Snowball Effect, an online equity crowdfunding platform, will go live to the public on Wednesday after being granted its licence by the Financial Markets Authority.
The platform has been created to provide Kiwis with access to early stage investments.
Snowball Effect co-founder Simeon Burnett said more than 200 companies have contacted the online platform about raising capital and the team is working with 14 businesses to bring them to market in the coming months.
“Equity crowdfunding represents a shift in the way SMEs access funding for growth,” said Burnett. “And it also changes the market for investors by broadening and simplifying investment opportunities in New Zealand.”
“SMEs have always struggled for capital but investors, particularly the average investor, have also had limited choice,” he adds. “Snowball Effect will open up this high-growth sector in New Zealand to everyday investors – and they can take small or large stakes without paying brokerage fees.
According to the firm’s website, companies making offers through Snowball Effect will range from very early stage businesses with little more than an idea, to more established businesses that may already be profitable. The risk of investing in a business tends to decrease as a business develops and matures.
Burnett said, “It is however important that investors consider the risks of each investment opportunity carefully before committing. While these high growth companies may provide a potentially exciting investment opportunity, they typically have higher failure rates than more mature businesses”.
The company will initially present investors with the opportunity to take shareholding stakes in craft brewery Renaissance Brewing, which is seeking $600,000-$700,000 in new funding to expand its Marlborough operations.
The Financial Markets Conduct Act 2013 and corresponding regulations provide a new channel for investors. Through licenced equity crowdfunding platforms, each Kiwi company can raise up to $2 million in any 12 month period by offering shares to the general New Zealand public. Investors are free to invest any amount up to the $2 million limit per year in any company raising funds through a licenced platform.