The ‘Corporations Amendment (Crowd-sourced funding) Bill 2016’ took effect on 29th September 2017. At that time, only unlisted public companies were eligible to access equity crowd funding.
Intermediary platforms were then able to apply for the requisite Australian Financial Services Licence (AFSL) to enable companies wishing to raise equity via crowd sourcing, to be an intermediary to investors.
In January 2018, the Australian Securities and Investments Commission (ASIC) approved seven intermediaries with appropriate licence to act as a platform for Equity Crowd Source Funding, including Equitise and On-Market Book Builds.
Some nine months later the ‘Corporations Amendment (Crowd-Sourced Funding for Proprietary Companies)’ Bill 2017 received Royal Assent, advising that from 19th October 2018 the eligibility criteria to equity crowd fund extended from unlisted public companies, to private companies.
The market has regarded this extension as being well overdue, with the advantage of facilitating many more companies to access to equity crowd-sourced funding.
Since January 2018, 10 public unlisted companies have made successful equity crowd-sourced funding offers, raising more than $8.2 million in capital via equity crowd-sourced funding (as at 5th October 2018). Some of the larger of these investments include West Winds Gin ($933,500 invested by 288 investors), Xinja ($2,419,000 invested by 1,319 investors), DC Power Co ($2,181,750 invested by 14,950 investors), and PT Blink Limited ($815,000 invested by 468 investors).
Despite the success of these and other companies, some have been unsuccessful in their offers as they likely set their minimum too high. While equity crowd-sourced funding remains in its infancy and with investor appetite still relatively unknown, there will need to be a disciplined approach in setting the minimum and maximum amounts to be raised to ensure success.
The equity crowd-sourced funding offer document has certain requirements it needs to follow, with ASIC providing a template and guidance papers to help companies wishing to do an equity crowd-sourced funding offer.
Offer eligibility criteria includes the company needing to have less than $25 million revenue and less than $25 million in gross assets, have the principle place of business in Australia, and have the majority of directors residing in Australia.