The Year in Equity Crowdfunding - 2016

What a difference a year makes. The year was full with incredible headlines across the spectrum of politics and international affairs – and the equity crowdfunding industry was no exception. From dramatic shakeups by established companies to surprising decisions from government regulators, 2016 has been a dynamic year for the sector. Below, we take a look at the most significant events from 2016 on the equity crowdfunding industry, both at home and abroad.

Australian Government Stance on Equity Crowdfunding

Unquestionably, Australian politics have had an eventful few years, with the last 12 months alone seeing a bitterly-contested election, reshuffling in the Cabinet, and hundreds of new policy decisions. Turnbull has previously stressed how essential he considers innovation, and his innovation agenda announced last December hoped to spotlight startups as key to powering the economic future of Australia. Among the proposals were the proposal of new equity crowdfunding legislation. However, the bill, which allows unlisted companies with less than $25 million in assets to raise capital via an equity crowdfunding platform, has been stalled by the Labour Party, prompting fury from key commentators within the Fintech industry. 

Our co-founder, Chris Gilbert, was quoted by AFR as saying: "With the current state and the six months after royal ascent for the legislation to take effect, it is likely we might not have an operating equity crowdfunding market until 2018. This is an absolute disgrace." With flourishing equity crowdfunding markets already in place in New Zealand and Singapore thanks to innovative and liberal regulations that favoured a prosperous economy over any partisan concerns, Australia now lags behind as an alternative finance marketplace. As other countries continue to lead the way, Australia is unfortunately failing to keep apace with the rapidly developing startup sphere that other governments are positively encouraging. Time will tell how the politics surrounding this controversial decision will play out, but its hoped by many within the industry that politicians look to the thriving startup sectors of the UK and US for positive encouragement.

Shifting Landscape in Europe

While Brexit occupied the headlines in Europe for much of late 2016, there have been interesting developments in equity crowdfunding across the continent also. Platforms have been buoyed by the European Commission’s recent revision of crowdfunding minus prospectus to €8 million. According to Crowdfund Insider; “Taking into account the different sizes of financial markets across the EU, member states would also have an option to exempt from the prospectus obligation offers of securities of a larger size; negotiators agreed to set the threshold for such an exemption between €1 million and €8 million over a period of 12 months.” With the threshold currently at €5 million, this would provide an enormous boost for companies looking to raise online. Furthermore, in the wake of Brexit, crowdfunding platforms in the UK have seen their fortunes dip somewhat in 2016 – between October and December 2015, there was more than £22m a month being invested, compared with £16.6 million a month this year. However, as noted by TheMemo.com; “Early data from October indicates that this lift has already started in earnest with Seedrs announcing a record breaking month with over £20m committed on the platform last month.”

American Developments

For those not too preoccupied with the US election this year, the exciting developments in their equity crowdfunding landscape have provided gripping news. With Title III of the JOBS Act, essentially its equity crowdfunding provision, now regulating various US platforms, crowdfunding giant Indiegogo has decided to expand its activities into the equity crowdfunding domain. It has linked with MicroVentures, an equity crowdfunding leader that has helped companies raise over $100M through 200+ deals since 2010, to form a joint venture. This is hugely significant, as it represents a transition of one of the world’s largest rewards-based crowdfunding platforms into the equity domain, and will help bring the sector further into the public consciousness and the financial mainstream.

We haven’t forgotten New Zealand in the midst! According to research conducted by Crowd Ready, 2016 saw “an increased level of diversification and sophistication”, with $10.8 million raised successfully, and an increase in the average investment amount from $4,300 to $7,100. These are interesting developments year on year.

After an exciting and diverse 2016, Equitise is confident and positive about an increasingly diversified and sophisticated equity crowdfunding sphere for the year to come.

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