Doug Morris, the CEO of investment app Sharesight, recently shared with the Sydney Morning Herald that he believe that new Australian crowdfunding rules would still make the funding method costly for businesses like his.
Earlier this month, new rules were introduced to Parliament that would legalise online equity crowdfunding. This would allow businesses with $5 million or less in turnover and assets to raise up to $5 million a year through crowdfunding without a lengthy and costly prospectus. Companies will be able to take a maximum of $10,000 per investor a year.
Morris said that while the new rules would allow a five-year exemption from the normal reporting requirements for a public company, the option is still too expensive for Sharesight:
“I’m happy there’s movement, but I think it’s a half measure that will open the door to retail investors, while at the same time dissuading the exact type of start-up that should participate. That’s a bad combination. Limiting crowdfunding to unlisted public companies, for example, means that a company like Sharesight could not have crowdfunded the raise we just completed.”
Sharesight was founded in 2008 by New Zealand father and son, Tony Ryburn, executive director and Scott Ryburn, chief technology officer. Its app is free for one portfolio of 10 stocks and is used by other sites such as ANZ Securities, Bank of Queensland, CMC Markets and robo-advice site Stockspot.
It revealed that about 80% of Sharesight’s customers are Australian, with the rest mainly in New Zealand and Canada. The NZ-based company notably “crowdfunded” 75% of NZ$2 million ($1.88 million), or roughly $1.5 million, from them earlier in December, cutting out the need to pay for advisers other than a lawyer. Morris confirmed:
“We did a miniature crowdfund amongst our own clients. Most of our clients are investors. We surveyed the customer base and asked them would you be interested in investing in the company? We used the apps that we use to run the business to manage the communications.”