How it works in Canada
Pre-seed and seed money in Canada usually comes from angels, accelerators, early-stage funds and the founders' own network. Cheques are small, the legal budget is smaller, and many rounds use a SAFE or convertible note instead of priced shares. That keeps diligence light, but it does not remove it. A seed investor will still want to see that the company exists, that founders hold their shares and that code belongs to the company.
Most problems found at seed are housekeeping. Founders incorporated in a hurry, issued shares without resolutions, or wrote code before the company existed and never assigned it. A room forces those gaps into the open while they are cheap to fix. A pre-incorporation IP assignment and a ratifying resolution cost little now; the same fix during a Series A, with a US lead watching, costs more and looks worse.
Seed rounds in Quebec often run in French and English, and accelerator programs in Waterloo, Toronto and Vancouver frequently ask for room access as part of intake. Accelerators review the same basics an angel would: incorporation, founder shares and IP. Building the room once, in a simple structure, lets a founder reuse it for each program application, angel group and early fund without rebuilding a folder set every time.
Best data rooms for pre-seed and seed
Our five criteria, re-weighted for this use case, plus a small bonus for providers built around it.
- 1
Ellty ~C$211/mo 9.5 Visit Ellty - 2
iDeals Quote 8.5 - 3
SecureDocs ~C$354/mo 8.4 - 4
Ansarada Quote 8.3 - 5
Firmex Quote 8.3 - 6
Datasite Quote 8.3 - 7
Citrix ShareFile ~C$78/mo 8.2 - 8
CapLinked ~C$423/mo 8.1 - 9
Box ~C$21/user/mo 8.1 - 10
Drooms Quote 7.9
What goes in the data room
- 0101 Incorporation
Certificate and articles, by-laws, initial director and shareholder resolutions, NUANS name search.
- 0202 Founder shares
Subscription agreements, share certificates or DRS statements, vesting terms and any section 85 rollover papers.
- 0303 Shareholders agreement
Unanimous shareholder agreement or founders agreement, with drag-along, tag-along and transfer limits.
- 0404 Cap table
Current cap table with a SAFE or note conversion scenario at the proposed valuation cap.
- 0505 Convertible instruments
Signed SAFEs or notes, side letters, pro rata rights and the 45-106 exemption relied on for each.
- 0606 Founder IP
Pre-incorporation IP assignments, confidentiality and invention agreements, domain and trademark ownership.
- 0707 Financial model
18 to 24 month cash forecast in Canadian dollars, burn rate and planned hires.
- 0808 Grants and programs
IRAP, accelerator agreements, provincial innovation grants and any equity given to programs.
- 0909 Product evidence
Demo, pilot letters, letters of intent and early customer or user data, anonymized.
Canadian rules that apply
Family, friends and business associates exemption
Under NI 45-106, a company can sell to close family, friends and business associates of its directors and officers without a prospectus. Ontario adopted the exemption in 2016 with a signed risk acknowledgement. Keep the relationship evidence and acknowledgements in the round folder.
Start-up crowdfunding (NI 45-110)
National Instrument 45-110, in force since September 2021, lets a non-reporting start-up raise small amounts through a registered or exempt funding portal with an offering document and per-investor caps. Rooms for crowdfunded companies should hold the offering document and portal agreement.
Lifetime capital gains exemption
Shares of a qualified small business corporation can qualify for a lifetime capital gains exemption of C$1.25 million for dispositions after June 24, 2024. Founders and angels care about keeping the company eligible, so tax structure documents are worth including.
Features to insist on
| Data room | Activity log | Dynamic watermarks | Bulk upload |
|---|---|---|---|
| Ellty | Yes | Yes | Yes |
| iDeals | Yes | Yes | Yes |
| SecureDocs | Yes | Yes | Yes |
| Ansarada | Yes | Yes | Yes |
| Firmex | Yes | Yes | Yes |
| Datasite | Yes | Yes | Yes |
| Citrix ShareFile | Yes | Yes | Yes |
| CapLinked | Yes | Yes | Yes |
- Activity log. Per-user history of opens, prints and downloads with timestamps, which you can export for the closing binder.
- Dynamic watermarks. The reader's identity and the date are printed across every page, which discourages screenshots and identifies the source of a leak.
- Bulk upload. Upload an entire set of nested folders at once, with the index numbers kept as they were.
How to set it up
- 1Check the company is properly formed
Pull the certificate of incorporation, articles and organizational resolutions. If shares were issued without a resolution or founders never signed subscription agreements, ask your lawyer to paper it now with ratifying resolutions.
- 2Get every founder to assign IP
Each founder signs an assignment of anything built before incorporation, plus a confidentiality and invention agreement going forward. Add assignments from any contractor or student who wrote early code. Keep the signed copies in the room.
- 3Model the conversion
Show what each SAFE or note converts into at the next priced round under realistic valuations. Angels ask for this first, and it exposes stacked caps or most-favoured-nation clauses that need fixing.
- 4Keep the room to ten folders or fewer
Seed investors do not have time for a 300-file room. Put the essentials in clearly named folders, and keep anything sensitive, such as user data, out of the room until it is asked for.
- 5Track interest and follow up
Use the activity log to see which angels opened the cap table or model and for how long. Follow up with the engaged ones first, and close access for anyone who passes.
Common mistakes
- Writing code for months before incorporating and never assigning it to the company.
- Issuing SAFEs with different caps and discounts and not tracking the combined dilution.
- Relying on the family and friends exemption for people who are only social media contacts.
- Putting raw user data or health information in the room when anonymized samples would do.
FAQ
Do we need a data room for a SAFE round?
A simple one, yes. Even for a SAFE, an angel group or seed fund checks incorporation, founder shares, IP and the cap table. A small, tidy room saves a week of email and shows you can run the company. It also becomes the starting point for your Series A room.
Which prospectus exemption do seed rounds use?
Most rely on the accredited investor exemption for angels and funds, and some add the family, friends and business associates exemption for people close to the founders. Each needs a Form 45-106F1 filing within 10 days. Keep a list of investors with the exemption used for each.
What do seed investors in Canada most often reject a company for in diligence?
Founder IP that was never assigned, messy share issuances and undisclosed SAFEs or side deals. These are rarely fatal, but they delay closing while lawyers fix them. Sorting them out before you open the room avoids losing momentum with the investors who are ready to sign.