News & Analysis

VentureCrowd gears up for changes to equity crowdfunding regulations with $1.5 million funding round

- November 26, 2015 2 MIN READ

Equity crowdfunding startup VentureCrowd is gearing up to accept retail investors to its platform with a $1.5 million funding round.

The startup has already raised $1 million from a handful of “cornerstone” investors, with the remaining $500,000 to be raised through the VentureCrowd platform itself. The round is expected to close by next week.

The announcement comes just a week after Small Business Minister Kelly O’Dwyer announced changes to regulations on equity crowdfunding or, as the Government puts it, ‘crowdsourced equity funding’.

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. O’Dwyer announced that the new regulations, which will be put before Parliament before the end of the year, 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.

This means that startups wishing to raise through equity crowdfunding will have to file to become exempt public companies for a set period of time, before becoming full public companies. During this exemption period they will not be made to fulfil the usual compliance requirements prescribed for public companies.

Though the startup world has been calling on changes to equity crowdfunding regulations for years – the government issued a discussion paper titled ‘Crowd Sourced Equity Funding’ looking at changing regulations in October 2013 – the VentureCrowd team has been vocal in its disapproval of last week’s announcement.

Jeremy Colless, founder of VentureCrowd, said, “It is a great pity that the government continues to drag its feet on proposed new legislation that will allow retail investors access and exposure to alternative asset classes such as venture capital, property and credit.

“Australia has fallen behind other jurisdictions that have already implemented equity crowdfunding legislation, including the UK, US and New Zealand. Despite repeated consultation, the current proposed legislation is handicapped by Treasury’s lazy attempts to squeeze equity crowdfunding into the existing limitations of the Corporations Act, rather than introducing truly transformational legislation.”

Speaking to ABC Radio’s PM program, VentureCrowd COO Tim Heasley said the proposed changes will create more administrative burden for startups and criticised the capping of investments. It was a thought echoed by Anna Guenther, cofounder of New Zealand equity crowdfunding platform PledgeMe (which, incidentally, also conducted a funding round through its own platform earlier this year), who told Startup Daily that capping how much individuals can invest “seems like over-regulation.” While New Zealand does not impose caps on investors, Guenther said the average spent by individuals on PledgeMe is around $2000.

Almost $10 million has been raised through VentureCrowd since the startup launched in late 2013, with hundreds of investors buying into startups including ingogo, HeyYou (formerly Posse and Beat the Q), and CrowdMobile. These raises have ranged from a $50,000 seed round to a $4.2 million raise that was part of a $12 million Series C round for ingogo.

Rob Nankivell, CEO of VentureCrowd, said the platform has an exciting pipeline of startup deals at the ready heading into 2016, and expects the platform will successfully complete raises for 20 to 30 Australian startups over the next 12 months.

“That target could be significantly higher if the government introduces a workable retail equity crowdfunding framework,” he said.

Nankivell said the startup will also soon be introducing new investment opportunities, looking at property developments and invoice financing.

Image: Jeremy Colless. Source: Supplied.