On Tuesday Birchal, the country’s biggest equity crowdfunding player, hit $3 million for its own raise over the course of a lunch break.
Birchal achieved its goal on its own platform in one hour and three minutes — the second fastest in Australian history.
But co-founder and managing director at Birchal Matt Vitale says it’s just the beginning of its plans to build Australia’s “first equity crowdfunding ecosystem.”
Amid the meteoric growth of retail crowdfunding in Australia, the local leader says it wants to make SMEs and startups part of the mainstream suite of investment options open to retail investors — and sophisticated investors too.
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Birchal raise to build ‘equity crowdfunding ecosystem’
Tech investor Dom Pym led the round following on from earlier investments that brought his total funding to $1 million.
The remaining investors came in through Birchal’s expression of interest process, including a broad mix of retail and wholesale investors.
Vitale said while the fast result was a great outcome, “it’s not about breaking records for us”.
“Closing the offer quickly has meant we can get back to supporting our clients as soon as possible,” he said in a statement following the raise.
The practice became legal in 2018, and Australia now counts 15 platforms with financial services licences that allow companies to raise a maximum of $5 million a year.
However Birchal remains the biggest name in the space by a wide margin, claiming it has helped more than 130 companies raise over $100 million since 2018.
High profile raises include Zero Co, which raised $5 million in six hours last year, and Bubble Tea Club which raised $1.7 million from 1399 investors.
And according to its internal data the September 2021 quarter was the biggest the Australian industry has seen, with a total of $19.5 million raised across 24 successful deals.
This is up 110% compared to the same period last year and also almost two thirds of the $30 million raised via equity crowdfunding in the whole of 2020.
Establishing SMEs and startups as a ‘mainstream asset class’ for retail investors
Vitale says the raise will help build out the infrastructure required to attract even more retail and sophisticated investors to Australia’s startup landscape.
“We feel that startups and SMEs are able to be offered to retail investors now, for the first time at scale through equity crowdfunding,” Vitale explains.
This is the first time the infrastructure has existed for retail investors to be part of the success of startups and SMEs.
Not only that, it’s helping promote “thinking about (startups) as an asset class, something that they can invest in to build wealth,” he says.
But to truly bring crowdfunded investing into the mainstream as an asset class, Vitale accepts it needs to be made more accessible — as well as safer for the average retail investor.
“We feel we’ve got a really compelling solution in equity crowdfunding, and we’ve proven over the last few years that it is efficient, cost effective, and really successful [way] for companies to raise capital,” Vitale says.
It’s why Birchal is building out an ecosystem that will integrate stakeholder communication infrastructure, along with other consumer protections, into an equity crowdfunding platform.
“Asset classes need the ability for people to exit their positions,” Vitale explains, which includes secondary trading as well as “really good tools and resources” for consumers.
“So investors can research opportunities, but also companies can communicate with their shareholders and update them on their progress in a timely way,” he says.
Vitale says Australia is already well placed with existing regulation, which caps investment at $5 million per company.
Other rules require Australian companies to provide a regulated disclosure document that isn’t needed in the UK and similar wealthy countries that have seen a surge in interest around equity crowdfunding.
This is a good thing in that it has “promoted some standardisation and more transparency of how these offers are presented to investors” that will bolster consumer protections as the sector grows.
Vitale says he’s excited to see how the funds will help scale the existing opportunities for both emerging companies and consumers.
“We firmly believe that this is the way of the future for early stage companies. And you know, a really great thing that Australia has now.”