Equity crowdfunding in Australia: We have lift-off

Equity crowdfunding has been celebrated as a game-changing alternative to venture capital and traditional business loans but has until recently been off limits to most retail investors.

With the lifting of Australian restrictions on who can use equity crowdfunding platforms, there is cautious uptake from consumers and start-ups – with several platforms establishing a clear lead – but the claim of outsize returns will take time to be tested.

Total funds raised by equity crowdfunding platforms, A$Mn

Though the idea of sourcing funds from multiple supporters of an enterprise has been around for centuries, the term crowdfunding has only become popular in the last decade

In essence, the term crowdfunding refers to the combination of funds from multiple investors or donors - often a large number, rather than the small syndicates typically involved in vehicles such as venture capital (VC) funds and hedge funds - for a specific investment, which may or may not be intended to deliver a return.

Over the last decade, the types of investments included in the crowdfunding category have grown from hobbyist items (clothing, artisanal alcohol products, and niche new devices) to traditional assets – such as property, debt (e.g., mortgages, student loans, business loans), and start-up securities – to non-traditional or exotic offerings such as new currencies and initial coin offerings (ICOs) of custom virtual currencies designed to raise capital for use in platforms such as AngelList, Republic, and now Indiegogo.

“This article is an extract of a report published by our sister company Venture Insights. To enquire about becoming a subscriber, please contact Nigel Pugh.”