While many in the startup sector were disappointed by the lack of innovation-centric policies in Tuesday’s budget, the federal government’s move to extend its crowdsourced equity framework (CSEF) to proprietary companies has brought a sigh of relief.
The Corporations Amendment (Crowd-sourced Funding) Bill 2016 passed through the Senate in March, but at the time was shadowed by concerns about its capacity to benefit the startups that need it most.
“This bill locks out so many people that even the small business ombudsman, Kate Carnell, said it would make more sense to wait for the changes to accommodate proprietary companies,” Shadow minister for the digital economy Ed Husic previously told StartupSmart.
In March, Husic and FinTech Australia went head-to-head on the bill, with Husic accusing FinTech Australia of staying quiet about the number of companies locked out of the funding arrangements due to the scope of the legislations.
However, in Tuesday’s budget papers the government has committed to extending the reach of the framework, with $4.5 million to be delivered to the Australian Securities and Investments Commission (ASIC) to implement the program. This will help “individuals make small financial contributions to a company in exchange for an equity stake” in proprietary companies, the government says.
Speaking to StartupSmart today, FinTech Australia chief executive Danielle Szetho said the extension of the CSEF scheme to private companies is “terrific” and will enable a wider range of startups and small businesses to access capital through retail investors and innovative fintech platforms.
In the coming months, Szetho says her team will be engaging FinTech Australia members and working with the ASIC to ensure a “world-leading framework for equity crowdfunding” is brought to life.
“We’re taking some time to review that framework now,” she says.
Szetho says a key focus will be to “assure the investor community and startup community” and expects Australia to soon see a number of new equity crowdfunding companies hitting the market.
“Get ready … it’s a very exciting time,” she says.
StartupAus chief executive Alex McCauley and TechSydney chief executive Dean McEvoy are more reserved about the impacts of the policy, but agree the extension of equity crowdfunding to proprietary companies is a small glimmer of hope in a largely disappointing budget for startups.
“It’s an important thing for proprietary companies and we had been hoping the government would extend the [CSEF] regime,” McCauley tells StartupSmart.
“We first advocated for it a few years ago when the funding landscape was a little different for [Australian startups] and less advantageous.”
Get SmartCompany FREE to your inbox every weekday
While the impact of the CSEF has “diminished” now, McCauley says, it will help develop Australian-grown tech ventures and startups by opening up this “really exciting asset class” to more retail and mum and dad investors.
Though this is an “excellent” move, McEvoy describes the budget as “underwhelming for the tech industry”.
“Just a year ago, the government was all about Australia becoming an ‘Innovation Nation’ but there was a distinct lack of measures for high-growth technology companies in this year’s budget,” McEvoy said in a statement.
“Overall this budget is underwhelming for the tech industry and that’s disappointing for the future of Australia … while we welcome some excellent initiatives for fintech, such as removing the double taxation of digital currency, extending crowdsourced equity funding and open data in banking, there’s no bold statement there that will get the Australian public enthusiastic about innovation.”