What an end to the year. The equity crowdfunding platform I co-founded, PledgeMe, just had the largest ever public equity crowdfunding campaign across Australia and New Zealand with Puro raising $4 million from the New Zealand public and wholesale investors. Overall we’ve seen $50 million raised in the equity crowdfunding space across Australia and New Zealand in 2019, and I have a feeling there will be more to come in 2020.
We’ve seen firsthand how equity crowdfunding is helping those who traditionally may have struggled to gain access to capital to tap into their crowd. These are businesses that have already proven successful to their loyal customers. And if I was a betting type, I’d wager we’ll see people from more diverse backgrounds in 2020 activate their networks through equity crowdfunding.
This will include the first Indigenous campaign in Australia, and even more women. Whereas just three percent of venture capital money in this country, and globally, is allocated to female-led businesses, in the rest of our sector 38% of campaigns have been female focused. On PledgeMe that figure rises again to 56%.
I expect to see more crowdfunding campaigns for all or nothing issues, like climate change. The community is already engaged and willing to support genuine solutions for the world’s biggest challenges. While the media still gives airing to dissenting views on its existence, and government interventions move slower than the melting ice caps we’re seeing, it will be up to individual initiatives to help.
Growth in regions
Businesses in regional areas are further away both geographically and demographically from your average VC funded company. But as public sentiment towards ethical businesses rises, so does the chance for those already making an impact on sustainable business practices: those often found in more remote areas.
We’ve already seen a biodynamic farm in Atherton, Queensland, and an ethical milk farm in Congupna, Victoria, raise over $1 million this year. Expect that pool of businesses to broaden next year.
Despite passing the two-year milestone in Australia, there is still work to be done to spread the potential for equity crowdfunding for smaller businesses.
You don’t need to be a tech startup aiming for 10x growth to get funding. Most of the businesses we’ve seen be successful are often in niche areas and have already seen success through sustained growth. These businesses need investment to get to the next level, whether that’s acquiring assets to improve production or increase the size of the team. The biggest success factor that we see is the company has a crowd that loves what it does.
The industry needs to raise awareness of what is involved for investors too. Equity crowdfunding is an option for those who would like to have interaction with the people they’re investing in, rather than a faceless stock market bet.
On a few campaigns this year we’ve run into trouble because of the tight regulations in Australia, compared with the more laissez faire approach in New Zealand and the UK, which the Australian framework was modelled on.
Every time you share an equity crowdfunding campaign, you are required to share a reference to the risk warning statement and offer document, even though when you go to the platform to pledge, the same warning must be seen prominently on every page. And during your signup process investors are required to confirm they have read and understand the warning. Yes, we need to be clear, but why do we, as those running the campaigns, have to use up half of our Twitter limit?
Extending campaigns because of technical issues is still a major headache, when it doesn’t need to be. Those raising through a prospectus are allowed to extend deadlines, but for some reason this is a definite no-go for equity crowdfunding campaigns. This issue needs to be looked at to address this disparity between how the two are treated in my opinion.
This year there was over $15 million raised on the PledgeMe platform. This is an increase of 30% from last and there are still campaigns to finish. We’re expecting this figure to grow by 50% next year with the rise of social enterprises that give back to the communities in which they’re forged. The talk in the startup world of zebras rather than unicorns started a few years back and has been gaining momentum. Sustainability is taking centre stage.
We’re already seeing movement towards purpose in business at the highest levels. In August this year, the US Business Roundtable, which is made up of chief executives of 181 large companies, stated the primary focus for companies is no longer only shareholders. Rather, companies should also benefit customers, employees, suppliers and communities. It was the first time the group had looked beyond pure capitalism for its raison d’etre.