Cash-strapped firms seek Snowball Effect

Last updated 13:02 09/04/2014

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Equity crowdfunding provider Snowball Effect hopes to have its first investment opportunities online from the middle of next month.

The crowdfunding platform follows a law change this month that makes it legal to raise up to $2 million in equity without a formal prospectus.

Snowball Effect's aim is to allow clusters of often small-time investors to put capital into cash-constrained businesses in exchange for shares.

Director Simeon Burnett said the company was working through the licensing process with the Financial Markets Authority but anticipated strong demand from small to medium-sized enterprises in need of capital.

The company is so far working with 11 companies seeking to raise funds, two of which are start-ups.

The other nine are established companies operating across sectors ranging from retail clothing and food and beverages to cloud-based software.

Burnett said more than 100 companies had expressed interest in raising funds through Snowball Effect, and those closest to launching were seeking capital of between $100,000 and $1m.

On the Snowball Effect website, they would have up to 60 days to raise their funds.

He was not surprised by the interest in crowdfunding equity, an area that was once the preserve of angel and venture-capital investors.

"Our market validation programme, conducted alongside one of our partners, The Icehouse, highlighted that many SMEs are attracted to the simplicity, low cost and the short time frames involved in raising funds through equity crowdfunding," he said.

The company has appointed Wellington commercial lawyer and former ACT MP Stephen Franks as an independent director.

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- Fairfax Media

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