Crowdfunding laws lift fintech appeal

08-Sep-2017

By Daniel Paperny

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The passage of equity crowdfunding laws was a turning point for fintech in Australia as the new legislative regime will help open up access to early-stage capital markets for retail investors in the years to come, according to fintech accelerator H2.

In an interview with financialobserver, H2 founding partner Ben Heap said the equity crowdfunding reforms had been an important legislative development for retail investors because they formed “an important new level of flexibility within our capital markets”.

“The equity crowdfunding space is increasingly active all around the world … it provides a new way for smaller companies to access investors and a new cohort of investors can access these same smaller companies,” Heap said.

“The government [first] committed to that [legislation] several years ago and that took longer than everyone would have hoped but nevertheless … it’s an important example of bipartisan legislation ultimately which is to everyone’s benefit.

“For those reasons, it’s a really important part of the legislative framework moving forward.”

The Corporations Amendment (Crowd-Sourced Funding) Bill 2016 was passed in the Senate in March to provide retail investors greater access to early-stage capital markets, as well as help Australia’s regulatory environment become more internationally competitive.

The bill means fintech start-ups can raise funds by issuing securities to a larger pool of investors in return for financial contributions through an online platform.

“New Zealand’s relative agility in introducing that legislation as quickly as they did was an important lesson for Australia,” Heap said.

“I think Australia has now got there with the legislation. That’s an important step forward [but] we probably need to seek to be more agile, more responsive to follow on with legislative change and the signs are that’s increasingly becoming the case.

“There’s no doubt that momentum in itself is a very powerful force and the fact that you’ve got an increasing number of successful fintech start-ups has empowered others to get serious … successful investments [in start-ups] by venture capital firms and retail investors also empowers those investors to continue to make investments in other ventures, so success begets success.”

Heap’s comments were echoed by automated investment start-up Equitise co-founder Jonny Wilkinson earlier this year when he told financialobserver the incoming regime was significant because traditional retail investors had not been able to readily invest in fintech in the past.

Equitise, which is backed by both Investec and H2 Ventures in Australia, allows Australian investors to back early stage fintech start-ups through equity crowdfunding.

It has 16,000 investors in its network and provides a platform for them to participate in a series of funding rounds that allow them to invest money in vetted start-ups.

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