What is equity crowdfunding?

Equity crowdfunding allows you to raise capital for your business by offering an ownership stake (shares) in your business, in exchange for an investment. It allows your friends, family, customers and fans to invest in your business without the traditional expense of listing on the stock exchange.

How does it work in New Zealand?

In New Zealand, you can raise up to $2 million dollars per 12 month period for your business through equity crowdfunding. You must run your offer through a licenced platform. Currently the only platforms licenced for equity crowdfunding are Snowball Effect and PledgeMe. Your business must be properly registered, and you must provide financial statements and business plans. Your directors must meet minimum VEDA scores, and all current shareholders must sign off on your equity crowdfunding financial statements. Based on your company’s valuation, and how much capital you are looking to raise, you decide how much equity you are prepared to sell. You set both a minimum and maximum raise. You also set the minimum investment price. Both Snowball Effect and PledgeMe have set minimum investment at $100 for the platform, however you can choose to set the minimum investment for your campaign at a higher level if you wish. No money changes hands, and no investments are made until your campaign meets the minimum. The campaign is over when and if you hit the maximum, or on the closing date – whichever is first. Once the campaign is closed, the platform will verify the identities of your investors, shares will be issued, and the money changes hands. You are then legally mandated to ensure your investors are kept informed about the performance and future direction of your company. Payment of dividends is dependent on your initial financial statements and business decisions moving forward. Currently there is no re-sale market for shares bought through equity crowdfunding, however this is an issue recognised by the industry, and it is something that is being considered by the major players as a direction to move into in the future.

Is it right for my business?

The current track record suggests that established businesses have a much higher chance of success than businesses seeking seed and set-up capital. Much like rewards crowdfunding, equity crowdfunding takes work. And a crowd. Established businesses are able to trade off their track record to provide evidence that investments will be safe. Additionally, customers, clients, and fans love the opportunity to buy into the brands they love. Typically, equity is a route I suggest to businesses looking to raise more than $100,000. Without a product to “pre-tail”, this level of funding is difficult to reach at the donation levels typically found in rewards-based crowdfunding. To be ready for equity crowdfunding, you REALLY have to value the crowd over and above the money it brings. A crowd comes with communication requirements, and adds a layer of complexity to your business. But the crowd is also your best marketing tool. A group of people so passionate about your business and direction that they have invested their money in it, is a group of people who are going to tell everyone they know about what you do. Your crowd will become your best customers, and biggest asset if you approach your campaign from the right direction.

How can Kat work with me?

Kat can help you to understand whether or not equity crowdfunding is right for you, and which platform is right. She can make introductions to the right people, and help get your campaign off to the best start. She can work with you to develop a compelling pitch that speaks to your crowd, and plan the communication strategy for releasing details to the public. Kat specialises in the communication and marketing aspects of equity crowdfunding, rather than the legal and financial aspects. Due to the technical legal nature of equity crowdfunding, it is important you are able to access independent legal and financial advice.
To contact Kat about your equity crowdfunding campaign, fill in the form below. She will be in touch within three working days