What are you doing on April 1st? At PledgeMe, we’ll be putting any April Fools jokes on hold while we celebrate.
Even though it’s a day normally synonymous with silliness, a decidedly unfoolish regulation to legalise crowdfunding investments will be launched. We hope this will democratise investment – making it more accessible, transparent and cleaner through technology and your crowd.
Yes, New Zealand is finally making the long-awaited move into the equity crowdfunding space. At PledgeMe, we’ve been watching and waiting for two years – and personally, it’s a bit longer if you count my Master’s thesis on crowdfunding. Overseas, they’ve been shaking their money makers in the space for three years (in the UK) and six months (in the US). Some of the reports coming out show how valuable this new form of funding is, and that it does support further raises.
This will allow businesses to raise up to $2 million a year through licensed crowdfunding websites, such as Pledgeme, by issuing shares or other incentives to the public.
Under current regulations, crowdfunding businesses are prevented from offering pledgers any financial return for their kind support. The new regulations will empower businesses to do so without the burden of whipping up a formal prospectus or getting bogged down with more extreme financial reporting obligations. (Simultaneously raising capital and running a business is already enough of a challenge in itself, amirite?)
Why is this exciting?
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It will streamline and educate investment rounds for newbies.
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It moves investment from just a strategic play for the angel investors, venture capitalists and ballers of this world. With the crowd now deciding what’s worth investing in, we’re going to see those ivory tower barriers turn into bridges. Smaller ventures, which previously may have been overlooked by investors will now get the support of their networks – which might grow into towering support of its own.
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It’s going to make those initial smaller raises from family and friends a lot more transparent – you can actually publicly share it even without a public prospectus, and everyone can see Uncle Jim got on board (and follow suit). Everyone has 50 friends, and your personal base of passionate people who really believe in your fledgling business will want to help you out. These are your ready built backers, and brand ambassadors. It’s about more than just the money.
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But, you can raise up to $2 million – though, as we know in startup land, every little bit counts. The average raises overseas currently sit between $80-120k.
Fear not, lovely incumbents – crowdfunding in the equity space isn’t going to remove the need for angels and venture capitalists, and doesn’t stop capital from being matched further downstream.
So in the lead up to April 1st, we’re super stoked to announce we’re going for it – we’re putting our stake in the ground and going for the license that will let us help Kiwi businesses – which lines up with our basic mission to help Kiwis fund things they care about. And, oh, how they care about entrepreneurship!
You should be excited! We’re excited. And we would love for you to join us on this adventure; we want our crowd to help us paddle in the right direction. If you have advice, if you want to partner, if you want to adopt-a-business – let us know! Let’s help Kiwis fund things they care about.
This is super exciting for those of us who’re working toward building collaborative startups which rely and thrive on wide stakeholder groups and community action for success.
For those of us keen to build something ‘more than profit’ – equity crowdfunding is just about the most exciting thing to happen since we decided to build our startup 🙂
Can’t wait to see what this might unlock for early stage startups like Volunteer Impact – roll on the crowdequity revolution!
Oh Sam, we need to talk! Would love to play with you around Volunteer Impact 🙂
Yes! Lets do it.
This is really really cool and I’m excited at the prospects for changing how we get small companies off the ground in NZ.
Are you going to put details up later? For instance how the claims of the companies wanting funding (their revenue, burn rate, IP protections, key customers etc) going to be verified. Will they be verified? And what requirements are there around share classes, anti-dilution clauses etc?
Well done. This is going to be awesome 🙂
Hey David,
Thanks for the note – we are going to share more soon. Just working through what the FMA are going to require us to require at a minimum – and then figure out if there’s anything else we think should be included. We also want to make sure it isn’t just about the raise – but that we’re able to use tech to support ongoing shareholder comms etc.
It will be awesome 🙂
Anna
Good move! I don’t have a *lot* of money to invest, so I’ve been trading cryptocurrencies which is fun, you can move small amounts of money around and play the market, but would be great to invest small amounts right here at home.
This is interesting. How does it work? Will pledger/ investors have ownership or shares in the company? What kind of paperwork is involved? Do they get returns on their investment? Tell me more about the change of regulations.
Hey Meliors,
That’s right – the pledger will be pledging for shares in the company. Companies will have to discuss how they plan to deal with dividends etc in their pitch, and there will be a bit of paperwork involved. But, we’re hoping technology will make the process a lot cleaner, more transparent, and easier.
We’ll share more soon 🙂
Anna
I would like to eventually sell my entire start-up business to equity crowdfunding investors. Will PledgeMe allow for this?
Hey John,
Interesting! Want to send me an email to discuss? anna@pledgeme.co.nz
Anna
AFAIK no. Equity crowdfunding is about raising money for a business – selling bits of it is what the stock exchange is for (or business brokers).
Who gets to decide how equity crowdfunding works in New Zealand? Moving to the stock exchange is a wonderful thing but very few New Zealand companies will ever achieve that. NZ is a little country with little businesses. Equity crowdfunding is new. We should use it in a way that is best for New Zealand. I am a technical person. My expertise is in bringing an invention to the prototype stage. Moving my ESPcat business to the stage following prototype is probably best handled by someone else. Maybe equity crowdfunding could finance that next step.
Model watching is a dangerous thing. Watching a NZ company get snapped up by a multinational is all very exciting for the two or three people who make enormous amounts of money. Crowdfunding should be about democratizing investment so the little guy makes something.
Is this up and running yet Anna? will there be a separate search category for these pledgeme listings?
Hey Sousa,
We’re still going through the licensing process, but we’re aiming for it to be within PledgeMe as a separate category 🙂
A
Hi Anna… Are we there yet?
Thanks!
Hi Honey – we are now 🙂