KIWI crowdfunding platforms maintained a slight lead over their younger Australian counterparts during 2020, new figures show.
But both entrepreneurs and regulators in the alternative equity raising sector are confident there will be a significant increase in deals over the next 12 months.
While the business is still a niche part of financial services, it’s helped scores of start-ups scale up and introduced many new investors to capital markets.
The NZ$34million (A$31m) raised from retail and other wholesale investors in New Zealand is slightly ahead of the NZ$32m (A$30) in Australia.
And while COVID-19 seems to have had more of an impact in Australia during 2020, both markets have already seen a strong rebound which is expected to continue.
Equitise co-founder Jonny Wilkinson, whose platform operates in both countries, definitely expects deals in Australia to outstrip those in New Zealand.
“Whether $30m becomes $60m, I don't know. It could theoretically become $100m over the next year if everything goes really well,” he said.
“It's probably going to double or thereabouts from last year.
“I certainly think there will be a significant amount of growth this year and the market will expand in size.”
As an entrepreneur who went to New Zealand to gain experience in crowdfunding at the same time as lobbying to make it legal in Australia,
Wilkinson isn’t surprised that New Zealand is still ahead.
With crowdfunding taking place since 2014, the market is more established than in Australia, which only won regulatory approval in 2018. There is more flexibility in the way New Zealand regulates crowdfunding as well, he explained.
“It's not as detailed and prescriptive in what you need to produce and document, it relies on some basic principles,” he said.
“In Australia, it's quite prescriptive. There are significant regulations telling what needs to go into those documents and also what the platforms need to produce and how they need to check.
“It's basically a cut down prospectus. Whereas in New Zealand, it’s okay as long as all the relevant information is contained within the material and it isn’t misleading or deceptive.”
The impact of COVID-19 meant Equitise “did nothing from March to August” and hindered the company’s growth.
But Wilkinson is confident for 2021 and expects to see 60 to 70 deals across the market.
Equitise, which has $38m raised from 39 completed equity crowdfunds since it was founded, already has nine current offers.
A new report by the Financial Markets Authority showed the industry continued to develop despite the pandemic with crowdfunding raising $16.5 million from retail investors in the year to June 2020 - up 20% on 2019.
There were 25 successful offers, compared to 19 in 2019. And a total of 5,300 investors were using the licensed service in 2020.
FMA Director of Capital Markets Sarah Vrede said the data showed continued interest in the maturing sectors.
The number of participating retail investors jumped 47% on the previous year to 5,374 - with a noticeable increase in smaller value investments.
“A consistent trend has emerged that crowdfunding investors are generally first-time users of a platform, which may suggest investors have targeted interest in the specific company raising capital,” Ms Vrede said.
Of the 30 offers, 25 were successful. Although the number of successful offers was lower than the 2017 peak of 34 offers, the amount of capital raised by licensed retail investors in 2020 was 38% higher than 2017.
“One of the main intentions of the Financial Markets Conduct Act is to promote innovation and flexibility in New Zealand’s capital markets.
“Crowdfunding services provide an alternative pathway for companies to raise capital in a cost-effective manner.”