PledgeMe, a New Zealand based crowdfunding platform, has announced an expansion into Australia just as equity crowdfunding regulations are scheduled to change. Australia has been slow to improve their regulatory environment for raising capital online but improved rules will be in place soon.
“Australia is set to legalise equity crowdfunding later this month. We plan to be on the ground there, to connect with potential partners, work with local companies and assess the final regulatory landscape” says PledgeMe co-founder Anna Guenther. “We’re excited that Australia is finally entering this space, but also cautious” explains Guenther, “America introduced equity crowdfunding last year, but it seems that over-regulation has stymied the potential of equity crowdfunding there”.
PledgeMe notes that Title 3 of the Jobs Act (Reg CF) came into force in the US in May 2016. In the first year, only NZD $52 million was invested through equity crowdfunding platforms in the States, compared to NZD $12.4 million in New Zealand’s first year, despite New Zealand only having 2% of the population of the United States.
“The subdued first year in the US could also be due to the availability of capital, but when running an equity crowdfunding campaign costs $20,000 – $50,000, plus ongoing compliance costs, early stage and growing companies just won’t go there,” states Guenther.
PledgeMe says that Australian rules are more restrictive than New Zealand crowdfunding regulations – with investor caps of $10,000, requirements for the companies to shift their structure and become public unlisted companies adding compliance burdens, restrictions on emailing the offer documents, and strict rules around advertising.
“We’re going to do everything we can to help Australia temper their over-regulation” says Guenther “but if their legislation doesn’t actually help companies, we won’t stay,” adds Guenther.
The Australian Corporations Amendment (Crowd-sourced Funding) Act 2017 provides a legislative framework for equity crowdfunding. The Act received Royal Assent on 28 March 2017 and will take effect from 29 September 2017.
PledgeMe said it has received a spot in the HotDesQ program run by the Queensland government, and will be setting up in Brisbane. The program provides networks, support, and funding for companies to relocate to Queensland, Australia.