apply to private placements, and they differ by province and by the type of investor. Speak with a qualified securities lawyer before you approach investors, not after. A short conversation at the start usually costs far less than fixing a mistake later. Your accountant can also advise on the tax side of issuing shares.
Launch Capital is a Toronto venture capital firm and family office that provides growth capital to Canadian technology companies. Our team is made up of operators who have built and exited companies. If you are preparing a private placement, Send us your pitch. It takes two minutes and no deck is required.
