With Australia finally opening its doors to equity crowdfunding, Kiwi startup PledgeMe has announced it’s expanding across the ditch. Jihee Junn talks to founder Anna Guenther about the long road to expansion and what to expect.
There’s no better way to vouch for your product than to take said product to task yourself.
It’s exactly what PledgeMe did back in 2015. Two years ago, the startup – whose business model bases itself around championing other startups – announced that it was running its second equity crowdfunding campaign and using its very own platform to do so. And much like its first round of funding in 2014 where it raised a $100,000 in less than 24 hours, the company again exceeded its own expectations, raising more than $365,000 to expand the business further.
“Terrifying” was how founder and CEO Anna Guenther described the process in last year’s Business is Boring podcast, likening the whole thing to being a bit like “getting naked and running through a field of investors”. But despite the terror of having to “eat [their] own dog food”, PledgeMe’s gamble appears to be paying off, as it announced this week it was opening in Australia.
The six-year-old company – which has helped startups like Eat My Lunch, Ethique, Yeastie Boys and even The Spinoff crowdsource funds in the past – first set its sights on Australia two years ago, with Guenther now set to head to Brisbane for six months to help get the business off the ground.
While the vibrancy of Sydney or Melbourne might seem like more obvious picks, Guenther says the company picked Brisbane in an attempt to avoid overcrowded competition (local platforms like Igniteme and Birchal are also set to get in on the equity crowdfunding action), likening the set-up to its initial expansion in New Zealand by starting in Wellington and eventually working its way up to Auckland. However, the more obvious reason for setting up camp in Australia’s third largest city might be explained by the involvement of Hot DesQ, a start-up relocation programme that will provide the company with benefits like six months of free co-working space, access to mentors, and a pot of funds valued up to A$100,000.
While start-ups in New Zealand regularly head to Australia for their first taste of overseas expansion with companies like Banqer, Auror and Freshbrush all taking the plunge in 2017, things haven’t been quite so smooth sailing for Guenther’s crowd sourcing website. Much of this stems from PledgeMe’s equity crowdfunding option, which offers supporters shares in return for their financial investment. If the campaign meets its minimum target, pledgers become shareholders, going on to have a stake in the company’s (potential) success.
While the practice seems straightforward enough, Australia (along with a handful of other countries) prohibits equity crowdfunding, primarily on the basis of the supposed risks involved. That is, until now. Changes to Australia’s legislation come into place on September 29 allowing crowd-sourced platforms like PledgeMe to apply for a licence that will enable small investors to invest up to $10,000 per company per year.
“We’ve been watching Australia for a few years now, and actually, the last time we raised investment for ourselves, it was to look into Australia back in 2015,” says Guenther. “At that time, we realised that Australia was still well behind New Zealand in getting ready to launch equity crowdfunding, so we’ve just been waiting for them to legalise it.”
While New Zealand made the bold move of introducing relatively liberal equity crowdfunding regulations in 2014, Australia’s spent the most part of the last few years twiddling its thumbs about the process. And despite now getting the go ahead, Guenther and others speculate that equity crowdfunding in Australia may very well be heading the American way – that is, drowning in a swamp of excessive rules and over-regulation. After all, Australia’s love for rules is notorious, most recently demonstrated by Sydney’s controversial lockout laws that have been accused of hampering the city’s nightlife.
“I think they’re looking set to over-regulate with investor protection in mind, which is important. You need to make sure investors are really clear on the risk,” she says. “But I think that they’ve gone too far and that it’s going to be hard for companies to crowdfund.“
“In terms of the structure companies will need to have, companies aren’t allowed to be private or proprietary companies. They need to be public unlisted.”
“In terms of the way they’re allowed to share information, companies are not allowed to email, for example. So at the moment, it’s looking like it’s going to be quite restrictive, but we’re hoping that the Australian government will look to reduce some of those restrictions.”
Guenther says the company provided feedback last month on over 300 pages of guidance notes, legislation, and templates (featuring pearls of wisdom such as the one pictured below) with the hopes that it’ll “make it easier for companies to raise money than what they’re currently proposing,” with Guenther adding that “we’ll have to wait and see if they’ve taken any of that on board.”
With an overriding sense of uncertainty still permeating the market, PledgeMe’s Australian future is one of excitement tempered with cautious expectations. And while Guenther says the company has no plans to eat its own dog food again just yet, if things go to plan across the ditch, a third crowdfunding campaign might just be in the works.
“There’s definitely a lot of interest in what we’re doing. We’ve had some great conversations with potential partners,” she says.
“But it’s really now just a case of me getting there and meeting people and figuring out what we can actually do with the final legislation guidance notes… assessing how it is on the ground, and whether we should be getting a licence and then going for it.”
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