Startup News & Analysis

First equity crowdfunding campaign raises $500,000 in 18 hours for digital banking startup Xinja

Dominic Powell /

Xinja

Xinja chief executive Eric Wilson. Source: Supplied

Australia’s first startup to roll out an equity crowdfunding campaign has seen an overwhelming response, raising $500,000 in less than 24 hours from hundreds of retail investors.

The company in question is digital banking platform Xinja, which is hoping to gain the acclaim of being Australia’s first ever “neobank”, providing customers with 100% digital banking services that are not tied to any of the ‘big four’ incumbents.

The company’s equity crowdfunding campaign kicked off using the Equitise platform last Thursday night on the same day the Australian Securities and Investments Commission (ASIC) approved the country’s first seven equity crowdfunding licenses. Within 18 hours, the startup had raised over $500,000, and is currently sitting at more than $750,000 in contributions.

“If I’m honest, the response has completely blown me away,” Xinja chief executive Eric Wilson told StartupSmart.

The raise will be capped at $3 million and will run for three months, although Wilson says the company has the ability to end the campaign before then. He says Xinja has been preparing for the raise for the best part of the last three months, and while the team had hoped the licenses would come through before Christmas, they were ready to go ahead right away on Thursday.

“We’ve always planned to do equity funding, and now we’re literally the first startup to do it. We view it as a way to connect with our customers and give them a chance to own a piece of the company they’re using,” he says.

“We want to make sure the people we work for are both our customers and our owners.”

Wilson estimates the average investment so far has been around $2000 per investor, but the campaign has seen investments ranging from the minimum $250 to the maximum $10,000. This is on par with what companies in the UK have seen, says Wilson.

With great crowdfunding comes greater responsibility

Taking investment from hundreds of retail investors is a bit different to taking venture capital, says Wilson, although he highlights that “everyone’s money is important”. Despite this, he says there’s a greater sense of responsibility for startups seeking equity funding

“There’s hundreds and hundreds of investors — mums and dads, brothers and sisters — some you know, some you don’t. They’ve backed us and trusted us to do the right thing, which is quite a responsibility. It’s our job to not mess this up,” he says.

“You don’t take money from anyone lightly, but we’re very conscious when it’s just normal people like us who may not have millions of dollars.”

Neobanks have been around in markets such as the UK and US for a number of years, and it was only a recent change in the last federal budget that allowed for startup banks such as Xinja to apply for a restricted banking license from the Australian Prudential Regulation Authority. Wilson hopes to gain approval by the end of 2018.

He says Australia is a perfect location to start a neobank, citing the dominance of Australia’s big four banks and “not much innovation” in the sector as reasons why he thinks the market is “asking for” digital banks. Although the sector is in its infant stages, Wilson believes there could be a good number of neobanks in the not-too-distant future.

“I could see four or five neobanks operating in Australia in ten years. If you were running a major bank, you’d be looking over your shoulder,” he says.

The money raised by Xinja through equity crowdfunding will form part of the startup’s $10 million Series B funding round and will be going towards building out its tech platform and mortgage management system.

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Dominic Powell

Dominic Powell is the lead reporter at StartupSmart.

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