Standing out in the crowd

THE head of one of Australia’s first equity crowdfunding platforms has told the Geelong business start-up community of the early learnings of raising capital through the service.

It’s been less than five months since the first Australian licences were issued to seven platforms to source equity crowd funding, opening a new form of funding for start-ups and businesses.

The chief executive of Birchal, Alan Crabbe, highlighted the need for enterprises to have established a community of support with quality marketing collateral in the lead-up to, and during, an expression of interest process prior to the offer going live.

“With raising investment, it just doesn’t start the day that you launch and you say, ‘this is my offer, do you want to invest?’,” Mr Crabbe said.

One of the keys was to keep supporters and potential investors engaged through multiple channels including direct communication, social media and meetings.

A Birchal crowd-funding listing includes a profile of the business and its expression of interest process and is a critical stage to engage with investors and evaluate the value of the business.

He said Birchal had hosted 10 EOI processes which engaged 5500 people registering their interest to invest.

The platform usually uses a “private mode” for the first few days of the offer to get investment in from those who have expressed interest.

It also time limits the offer to create a sense of urgency.

Mr Crabbe said at this early stage of equity crowd-funding, the perception of wider support was important to investors who were “very shy about jumping in”.

“What we are seeing with retail investors, especially at this stage, is that they want to see it is a sure deal ... that it is a success,” he said.

Crowd-funding started about 10 years ago, with platforms including Pozible — which Crabbe also founded — enabling people to raise money from the public, typically in return for a reward.

Equity crowd-funding is similar except the investors are given a stake in the business.

An eligible business can raise up to $5 million a year through crowd-sourced equity funding and limitless numbers of people can invest as much as $10,000 a year.

Investors in “Early Stage Innovative Companies” are eligible for a tax incentive.

Birchal facilitates investor transactions through a trust fund. It charges an initial establishment fee of $2000 which is fully reimbursed if the funding target is reached, after which it takes 6 per cent of funds raised.