Snowball Effect expands investment role

Businesses are being given the chance to link up with wholesale investors to raise capital.

Online private equity marketplace Snowball Effect, has announced an expansion of its service.

The company said it is now including private introductions to investors of suitable companies, and will also offer support and advice for firms looking to explore capital raising options.

Snowball Effect launched in Auckland two years ago, and since then, claims to have raised more than $20m of equity capital for 24 companies.

Its chief executive Simeon Burnett said: ‘‘We have witnessed increasing demand from both companies and investors for SnowBall Effect to be offering more than just a public capital raising service.

‘‘We have had a lot of enquiries from growth stage companies that are wanting to raise capital from private investors who are keen to get actively involved in the business, as well as those who are looking for a passive investment.

‘‘We see our role as supporting companies in their journey to become investment ready, then providing a range of capital raising options for them. For many young, growing companies there is no obvious place to turn to for advice.’’

Snowball Effect has developed what is thought to be New Zealand’s first, online process to validate investors as ‘‘wholesale investors.’’

People who want to invest in companies privately are currently required by law to certify they meet certain criteria, generally relating to wealth, or show experience in dealing with high risk financial products and services.

‘‘Often, investors and even advisors are not sure what a wholesale investor is,’’ said Burnett. ‘‘We have created a process that tries to explain this as simply as possible, and allows investors who qualify to register quickly and easily. Once they have registered, our aim is to develop an understanding of how they like to invest and be involved, and then provide a deal flow to match.’’

Since launching, Snowball Effect has amassed an investor audience of over 10,500, with around 800 wholesale investors.

Burnett said the company generally focused on growth stage firms, rather than very early startups, although he said it had worked with a number of early stage firms.

Snowball Effect has recently appointed former Bell Gully lawyer and entrepreneur Cowan Finch, to work alongside companies looking for capital from private investors. Finch previously worked in Australia.