Crowdfunding licences approved

TOM PULLAR-STRECKER
Last updated 11:25 31/07/2014

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PledgeMe and Snowball Effect are the first crowdfunding services licensed by the Financial Markets Authority to let businesses sell shares to the public through their websites.

Equity crowdfunding allows businesses to raise up to $2 million a year from investors without the usual red tape involved in share issues.

It became legal in April but has not been possible until today as crowdfunding platforms need to be licensed by the FMA to provide the service to clients.

PledgeMe chief executive Anna Guenther said it had been working with companies that were ready to use equity crowdfunding to raise capital and would launch the first campaigns on August 15.

The company had helped 650 New Zealanders raise a total of $2.5m for various projects over the past two years, she said.

Until now, businesses have been restricted in what they have been able to offer contributors in return for funding.

"This new licence from the Financial Markets Authority means Kiwi entrepreneurs can now raise capital by selling shares in their companies to investors on the PledgeMe platform," Guenther said.

"It is also an easy way for anyone to invest in a company they want to become successful."

Snowball Effect co-founder Simeon Burnett said Marlborough craft brewery Renaissance would probably be the first to raise equity through its platform next month. Renaissance was looking to raise $700,000 to fund its expansion, he said.

Burnett said it was hard to forecast how investors would take to equity crowdfunding, but the advantage businesses such as Renaissance had was that they had a strong brand and could tap into their own pool of support.

FMA compliance director Elaine Campbell said PledgeMe and Snowball Effect had demonstrated they had met minimum standards required by the regulator to protect investors, but equity crowdfunding was still risky for investors.

"Companies issuing securities through crowdfunding services require less disclosure than companies listed on the registered exchange, the NZX," she said.

"Typically, these companies will be at a much earlier stage in their existence than listed companies, so their financial track record and business prospects will be much less clear."

The FMA has put together advice for people considering getting involved in equity crowdfunding and peer-to-peer lending.

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Peer-to-peer lending lets individuals and businesses raise up to $2m a year through loans without much red tape and also become legal in April.

The first peer-to-peer platform licence was granted by the FMA to Auckland company Harmoney this month.

- Stuff

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