People thought that crowd funding was a fad, that it wouldn’t pop. To be honest some people still think crowd funding will only last until the smaller alternative market NXT kicks into gear (news here).
Looking back at the last year, I’m optimistic that the New Zealand equity crowd funding scene is putting down some solid roots.
Where we are at
Ignoring for a moment the United Kingdom’s playmakers, New Zealand’s end of 2014/beginning of 2015 highlights:
Snowball Effect (“Snowball”), true to its name, has been gathering momentum in terms of cash; first with a record of $700k + for CarbonScape, and recently Aeronovics proved that people want drones raising $1.5m (the current NZ record for crowd funding).
The market saw a shake up with the entry of a competitor Equitise. The history behind Equitise is exciting. Equitise embodies the age of the collaborative commons, or the “Uber” mentality, as it popped out of the world’s only financial services focused accelerator in Australia (https://equitise.co.nz/about-us).
PledgeMe’s less VC like crowd funding model is going strong, of note has to be the end of last year when PledgeMe crowd funded its own platform. The notion that the crowd can fund it’s own platform, own a piece of it, and then buy other companies through it, is fantastic. But, it does make one wonder if it needed the cash (not necessarily a bad thing).
The nuts and bolts
Snowball is pushing NZ’s crowdfunding boundaries. The current campaign involves the offer of shares to wholesale investors (wealthy investors/business people who don’t need a lot of information about investments). This provides an interesting tension between the private nature of traditional funding, and crowd funding’s democratic roots (the subject of this blog’s next post).
PledgeMe hasn’t had the same pop as Snowball yet. My own humble view is that the market still sees PledgeMe as a crowdfunder for the charity/prototype model rather than equity. their latest offer – SellShed (offer here) looks interesting modern, user driver, and tech orientated, i.e. the “millennial space”.
The promise of a new competitor in Equitise has unfortunately been fraught. The gist from what I gather is this – the parent company of the company on offer owns a significant amount of the company on offer’s IP. Now, Equitise got a bit roasted in the press for this – I hope that the journalism on that front was fair, because there could be good reasons for siloing a company’s IP with its parent, or protections in place to ensure the subsidiary’s use. Again, the proof will be in the pudding with Equitise in its infancy and some good vision at the helm.
Putting aside the market value of these offers, as I have attempted to do so, and looking at them from the way they are produced, marketed, and their success in terms of funding targets, you can make one reasonably safe conclusion – the New Zealand crowd funding market is making noise, there are waves there, and like the latest House of Cards season, you’re hopefully yet to see its best.
One thing that is really piquing my interest at the moment is the spectrum of collaborative commons, or democracy, given to each crowd funding model – aside from legal considerations, to what extent should a platform vet the investments that wish to be crowd funded?
- How does crowd funding relate to private equity – is their relationship symbiotic or toxic?
- Is venture capital cash more valuable than that of the crowd?
- Do people invest in crowd funding based on emotion rather than economic sense? Are these things exclusive?
- To what extent must/should a platform be transparent about preloading an offer (knowing people will fill the tank up quickly)?
- How will wholesale and retail investment interact?
- We’ve not seen a nominee shareholder model in New Zealand, where the platform holds shares on behalf of investors, for the company they invest in, is one coming?
- How much competition can the NZ market sustain, is there room for three (or more) equity crowd funding platforms?
The next post will see a comparison of the different platforms, and hopefully a succinct discussion of the benefits of each approach.