Startup News & Analysis

Australia’s first equity crowdfunding raises finalised as neobank Xinja pockets $2.16 million from investors

Dominic Powell /

Xinja

Xinja chief executive Eric Wilson. Source: Supplied

Australia’s first equity crowdfunding campaigns are now in their final stages, with founders saying the response from everyday investors has exceeded expectations.

The financial watchdog dished out seven financial services licenses in January, paving the way for Australian companies to raise money through equity crowdfunding for the first time.

Digital “neobank” Xinja announced yesterday its equity crowdfunding campaign had broken through the $2 million dollar mark with three days left to go, continuing a strong run for the fintech after its campaign raised $500,000 within 18 hours of launching on crowdfunding platform Equitise.

While it’s still waiting on its banking services license, Xinja’s goal is to be Australia’s first digital bank, providing users with all the services of a typical bank, even mortgages and loans, without being tied to any of the “big four” incumbents.

“We didn’t know what to expect, to be honest. We’re the first equity crowdfunding campaign in Australia and the first neobank in Australia, so that’s two unknowns,” Xinja co-founder Camilla Cooke told StartupSmart.

“We thought initially we’d get $500,000 to $1 million, as the only thing we had to go on were historic fundraises in the UK and some insights from Equitise as they operate in New Zealand. It was a bit of a stab in the dark.”

Xinja’s raise is currently sitting at $2.16 million and is set to close on Saturday evening. The results have “delighted” the founders, who say the process was highly rigorous, but straightforward.

Xinja co-founder Camilla Cooke. Source: Supplied.

The average amount contributed by investors was also much higher than expected, coming in at around $1850, with the minimum contribution being $250 and the maximum being $10,000. Seventy percent of investors contributed less than $1000 to the raise though, with a number of sophisticated investors coming in at the higher end to boost the average.

Cooke says this indicates not only an appetite for retail investors to get involved with unlisted startups, but an overall appreciation from the general Australian public of the impact of startups on our economy.

“The overwhelming response we received showed that investors were aware the banking laws were changing, and they were keen to dip their toe in a banking startup,” she says.

“Such a strong and warm response indicates that the public here do recognise the role startups play in the economy and the potential value of them. They just haven’t had access to investing like this before, so I don’t see why this couldn’t be brought on in any other industry.”

However, Cooke says it’s essential that investors fully understand the process. While startup investing can mean high returns, such investments can be high risk, and Cooke warns investors to be critical and founders diligent.

$300,000 for sportstech company

Another equity crowdfunding campaign was also recently completed, with Australian sportstech company Revvies raising $300,000 through crowdfunding platform OnMarket. The company creates small dissolvable caffeine strips for athletes and students.

The company had 239 investors who contributed to the $300,000 figure, with a similar minimum of $250, and an average investment amount of $1225. The campaign ran for 36 days.

“We were very excited to use equity crowdfunding through OnMarket to raise capital for our business. The beauty of accessing the crowd is that our new investors will now become our endorsers, our influencers and our advocates,” Revvies founder John Nolan-Neylan said in a statement.

“We found that equity crowdfunding to be a great way to build brand awareness for Revvies, and an exciting new alternative to the more traditional ways small companies like us would normally raise capital.”

While equity crowdfunding is being viewed as an alternative to avenues such as venture capital, Cooke says Xinja sees it as complementary, as its $2.16 million will contribute to an overall Series B raise of around $10 million.

“In some ways, this was easier than VC funding, but I would think a lot of startups doing equity crowdfunding will be looking at mixed fundraising strategies,” she says.

Xinja is currently rolling out its own prepaid debit card for its early waitlist members, which will be tied into a recently launched app for iPhones that will allow users to load and manage funds on the card. The bank is also looking at rolling out a home loan offering this year, along with full transactional banking once it receives its license.

One caveat of pursuing equity crowdfunding for startups is the additional diligence and reporting requirements that come with being an unlisted public company with numerous shareholders.

Cooke notes this is something Xinja “feels the weight of”, but says the fact the startup operates in the highly regulated financial services space set it up well for the stringent requirements of equity crowdfunding.

“To become a bank we have to subject ourselves to the same regulation as banks, and those are even set to tighten rather than loosen. We’ve had a level of diligence and scrutiny already from the regulators,” she says.

NOW READ: Melbourne brewer Sample to launch equity crowdfunding campaign on Birchal to “give back to consumers”

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Dominic Powell

Dominic Powell is the lead reporter at StartupSmart.

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