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When it comes to crowdfunding, New Zealand is an interesting market. The Financial Markets Authority (FMA) is the regulatory body that oversees and regulates crowdfunding platforms in the country. There are two categories of crowdfunding licenses – for equity crowdfunding and for peer-to-peer (P2P) lending, or the so-called loan-based crowdfunding. Any unauthorized equity crowdfunding and P2P lending service providers are not allowed to operate in the country.
In equity-based crowdfunding, investors receive a piece of equity (ie. shares) in the company which they help finance. This is often used by start-ups and growing companies. P2P lending, on the other hand, is a branch of crowdfunding where investors provide loans which are later returned with an earned interest. (We’ll look closer at P2P lending in New Zealand in another article.)
The market is not very big, neither very dynamic, if compared to others. It, however, has the potential to develop and grow. A distinctive characteristic of New Zealand is that, following regulatory amendments from April 2014, companies have a cap of $2.0 million for raising funds through equity crowdfunding in any 12-month period.
There are just seven licensed crowdfunding platforms in New Zealand, some of which are not (fully) operational. Following is a list of all equity crowdfunding websites in New Zealand and some more details about their business (in alphabetic order):
Alphacrowd Ltd. (www.alphacrowd.co.nz) – AlphaCrowd, set up in New Zealand in 2015, is an equity-based crowdfunding platform for digital and technology businesses. It is in process of launching in Canada (www.alphacrowd.ca) as part of its global expansion program. The website works with selected companies and helps them raise money to finance their business development and expansion. Depending on their development stage, companies can raise through the platform a minimum of $50,000 if they are at seed stage, $200,000 at the Start-up stage and $500,000 at the Expansion or Growth stage. The maximum that can be raised via equity crowdfunding in any 12 month period, as it is set by regulatory limitations, is $2.0 million. Meanwhile, the minimum investors amount is $1,000 per investor. AlphaCrowd does not charge investors any fees, while issuers pay a fee of 6% of the total amount, but only if the crowdfunding is successful.
Crowdarm Ltd., aka Crowdcube, (www.crowdcube.co.nz) – In late 2014, Crowdcube became the third crowdfunding licensee in New Zealand. The website is operated by a joint venture between UK-based equity crowdfunding platform Crowdcube and local investment bank Armillary Private Capital. Although one of the largest crowdfunding platforms worldwide, Crowdcube is not reaching its potential in New Zealand as it only had a single pitch seeking crowdfunding on the website at the time of writing this article.
Equitise Pty Ltd (www.equitise.com) – This is an equity crowdfunding platform for start-ups from New Zealand and Australia. The company was founded in Australia in 2014 and launched operations in New Zealand in the following year. Companies can raise from $100,000 to up to $2.0 million in a 60-90 day round. Investors, on the other hand, can invest a minimum $100. In case companies can’t reach their target amount, investors are fully re-funded. The website charges startups a one-time fee of 7.5% of the raised capital, while investors pay a 5.0% fee on any profits made on their investment.
Liftoff Ltd. (www.liftoff.nz) – Liftoff is another crowdfunding platform using an equity-based model. It targets companies that seek early-stage investment capital or crowdfunding to enable growth. Technically, the platform is operational, but it has no active accounts at the time of writing this article. It has been having trouble attracting offers and investors since the beginning. Sorry to say, but the platform has made an overstatement to say “Liftoff closes the gap between Inspiration and Implementation”.
Pledgeme Ltd. (www.pledgeme.co.nz) – PledgeMe is a platform that combines three different crowdfunding models in one place – project (aka reward), equity, and lending (aka P2P lending) crowdfunding. PledgeMe, together with Snowball Effect, were the first two crowdfunding platforms to get licensed in New Zealand in July 2014. More than $12.2 million have been raised through the platform. The number of successful projects completed on PledgeMe exceeds 1,000 and the success rate is about 50.5%.
Propellar New Zealand Ltd. (www.propellar.nz) – Propellar is the seventh, and so far latest, equity crowdfunding platform to receive license in New Zealand. The platform has not launched operations yet.
The Snowball Effect Ltd. (www.snowballeffect.co.nz) – The first equity crowdfunding offer in New Zealand was launched on the Snowball Effect platform in August 2014. Since then, the platform has turned to the leading marketplace for equity crowdfunding in the country. It claims to hold a share of over 70% of the market in New Zealand. More than $19 million has been raised through the platform for public and private offers, as well as wholesale and retail investor offers. It employs an all-or-nothing model, which means that if companies don’t reach a pre-set target amount, the funds are returned to investors.
We have also introduced you to some of the leading crowdfunding platforms in the US and the UK, as well as to the leading P2P lending platforms in the US and the UK.