Equity crowdfunding – ten years on.

By co-founder of PledgeMe Anna Guenther.

New Zealand was the first country in the world to bring new legislation in to legalize equity crowdfunding from the public, but it almost didn’t happen.

Urban legend has it that equity crowdfunding was an afterthought in the updated Financial Markets Conduct Act. There was a concerted push to allow peer-to-peer lending, and the people lobbying to include that made a side comment about equity crowdfunding which was already occurring within existing legislation in the UK.

The afterthought has enabled over $100 million to be raised from the public by over 200 companies in New Zealand since it came into effect 1 April 2014 – an April Fools joke that’s actually changing the trajectory of companies in Aotearoa.

And the livelihoods of some investors. There have been returns made to investors with the likes of:

Ethique providing a 48 x return to investors that came into their first equity crowdfunding campaign. So those who invested $500 had a $25k return when the company sold five years later. The founder, Brianne, has said she’s most proud of the returns some of her investors made paying off their home mortgages.

Thankyou Payroll provided dividends to investors, which was seen as potentially a world first in equity crowdfunding. They then completed an ‘exit to community’, where they bought shares back from investors to transition their company to being owned by a foundation. Investors in their equity crowdfunding round received a 30% return on investment.

Of the 200 companies, some are no longer around and all of the capital invested has been lost. But fewer of these companies have gone under than the average. Only 40% of companies established in 2017 are still around today, but from the successful companies that have raised via PledgeMe over 77% are still around today (75% of the ones that raised 2018 or earlier).

In some ways it still feels like early days for this industry. Ten years in terms of the financial markets isn’t very long at all. The first stock exchange started in the 1600s, with the London and New York stock exchanges beginning in the late 1700s. And there’s still so much to do to educate about this new form of capital raising and provide accessibility to the wider business community.

The future we want to see is one where the money raised through platforms like ours represent our country, in terms of location, gender, background. And one that truly reflects the causes Kiwis care about, no matter what their income levels are.

While we’re not there yet, at PledgeMe we’re heading in that direction, with 67% of all funds on our site being raised by women last year, 50% of all funds pledged supporting regional crowdfunding campaigns, and over half of the funds raised with a social or environmental impact in mind.

We’d love to see this sort of representation across all equity crowdfunding platforms. Think of the future this sort of funding could create for those who have been traditionally locked out, but also for our country as a whole.

If you’re interested in learning more about equity crowdfunding with PledgeMe, read more about it here.