Published on the 12/01/2016 | Written by Donovan Jackson
Researcher Juniper said crowdfunding platforms will deliver a sevenfold increase in technology investments within 5 years; local operator describes NZ performance as world-leading…
In its latest research, Crowdfunding: Strategies & Impacts for Technology Markets 2015-2020, Juniper estimates that investments made in technology via crowdfunding platforms will grow from an estimated $1.1 billion in 2015 to $8.2 billion by 2020. Meanwhile, local crowdfunding platform Snowball Effect said New Zealand has already outperformed other territories in its first year of equity crowdfunding offers.
Juniper said the crowdfunding industry is to see an accelerated growth from the lucrative, but less well-known, method of funding known as ‘equity crowdfunding’. It said this is against an investment market which is currently seeing a slowdown in traditional investments from venture capitalists and angel investors.
The new research identified the UK as the leading market for the regulation of equity crowdfunding, with the establishment of successful platforms such as CrowdCube.
Juniper said it believes other nations will follow this model by legislating to allow less sophisticated investors to engage in equity crowdfunding. It said the US in particular holds considerable promise, with the positive SEC (US Securities and Exchange Commission) ruling on the JOBS Act, Title III passed in October 2015. The result of which will be a surge in equity funding from 2016 onwards; as funding portals seek registration as early as January 2016.
There’s no shortage of equity crowdfunding platforms in New Zealand, with the number of operators including Snowball Effect, Equitise, LiftOff and PledgeMe.
Snowball Effect founder Josh Daniell said New Zealand had a better first year of equity crowdfunding than any other country in the world on a per capita basis. “We’re off to a good start [and the country] has a relatively liberal regulatory framework which helps.”
He described the local market as ‘highly curated’, “resulting in a success rate of over 85 percent. This is much higher than the success rate in other parts of the world; we want to attract high quality investors, so we need high quality product on the marketplace.”
Daniell described interest from the tech sector as ‘good’, with offers on Snowball’s platform including Aeronavics, CarbonScape, and Breathe Easy.
The ‘Reward’ Crowdfunding model, popularised by the likes of Kickstarter and Indiegogo, said Juniper, has been the most widely adopted, but has suffered recently following a number of high-profile failures, such as the Zano drones debacle.
In response, Juniper said platforms are beginning to look at more hybrid crowdfunding models, whereby users have the option of investment in the company or project itself via equity or debt, rather than receiving a one off ‘gift’ for their support courtesy of the rewards model.
Juniper’s whitepaper, Following the Crowd: Investment through Equity Funding, is available to download (registration required).
