Equity crowdfunding websites are taking off in the US, and Australia wants a piece of the action. A movement to give the country’s entrepreneurs a boost has been growing. While equity crowdfunding has been legal there even longer than in the US, only licensed wholesale investors are allowed to participate, while average citizens are barred from doing so. A couple platforms for wholesale investors have popped up, including ASSOB and VentureCrowd.
ASSOB is an “offerings board” that matches investors and entrepreneurs and promotes capital raising campaigns. VentureCrowd lets start-ups pitch and secure funding online from a crowd of investors in exchange for equity in the business.
Sydney-based Artesian, an early stage VC firm, developed VentureCrowd, and plans to launch it this coming February.
“VentureCrowd will democratise the early stage finance sector in Australia in a way that has never been done before,” Artesian managing partner Jeremy Colless says, but it would certainly be more democratic if everyone were allowed to vote.
Colless points out a few key differences between his platform and ASSOB. VentureCrowd is targeted at early-stage startups, whereas ASSOB is more for corporate finance and traditional fundraising up to $5 million. VentureCrowd also has a lower barrier to entry; it doesn’t charge startups a fee to be listed, require them to be registered as a public company, or force them to deal with a large number of shareholders. Shareholder management is done for the startup through VentureCrowd.
As a result, Colless says VentureCrowd will appeal more to early stage startups and be in a better position to capitalize on any legislation that opens up equity crowdfunding to the general public. Until then, he says Australia’s wholesale investors are sitting on $625 billion in assets that VentureCrowd hopes to tap into.
In the coming months prior to launch, VentureCrowd is partnering with Australian accelerators, incubators, universities, digital agencies, and corporate venturing programs. So far, it’s got Blue Chilli, StartMate, Blackbird Ventures, the University of Melbourne, SydVentures, Tank Stream Labs, Vivant, TechBeach, Fishburners, iAccelerate, the University of Wollongong, Slingshot Accelerator, AngelCube and Future Capital on board.
“As individual investors do not have the capacity to assess even a fraction of the startup opportunities that exist in their own region, let alone nationally, they will benefit from VentureCrowd’s partners’ filtered flow of startup opportunities that are subsequently selected to participate in mentor-driven accelerator and incubator programs,” Colless said.
Startups and investors can register their interest in the new platform here.
Following in US footsteps
Under a section of the United States’ JOBS act that passed in July this year, US companies are now allowed to publicly advertise that they are fundraising. This means that for the first time in 80 years, startups were allowed to raise money through crowdfunding in exchange for a stake in their company. Equity crowdfunding, as it’s called, is similar to Kickstarter and Indiegogo, except instead of offering a new product at a discounted price, contributors actually buy equity in the company.
The law opens up a whole new avenue for fundraising, both for startups and average people who want to invest in them. Sites like AngelList, CircleUp, Crowdfunder, and Startup Valley have all jumped on the bandwagon.
Not everyone agrees it’s a good idea, though. Critics worry it could lead to an explosion of Ponzi schemes, and too many investors could hurt startups’ prospects for future funding.
(Editing by Josh Horwitz)