PledgeMe law change 'empowers businesses'
Crowdfunding site PledgeMe is stepping into the world of equity funding with a law change on the horizon next month, founder Anna Guenther announced today.
New Zealand law will change on April 1 to allow equity crowdfunding, meaning companies and budding entrepreneurs seeking investment will be able to go public without the need for an expensive prospectus.
Investors will be able to give businesses small amounts of money in return for shares.
Guenther said she hoped the ''surprisingly smart'' regulation, under the Financial Markets Conduct Act, would ''democratise investment, making it more accessible, transparent and cleaner''.
''[It] will allow businesses to raise up to $2 million a year through licensed crowdfunding websites, such as PledgeMe, by issuing shares or other incentives to the public,'' she said.
''The new regulations will empower businesses to do so without the burden of whipping up a prospectus or getting bogged down with extreme financial reporting obligations.''
Guenther said PledgeMe, a Wellington start-up, had been ''watching the space'' for two years, but ''decided to wait and see how the final regulations panned out''.
''We only wanted to do it if it actually made things easier for companies. We also wanted to make sure it lined up with out mission - to help Kiwis fund things they care about - and we think it does,'' she said.
While the new law would not removed the need for angels and venture capitalists, it meant that ''smaller ventures'' such as start-up businesses, which previously may have been overlooked by investors, might get more of a chance.
''It moves investment from just a strategic play for the angel investors, venture capitalists and ballers of this world. With the crowd now deciding what's worth investing in, we're going to see those ivory tower barriers turn into bridges.''
PledgeMe has raised $2.5 million for 542 crowdfunding projects since its launch in 2012.
It will compete with Auckland-based equity crowdfunding start-up The Snowball Effect, which is also due to launch next month.