When it comes to crowd-funding, PledgeMe founder Anna
Guenther reckons it is all about the crowd.
Rather than being just about money, it was about building a
community around a project, knowing who the people were who
supported the start-up and figuring out how to engage with
them, Ms Guenther said.
She was excited about Cabinet's recent approval of new
regulations for crowd-funding and peer-to-peer lending, as
part of the Government's financial market overhaul.
There would be no investor caps for equity crowd-funding,
although there was a $2 million cap that a company could
raise through crowd-funding each year. Companies would no
longer need to prepare a prospectus or investment statement
before fundraising from the public.
Commerce Minister Craig Foss described it as an exciting
development for both start-up businesses and investors.
Crowd-funding provided a platform where contributors received
shares in the businesses they invested in, providing a new
avenue for early-stage and growth companies to source the
risk capital they needed to grow, Mr Foss said.
With the regulations coming into effect on April 1, New
Zealand would lead the Asia-Pacific region in the development
of crowd-funding regulation, he said.
Ms Guenther, a graduate of the University of Otago's
entrepreneurship master's degree, said the changes would
lower the barriers for people to find investors for their
Wellington-based PledgeMe is an online crowd-funding platform
which, since its launch in February 2012, has raised just
over $2.5 million for 540-odd projects ranging from a bionic
hand to a pallet pavilion. Individuals or groups list their
project on the site in the hope of attracting enough donated
funding to make it happen. A success fee is deducted if the
target is reached.
Ms Guenther said she knew many start-ups at the point where a
$10,000 to $20,000 investment would be ''the biggest help in
Everyone had $5 or $500. It was looking for $20,000 from one
person that was when it got really hard, she said.
PledgeMe had definitely exceeded early plans and expectations
and it was now exciting to see where it went, she said.
Ryan Baker, co-founder of Timely Ltd, which was launched in
2012 and produces a cloud-based appointment management system
for businesses requiring scheduling of their staff and
services, said it was good to see legislation moving with the
There was a place in the investment chain for crowd-funding
but it was ''not for everyone'' and he encouraged start-up
founders to ''do their homework''.
''Ask yourself if cash is really the thing holding you back
right now. Have you validated the business idea?
''Have you built the product as far as you can? Are you sure
that crowd-funding is the solution and are you aware of your
other funding options?'' Mr Baker said.
There was a genuine overhead going down the crowd-funding
route that could be distracting to the business.
''You end up with a large number of financially interested
parties in your start-up that you have to manage, rather than
focusing on just building a great business,'' he said.
Another often overlooked factor was that the value from a
crowd-funding project was often in the exposure the project
got, rather than the funding itself.
It suited certain types of niche projects but he advised
start-up founders to make sure it suited them first.
Upstart business incubator chief executive Steve Silvey
believed the changes in regulations were ''generally a really
Access to funding for young businesses was always important
and there always needed to be new avenues for that.
There was quite a bit of uncertainty over how it was going to
play out; what sort of investors would be attracted to it,
how they would receive information and what their
expectations of the business might be, and that would evolve
over time. It would be interesting to see what models
emerged, Mr Silvey said.
Otago Angels network manager Murray Downes said his personal
view was that crowd funding might be ''one string to a bow''
but it was unlikely to be a reliable single funding strategy
for a start-up.
It was hard enough for a start-up to get revenue from
customers; it could be ''pretty tough'' trying to get revenue
and funding from much the same source.
''My experience is that there's some selling required to get
investors on board and I sure do not believe in 'if we build
it, they will come','' Mr Downes said.
Jodyanne Kirkwood, a senior lecturer in entrepreneurship and
management at the University of Otago, said it was ''a little
bit of unknown territory''. It was exciting, particularly for
younger entrepreneurs and small companies that wanted to grow
but were not in a position to go out and get big venture
It was great to see New Zealand ''going down this road'' for
something that was really untested and that it had latched on
to it quite quickly, but she was also adopting a ''wait and
She believed it would take one to three years, when companies
had been funded through crowd-funding, to see how it worked.
New Zealanders were quite cautious and she did not see it as
being ''something that's going to go nuts straight away''.
Dr Kirkwood was keen to follow some of the companies to see
how it impacted them.
New Zealand Venture Investment Fund chief executive Franceska
Banga said the new rules could allow angel investors to
develop platforms to integrate crowd-funding with their
NZVIF, which was established by the New Zealand government in
2002, had watched the development of crowd-funding investment
in the United States and believed it could have a positive
impact on New Zealand start-ups.
''The early-stage investment community, and particularly
angel networks and investors, need to consider how
crowd-funding can be integrated with existing investment
platforms in order to increase the capital available to young
''Angel investment has become, over the past decade, an
important source of capital for start-ups. At the same time,
non-equity crowd-funding platforms, like Kickstarter, have
seen exponential growth, especially in music, design, and
consumer products,'' Ms Banga said.
The new rules provided the opportunity to design new
platforms that brought together the best of angel investing
with the best of crowd-funding, she said.