Equity crowdfunding platform to democratise entrepreneurism
Monday 21 October
NZ equity crowdfunding platform to democratise entrepreneurism
New Zealand entrepreneurs and small and medium-sized businesses seeking new capital will soon be able to access funding in exchange for equity for the first time through revolutionary online equity crowdfunding platform, Snowball Effect.
Equity crowdfunding provides entrepreneurs and small business owners with an opportunity to pitch their business ideas and growth plans to the public via a website portal, expanding the pool of potential investors while reducing the cost and complexity associated with raising funds.
Snowball Effect’s portal – www.snowballeffect.co.nz – is set to launch in April next year, once the relevant provisions in the Financial Markets Conduct Act come into effect.
The company’s Directors, Simeon Burnett, Francis Reid and Richard Allen, have over 25 years combined experience in international business and trade, corporate finance, strategy and valuation.
The trio have received the backing of The Icehouse, which has taken a small shareholding in the company.
Snowball Effect will bring together every day Kiwi investors with great Kiwi businesses wanting funding that doesn’t involve increased debt, a costly Initial Public Offering or ceding control of their company by relying on a limited number and class of investors. Investors, whatever their budget, will gain access to high growth vehicles previously only accessible via venture capital and angel investment groups.
Mr Burnett says extensive market research has shown that everyday investors and New Zealand and SMEs are struggling to connect, but want to do so.
“Our vision is a New Zealand economy fuelled by emerging businesses backed by everyday Kiwi investors,” he says.
“The country’s economic engine room is small to medium-sized enterprises (SME’s) and there are thousands of them with big vision who can’t take the next step on the growth ladder because the banks won’t lend, and other sources of capital don’t fit or are cost prohibitive. There are also thousands of New Zealanders with innovative ideas that can’t get them off the ground because raising start-up capital is typically limited to loans from friends and family.
“On the other side, tens of thousands of proud Kiwi investors or would-be investors would love to take a stake in one of the most dynamic sectors in the economy, but are currently unable to do so, particularly if they only have a small amount of money that they're willing to invest.”
Burnett says Snowball Effect will open the market up by connecting the two groups.
Another of Snowball Effect’s founding Directors, Richard Allen says Snowball Effect has the potential to transform the investment and SME sectors.
“While we will be complementary to other funding channels, we believe the concept democratises investment by giving everyday people greater choice about how and where they invest,” says Allen. “It also democratises entrepreneurism and business growth by giving company owners more options. With more options comes greater control.”
Mr Allen says they will work with businesses to ensure they’re clearly articulating the investor value proposition to maximise their chances of successfully raising capital, while minimising the cost and complexity of the fundraising process.
“Equity crowdfunding is not just about start-up businesses. It also provides shareholders in existing businesses a new means of selling their equity stake.”
Snowball Effect’s model is likely to include features such as standardised documentation for all participating companies; third party business account audits to provide independent verification; market growth information to help investors benchmark their investments; and the capability for investors to engage face to face with business owners.
“To ensure that we deliver an exceptional product, we are looking to work with New Zealand’s best service providers,” adds Burnett.
Social crowdfunding is well established internationally and in New Zealand, but is primarily used to fund arts and charitable projects. Deloitte estimates crowd funding will generate in excess US$5 billion globally this year.
Allen says, “Kickstarter and similar New Zealand-based sites are based on philanthropy, primarily for artistic projects, you can think of it as internet busking perhaps. While peer to peer lending can be likened to stranger IOU’s. Snowball Effect is about business equity and getting a fair share for your investment.”
A portion of Snowball Effect’s profits will be donated to projects that help develop entrepreneurship and financial acumen amongst young New Zealanders.