Technology Valley renewal dependent on new forms of crowdfunding and crowd lending
2 June 2016
Crowdfunding and crowd lending will play a major role in the success or otherwise of the Hutt’s rejuvenated Technology Valley initiative that is set to be relaunched on June 9. “For Technology Valley to grow it will require a great deal new investment and this can be achieved through new developments in crowdfunding and crowd lending”, says Professor Gary Mersham, a digital business technology researcher based at the Open Polytechnic.
The reason, he says, is that start-ups, accelerators, angel investing, crowdfunding and crowd lending are increasingly becoming part of an interlinked, newly emerging ecosystem for funding businesses at various stages of growth as they turn away from traditional funders like banks.
Crowd lending, which is a relatively new development, allows cost effective loans to be raised when a company or entrepreneur doesn’t want to lose equity. Early stage companies are already starting to benefit from both the experience from angel investors and local agencies like CreativeHQ and Lightning Lab. Crowd funding has led to collaboration between Angel investors and the crowd, and this model is maturing into a practical option for businesses at varied stages of their development. In some cases, startups are topping up angel investments through equity crowdfunding and others were using crowdfunding to fine tune their enterprise before launching an IPO. “There is a growing confluence of crowdfunding, angel investing and IPO’s” he said.
Equity crowdfunding inspires investing in a number of ways:
• Investment opportunities are more accessible because they are disseminated widely, reaching many who would otherwise not hear about these opportunities.
• Most crowdfunding offers have a small minimum investment amount, such as $500 or $1000. This enables more people to invest and diversify their investments.
• People are disposed to invest if they feel that they know enough about the space. Equity crowdfunding gives newbies access to the same offer information, Q&A, and commentary as experienced investors. Everyone can be part of a conversation about an opportunity.
• For angel groups, it provides an efficient way to top up a funding round.
• For equity crowdfunding investors, it provides comfort that sophisticated investors have assessed the opportunity and have committed.
• For the company, it’s an opportunity to harness the benefits of wide brand exposure and shareholder advocates in anticipation of a public offer. They can also benefit from feedback from backers on the product or service and pre-test some attributes.
Cash-strapped governments and global institutions are turning to crowdfunding. The World Bank has said development financing needs to go from billions to trillions and governments, donors, and multilateral organisations need to explore crowdfunding because it provides a low-cost way to reach groups of expatriate donors who are scattered across the globe. Crowdfunding startup Homestrings recently partnered with USAid to channel investment from the African diaspora into innovative projects on the continent.
“The recent successful crowd-funding campaign to return Awaroa beach to the Abel Tasman National Park is an example of this potential in the New Zealand context. The investment industry is being disrupted and redefined as are other industries. It’s healthy, undeniable and irreversible” Mersham said.
Professor Mersham will host a free open session at the Dowse Art Museum from 10-11am this Saturday introducing attendees to equity, reward, donation-based crowdfunding, and the recent development of crowd lending, as part of the Hutt Valley STEMM festival.
The opinions expressed here are those of the researcher and do not necessarily reflect those of the Open Polytechnic.