News, Insights and Stories from the Australian and New Zealand tech ecosystem.

New Zealand crowdfunding platform PledgeMe.Debt will allow organisations to issue bonds instead of equity

New Zealand equity crowdfunding startup PledgeMe has announced it has applied for a peer-to-peer lending licence that will allow it to launch to the public its new product PledgeMe.Debt, a debt crowdfunding platform that will allow organisations big and small, from companies to co-ops, to reach out to crowds to fund bigger and better campaigns.

The application for the license was submitted in December last year to the Financial Markets Authority (FMA) and if successful PledgeMe.Debt will run its first campaign by mid-2016.

PledgeMe.Debt is similar to the company’s existing products PledgeMe.Projects and PledgeMe.Equity, and will open up another way for more people to crowdfund. It works by allowing organisations to offer a campaign and have their crowd pledge, with the organisation then able to issue bonds and then repay the money plus interest back to their pledgers.

Anna Guenther, founder of PledgeMe said, “PledgeMe.Debt will differ from current peer-to-peer options because it will be a transparent campaign-led platform.

“Debt crowdfunding is an important addition as it will allow more types of organisations to crowdfund larger amounts of money. The advantage of offering loan notes is that the pledgers will get their money repaid in full, plus interest, instead of an immediate reward, or a long term stake in a company. It’s more of a middle ground, really.”

Guenther believes the new platform will further decide what gets funded in New Zealand and offer a better alternative than the big banks. Debt crowdfunding is a growing space that internationally makes up two thirds of the crowdfunding market and, according to PledgeMe, that market is doubling every nine months.

Debt opens up crowdfunding to a larger spectrum of investors and allows for a broader range of campaigns that are transparent. While equity is just for companies, PledgeMe.Debt will open up crowdfunding to social enterprises, not for profits, co-ops and communities and even schools.

“Organisations which can prove they can repay the loan will be able to offer a campaign on PledgeMe, their crowd will pledge, and if it is successful they’ll receive the money to go do the thing they said they were going to do,” explained Guenther.

PledgeMe is based in Wellington, New Zealand’s startup capital, where the entrepreneur scene is thriving on innovation and support from the government. The company was the first New Zealand-focused crowdfunding platform to launch and last year raised more than NZ$360,000 in capital through its own platform to grow.

Almost 1000 projects have been successfully funded through the platform, including Eat My Lunch, Conscious Consumers, Yeastie Boys, Parent Interviews, Sorbet, and Scoop.

Since the launch of PledgeMe more crowdfunding sites have popped up in New Zealand, making the space both a competitive and fun playing field for startups and investors.

Guenther said, “Now we’re seeing specialisation of crowdfunding sites with niche platforms popping up. It’s a really exciting space and we all play nicely with one another.”

PledgeMe is the first platform in the Southern Hemisphere to run project, equity and debt crowdfunding on the same campaign site, showing just how progressive the Kiwis are. Australia lags far behind, with the government only late last year announcing it would be introducing long-awaited changes to regulations around equity crowdfunding. 

Current Australian regulations limit the scope of equity crowdfunding to wholesale or sophisticated investors who earn at least $250,000 a year or have $2.5 million in assets. The government announced that the new regulations, which were to be presented to Parliament in late December, would allow public companies with $5 million or less in annual turnover, or up to $5 million in assets, to raise $5 million a year from retail, or ‘mum and dad’, investors. There were to also be consultations on the possibility of allowing debt crowdfunding.

PledgeMe expects its debt crowdfunding platform to launch mid-year. With it, Guenther said “campaigners will be able to reach out directly to their crowds of friends, family, supporters, and customers.

“Unlike many peer-to-peer platforms, PledgeMe isn’t backed by a bank. This means borrowers will have a greater say over what, when and how they borrow and their crowds will be the decisive factor. The relationship campaigners will have with their lenders will be a lot different and, we believe, a lot more beneficial.”

Image: PledgeMe Team. Source: Provided