1 Aug 2014

New equity crowd-funding platforms

6:58 am on 1 August 2014

New Zealand investors will soon get their first look at two new equity crowd-funding platforms, designed to make it easier for small and start-up companies to attract investors.

The Financial Markets Authority has issued its first two equity crowd-funding licences to PledgeMe and Snowball Effect. Their online trading platforms are expected to launch about the middle of August.

The main difference between the companies offering equity on crowd-funding platforms and those on registered markets, like the NZX, is the level of disclosure required.

Director of compliance at the Financial Markets Authority, Elaine Campbell, said the equity crowd-funding licence is a complement to the FMA's peer-to-peer lending service licence, with a few differences.

While there is a lower threshold of disclosure for crowd-funded companies, there are some offsetting advantages to reduce the risks for shareholders.

The benefits

PledgeMe chief executive and founder Anna Guenther said shareholders or pledgers took part in the process by getting a link to a campaign, going on through and then pledging to invest.

"So they get to look through all the information that the company provides around what they're doing, when they need the growth funding, see their financials and make a decision based on that information. And then once they pledge then they get to come along for the ride as well and see how the company goes in raising the money they need.

"And also ongoing - how the company is doing once they've raised the money and seeing that insight into a start-up that often people don't see."

The other company to receive a licence said shareholders were not the only winners.

Snowball Effect head of platform and investor growth Josh Daniell said there were benefits for the companies too.

"For companies, this is really a chance to market their products and create some real marketing bang out there in the market, there's going to be a lot of PR around it they're going to get a whole lot of new customers for their products from running the campaign.

"So it's really what comes alongside the cash which makes this a really interesting way of raising capital for businesses and those are the sort of businesses that we want to be working with too - the ones that are here not for the cash necessarily, but also for the benefits that go along with it."

The Financial Market Authority's first and, so far, only peer-to-peer lending service licence was awarded to Auckland-based Harmoney, in July.