- Australia is a newcomer to the equity crowdsourced market, with new legislation passed in 2017
- Companies with less than $25 million in gross assets can raise up to $5 million per year
- Retail investors can invest up to $10,000 per company per year
- Six equity crowdfunding intermediaries have licences
Australia’s equity crowdfunding market is off and running as of the beginning of this year, and offer investors the opportunity to invest directly into private companies. Since the passage of the Crowd-sourced Funding Act 2017, the Australian Securities and Investments Commission (ASIC) has licensed seven providers as intermediaries – Big Start, Billfolda, Birchal Financial Services, Equitise, Global Funding Partners, IQX Investment Services and OnMarket.
On-Market ran the the first equity crowdfunding offer which closed in March with Revvies, a caffeine energy strip maker. On-Market then followed on with the second equity crowdfunding offer, DC Power co, which closed in the middle of April. DC Power Co is a solar energy retailer, and crowdfunded close to $2.2 million from over 15,000 investors during the month of its crowdfunding campaign, says Tim Eisenhauer, managing director of OnMarket.
Equity crowdfunding can be a way to not only generate working capital, but also garner new customers, Tim notes.
“You can see this from the example of the UK market, particularly,” he says. “Crowdfunding is a great way to market your product/ company, especially to investors. Those investors, they become your influencers, your endorsers, advocates, if they’re not already a customer, they become a customer. For DC Power to bring on approximately 15,000 new shareholders, they’d hope that there’s a high conversion rate among those shareholders to become customers of DC Power Co as well.”
OnMarket focuses on companies that are in a later stage of growth, rather than in start-up phase, with a particular niche on disruptive companies, Tim says.
“People want to invest in companies that they care about and they have a point of differentiation to, either form the status quo, a new way to solve an old problem, or a new way to solve a new problem,” he says. “That’s one part of the engagement levels that we can create, correlated to that. If you’re just another me-too company, you’re not going to create that awareness to really generate and corral support to invest in that company.”
OnMarket operates an IPO platform and have conducted 85 IPOs with a database of nearly 45,000 investors.
“When crowdfunding came along, we saw our niche as being companies in growth phase and potentially making revenue – but not necessarily profitable, that suited our profile,” he says. “We see our companies as being in series two or series three, into the ‘I’ve got my minimum viable product, I’m making some money, it’s gaining traction, but I need a million dollars to boost my sales and marketing team, take it out and let more people know about it.”
Focusing on companies that have revenue also offers investors an opportunity to see an exit in the future, Tim notes.
“The liquidity side of crowdfunding – it’s important to realise and one of the reasons why we look at the growth stage companies with revenue is that we want to ideally give investors an exit at some stage, and the company has to answer the question of how their investors are going to get their money back,” Tim says. “The early stage is so early it’s not funny, whereas the company that’s been around for two or three years is further down the road. We’re already nearing 100 IPO transactions completed on via the OnMarket platform, we have great experience in helping a company do that, it makes sense for us to come in and maybe do some pre-IPO stages for companies.”