Published on the 03/02/2015 | Written by Clare Coulson
Equitise is the fourth equity crowdfunding platform to be launched in New Zealand since April last year – a boon for the start-up sector, but not without its risks…
Four equity crowdfunding platforms have been established in the past nine months following changes to the Financial Markets Conduct Act which opened up this new style of fundraising as part of the government’s business growth agenda. These crowd-sourced fundraising platforms enable a new, more agile way of capital funding, particularly good for our start-up economy. Equitise is the latest offering to launch, with the other three being PledgeMe, Snowball Effect and Crowdcube (although the latter’s website does not appear to be operating at present).
Sue Brown, a partner with DLA Phillips Fox with a background at the Financial Markets Authority, says the aim of the law changes was “to get the atoms buzzing at the small end of our financial markets to help businesses develop and grow”. She says the new platforms are now opening up capital growth opportunities to companies that would have been too small to raise capital using traditional methods. “They will appeal to those who want to invest in shares in a more agile, tech savvy, way. The risks remain the same though – if the company fails, shareholders get paid out last,” she says.
She expects that the types of businesses using the new platforms will likely be smaller and often more speculative than businesses raising capital through NZX main board and investors or through the new NXT market. Investors will also get less information about the offer. “So they shouldn’t buy shares unless they can afford to lose their investment,” she warns.
Blair Galpin, senior equity analyst at Forsyth Barr, agrees, saying: “It is opening up a new avenue for investors but at the same time exposing them to a much earlier stage of a business or idea which has its risks.”
He adds that the key to success for each platform will be to demonstrate success with its model across multiple proposals and to differentiate itself from its competitors with the type of investment opportunities it puts forward. While internationally the model is sound, he is concerned that there are too many providers in the New Zealand market “at least at this early stage”, although Brown thinks there is plenty of opportunity for new entrants.
According to the details released at its launch Equitise is differentiating itself with a more “serious” capital growth-style, business-focused approach, unlike some of the other platforms which mix equity funding with campaign-style funding. That said, Brown notes that its first offer of shares in Tourism Radio NZ, led by technology entrepreneur Aaron Ridgway, looks similar to others that have already been made through other platforms – “the proof of the pudding will be in the eating”.
Investments through the equitise.co.nz online crowd-platform start at $500 and the company expects to have an Australian branch of the business operating by June 2015.
