Some minor changes will enable Australia to fully embrace Equity Crowdfunding

by PAUL NIEDERER on MAY 24, 2014

Country after country, state after state are introducing regulations to facilitate equity crowdfunding for entrepreneurs and investors. This is normally sold by the implementers as a combination of ways to create more jobs and fund businesses that are finding it more difficult in the post GFC era to get funding.

Unfortunately Australia isn’t even yet at the starting gate for more broadly permitting equity crowdfunding except for ASSOB. ($138 million raised for StartUps and SME’s facilitated to date for around 300 companies)

ASSOB operates under existing legislation to match entrepreneurs and investors for startup and early stage companies.  It has managed to carve a position as the oldest and longest running equity crowdfunding platform in the world.


Conversations I’ve had with regulators around the world have enabled me to share with them the benefits and learnings from data gathered during ASSOB’s 8 years operation as an equity crowdfunding platform. Regulators appreciated the practicality of the data and I believe some of it has shaped better options in other countries around the world than just relying on taking a shot at what might work. Universities and the World Bank have written about the ASSOB journey and findings from data.

Over the last three years I’ve spoken at a score of international events on equity crowdfunding and I thought it was about time I focussed my expertise on changes that would enable Australia to embrace the evolving equity crowdfunding  space better. Some were included in ASSOB’s submission to CAMAC but there have been a number of countries come on stream, and a number of new learnings since the submission date of Friday 29 November 2013. For a further look into the future see my previous post “what can we expect crowdfunding to be in 2020″.

My suggested ‘best practice’ pathway is outlined below as a A) “quick summary“, as a B) “graphic summary” and C) “in detail“.

I hope that you will be on board with my suggestions for embracing the concept of equity crowdfunding in Australia and the regulatory changes needed. I’ve tried to blend my extensive practical experience in this area with a holistic approach to implementation. At the end of the day most of this is about legitimising transactions that take place every day but are often not properly done or clearly defined. By far the most money invested into the early stage space comes from friends, family, fans and followers. They deserve better recognition and legitimacy for their transactions. Equity Crowdfunding can reduce family and friend tension.

recent article in Forbes started “For the vast majority of people, money is raised from banks, from personal savings, and from family and friends.” Lets properly legitimise this.

As I’ve said in an early article … Equity Crowdfunding is not just about bagging accredited and high net worth individuals and running a diversified investment portfolio on their behalf.


Australian regulators are able to modify the fundraising provisions of the Act for ‘minor and technical relief’ without the need of a full parliamentary enquiry. Here are some of the changes that would enable Australia to embrace two huge trends that are driving crowdfunding. “Technological Disruption” and “Meaningful Investing”.

  • Broaden the definition of Associates. This group is not fully handled sufficiently in existing legislation.
  • Add  category of “Experienced” investors. These could be for example people that have reached a certain level in Angel and Director organisations
  • Recognise that consultants can accept shares for services rendered but cannot invest funds. This will assist cash-strapped companies in obtaining the corporate advice they need, without burdening operational cashflow requirements.
  • Portals cannot give advice or have a pecuniary interest but can curate offerings.
  • Small Scale Offerings 20 retail investors in a twelve month period should be lifted to 100 but there should be a cap of $25,000 per investor per annum. A maximum of $2 million can be raised per annumincluding the “CSEF” exclusion.
  • A new category of Equity Funding Portal be established for “Crowd Sourced Equity Funding” CSEF. Maximum $1 million per company per annum with a $2,500 max per investor.
  • Registered Portals can disclose summaries of the offer information to the public but prospective investors need to log in to see full deal details


WayForwardTriangle.001The explanation of this diagram is broken up into the following areas:

1.     Types of investors

2.    Limitations by Investor Type

3.    Promotion of Offers

4.    Changes needed


1) Types of investors

In an entrepreneurial journey many people contribute. Many prospective investors want to contribute, but with existing Australian regulations it is a challenge.

If we consider first degree connections to a company – say a startup or growth company that needs to raise $800,000 to grow – maybe there are a few mates that would like to contribute a couple of thousand each. However with the existing 20 retail investors in a 12 month period they would have to stump up with around $40k each to actually make it work for their entrepreneurial mate.

Strange though when this is a “small scale offering” exemption at an average investment of $40,000 when the average ASX share transaction is heading for $5,000 a trade!  This seems counter to the idea of risk aversion, when a fully disclosed company can accept small amounts, but an undisclosed company has no choice but to ask for large investments.

So what is this worldwide equity crowdfunding trend really about? Well, its basically people that are passionate about a “friend’s” opportunity who want to be able to easily invest and be involved.

Let’s now look closer at the various types of people who really want to support an entrepreneurial endeavor:


After the Founders, early staff are often next to invest. In Australia this is not easy to do due to the tax effect on employee share schemes and consequently seldom happens. The tip of the triangle above is really, really important and we hope that before year’s end the Australian government recognises this with legislation changes to Employee Share Schemes.


This group is not fully handled sufficiently in existing legislation. Many people have direct experience and knowledge of an investment offering that doesn’t usually make it into an investment document.

The types of people in this category should include the full gambit of associates. These are normally executive officers of a company, spouse, parent, child, brother, sister, uncle, auntie, grandfather, grandmother, accountant, lawyer, engaged business consultant and a shareholder for at least a year. You could say, those having genuine knowledge about the people responsible for running the company.

Professional Investors

This category is already provided for in legislation. The one type  that is not covered adequately is people like Angel or Experienced Investors that are informed and competent enough, but may not meet the monetary cut-offs. Just because someone has a lot of money doesn’t make them a “sophisticated” investor!

Angel investors have often learnt the hard way, as have Company Directors. Two examples of Experienced Investors are people that have reached a certain level in Angel and Director organisations. For this reason I believe a Fellow of an Angel Investors Group and  a Fellow of the Institute of Company Directors should be added to the professional investor category.


Tags: , , , ,


This RSS feed URL is deprecated, please update. New URLs can be found in the footers at [...]

NPRAfter Outcry, Crowdfunding Site Patreon Backs Off Plan To Raise ...NPRThe popular crowdfunding service Patreon has backed off plans to change its payment structure, after widespread, vocal and passionate opposition from creators and their fans. Last week, the site announced it woul [...]

EntrepreneurWhy Some Small Business Owners Are Turning to Crowdfunding to Save Their CompanyEntrepreneurMany owners of beloved local businesses, especially in pricier cities, have been forced to swallow their pride and appeal to their customers in times of crisis -- a process streamli [...]

TechCrunchHow hate speech crowdfunding outfit Hatreon crept back online ...TechCrunchIf you want to make a living creating white supremacist content, you're probably not going to do it via sites like Kickstarter and Patreon, which prohibit hate speech. Fortunately there's Ha [...]

ForbesCrowdfunding Do's And Dont's From iFundWomen's Karen CahnForbesDuring our conversation, she was transparent in sharing that her first software company, VProud, failed because she “did everything backwards” and spent too much time trying to perfect the product. “Pe [...]

CoinDeskKickstarter ICO? Don't Count On It Says Crowdfunding Leader ...CoinDeskThe company most widely associated with crowdfunding, Brooklyn-based Kickstarter, has no plans to get into the initial coin offering (ICO) business. Coming in response to the news yesterday that compet [...]

Crowdfunding bid to cut car cover for millennials | Business | The ...The TimesAn insurance start-up that claims it can reduce premiums for millennials will launch a £15m initial coin offering (ICO) next month in another sign of the growin.and more » [...]

TechCrunchFormer Gawker employees are crowdfunding an effort to buy Gawker.comTechCrunchWhile Univision acquired most of Gawker Media's sites last year (and renamed them as the Gizmodo Media Group), the deal didn't include Gawker itself. In fact, BuzzFeed reported last month [...]

Crowdfunding For French CastlesNPRYou too can own a French chateau, in part, anyway. Romain Delaume, CEO of Dartagnans, tells NPR's Scott Simon about a crowdfunding effort underway to preserve La Mothe-Chandeniers. SCOTT SIMON, HOST: What if I told you that for about $60, you cou [...]

CryptoCoinsNewsCrowdfunding Giant Indiegogo Looks to Make ICOs MainstreamCryptoCoinsNewsCrowdfunding platform Indiegogo has a plan to help initial coin offerings (ICOs) break into the mainstream, even as the U.S. Securities and Exchange Commission (SEC) is ramping up its oversight of [...]

CFB Finance


  • Crowdfunding
  • Crowdfund
  • Peer to Peer Lending
  • FinTech
  • Reg A+
  • Reg CF
  • Crowdfunding USA

Press Release

Live Crowdfunding .tv

What's Next Step in Regulation A+ JOBS ACTS Title IIII :L Interview : Steve Cinelli with Brian Korn Securities and Crowdfunding/Peer-to-Peer Lending Lawyer, Watch more video library | Conference | Interview | Campaign Showcase | Research | Education |