"Equity crowd funding" is the term used to describe
small or start up businesses raising funds from the public by
issuing shares in their company, via an online platform.
Equity crowd funding has captured headlines due to a recent
legislative change and the Financial Markets Authority issuing New
Zealand's first equity crowd funding licences, which allows the
licence holder to offer shares in companies for subscription by
investors without the need to issue an investment statement or
prospectus. Potential investors are able to browse a platform for
an investment opportunity, learn about the company and make a
decision whether to invest, or not. The issuer may request a
minimum level of investment, there is no maximum amount that may be
invested (however there is an overall maximum that a company may
raise, namely $2 million in a 12 month period).
Equity crowd funding is relatively untested in New Zealand. A
number of countries still have regulations which prohibit outright,
or otherwise restrict, equity crowd funding from functioning and
growing. However, one country that seems to have embraced the
concept is the United States. In 2012, $2.7 billion was raised by
companies through equity crowd funding in the US, followed up with
$5 billion in 2013, with over $9 billion forecast
to be raised in 2014 [www.snowballeffect.co.nz].
Clearly this is somewhat of a revolution in the US investment
As at the date of writing, one New Zealand company has managed
to reach the point of registering their share offer. Renaissance
Brewing, which plans to grow its craft beer business both locally
and internationally, has made an offer via the Snowball Effect
platform. The site features a video, a wide range of information on
the company and details various investor rewards.
Time will tell whether New Zealand will enjoy the success that
the US has experienced with equity crowd funding. Given New
Zealand's reputation for innovation and entrepreneurship, it
may be that it is the perfect location for equity crowd funding to
succeed. Equity crowd funding certainly has the potential to grow
rapidly and make a significant impact on the New Zealand investment
Should you be considering utilising crowd funding for your
company, please do not hesitate to contact one of our business law
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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