When equity crowdfunding was introduced in Australia, it seemed to hold great promise – to some of us anyway. In a co-authored paper, I had compared equity crowdfunding in Australia and New Zealand. In the paper, we had noted New Zealand’s relative success in the equity crowdfunding context.
It is therefore interesting to note that in 2022, when venture capital in Australia dried up, equity crowdfunding came to the rescue. An article in the AFR notes:
Start-up founders embraced equity crowdfunding in record numbers in 2022 amid a tighter venture capital funding market, but even this early-stage funding segment was not immune to valuation pressure.
Highlighting the gatekeeping role played by crowdfunding platforms, Matt Vitale, Co-founder of Birchal, one of the largest equity crowdfunding platforms in the country, notes:
“We work closely with companies as they prepare for an offer. There’s an expression of interest period where the terms aren’t set … and companies meet with [possible] investors…”
Vitale adds in a different article that the quality of businesses using this model had also improved:
“with 47% of established businesses achieving positive earnings at time of their CSF offers in 2022, compared to about a third in the previous three years”.
However, as one would expect, companies that have used this funding model have not all been successful. There is a news report about Endeavor Brewing not releasing financial statements as required.
To end on a positive note, Shebah (the female rideshare company,) an equity crowdfunded company which went into voluntary administration during the pandemic, was successfully restructured under a Deed of Company Arrangement.