Published on the 23/03/2015 | Written by Beverley Head

New Zealand has been identified as a “stand out” performer on the Digital Evolution Index, while Australia is stalling its start-ups’ growth with restrictive crowdfunding laws…

Although equity crowdfunding is again in the spotlight in Australia, thanks to VentureCrowd and Sydney Angels joining forces, it’s still a stop gap solution until legislation catches up with New Zealand’s more progressive laws.

At present, while crowdfunding is permitted in Australia – equity crowdfunding, where an investor receives a slice of the company in return for their investment – is limited to sophisticated investors using specialist investment platforms such as that offered by VentureCrowd.

Australia’s start up landscape is still lagging many other developed nations, while New Zealand is streaks ahead. Legislation that effectively penalises start-ups for offering employee share ownership plans has yet to be overturned in Australia, and the country has yet to legislate to allow retail-level equity crowd-funding as is now allowed in New Zealand, the US and UK.

The Digital Evolution Index (DEI), created by the Fletcher School at Tufts University, scores countries for their performance in a broad range of areas including transactions infrastructure, consumer behaviour, internet and social media savviness, funding and entrepreneurial ecosystems and legislation and regulatory landscape.

The most recent index which was published last month identified New Zealand as a “stand out” performer for digital evolution, while Australia was placed in the “stalling out” sector.

Tim Heasley of equity crowdfunding organisation VentureCrowd said that the New Zealand regime was “very liberal, very laissez-faire” compared to Australia. The benefit of that approach is paying out for Kiwi firms. In February Kiwi drone maker Aeronavics raised NZ$1.5 million in a week using the Snowball Effect crowdfunding platform and today Kiwi wine-maker Invivo set a new equity crowdfunding record on the same platform, reaching NZ$1.53 million by 5.20pm.

Heasley said that reforms to Australian crowdfunding legislation would be a gamechanger for the Australian start-up community, but rather than wait for the Australian government to act, VentureCrowd has established an alliance with Sydney Angels to provide top-up funding for start-ups. VentureCrowd has a special ASIC licence allowing it to court investment from around 400,000 sophisticated investors and high net worth individuals and has already conducted five deals with wholesale investors. The new partnership should help surface a raft more candidates which have been vetted by Sydney Angels and appear ripe for investment.

David Jackson, Sydney Angels committee member, said that the deal with Venture Partners “brings another form of investment and allows the ecosystem to grow”. But he said that beyond the sophisticated investors now able to use platforms such as VentureCrowd there were “mums and dads” interested in risking a few percent of their investment or superannuation portfolio on high risk sectors.

“The quicker the government regulates correctly the better,” he said. “Australia is riven by mediocrity and doesn’t take enough risk and that’s stifling the start-up community.”

On the other hand, the Australian stock exchange is still seen as an excellent capital raising vehicle by some New Zealand companies. Kiwi Martin Aircraft Company for example last year held a pre IPO funding round in Australia, followed by an IPO on the ASX earlier this year, settling on Australia’s bourse rather than one of the New Zealand or international exchanges.

According to CEO and managing director Peter Coker; “Going to Australia meant that we could tap into new investors. When it came to listing we know we wanted to tap retail rather than institutional investors because we are pre-revenue.

“We could have done that in New Zealand but the volume is lower.”

He said that a listing on the US Nasdaq would have taken too much resource and effort at this stage in the company’s development.

“The ASX was the best-of-all-worlds opportunity for the present,” he said.