Second INITIATE: Pacific Crowdfunding Summit held in Sydney

By Crowdfund Vibe Staff writers

Sydney hosted the INITIATE 2: Pacific Crowdfunding Summit on 8 September 2014.  Held in the historic State Library of NSW,  the event featured a veritable who’s who of leading Australian and global crowdfunding sites, including the founders of Pozible, ASSOB & StartSomeGood along with Anna Maguire, author of Crowdfund It. Jason Best, founder of Crowd Capital Advisers, gave an fascinating presentation via video link from San Francisco.

This was the second outing of the INITIATE formula following on from a successful first event last year in Wellington. Crowdfunding sites have been operating in Australia for a number of years. The diversity of its applications was one of the themes, in addition to the question of how to regulate equity funding in the country.

SLNSW sign .jpgThe first speakers & panel session ran through what is crowdfunding and what is required for success in its various forms.  Rick Chen from Pozible – which is either the number 3 or 4 rewards crowdfunding platform in the world – explained their globally expanding operation, which is now operating in China and the United States. To illustrate how crowdfunding works, he ran through a few successful campaigns such as the I am Frozen Custard, where a new South Australian burger outlet raised AUD$28,531 to purchase a Frozen Custard machine and the Star.21 Fitness Band a fitness tracker from China that uses gamification to help change habits, which raised USD$290,509 .  Anna Maguire, author of one of the first books on crowdfunding, Crowdfund It, then provided an wide ranging and illuminating overview of the field.  She highlighted its rapid global growth – it is doubling every two months globally with 470 new campaigns each day – and is projected to be worth $96 billion by 2025 in the developing world.  Anna explained the various forms of crowdfunding, including its newer species; royalty-based crowdfunding and subscription-based crowdfunding, and the role it is playing in the funding life cycle. Emphasizing that trust is crucial she provided some insightful advice on the risks involved and the crucial elements of a successful campaign: a story with a video, validation, good networks and tenacious communication.

This was followed by a intriguing panel discussion with Lloyd Perry of Indiegogo, Prashan Paramanathan of Chuffed and Stuart Fox of Venture Crowd who highlighted the similarities and differences between the donation-based, rewards-based and equity forms.  In between serious discussions on managing the risks for their platforms, they provided some anecdotes on the benefit of the various forms of crowdfunding to new businesses. They even mused how Lloyd’s innovative condom start up from a few years back could have benefitted from rewards-based crowdfunding!

imageThe flexibility and diversity of crowdfunding was a theme in a later session, where four distinct platforms ran through their particular niche. Tom Dawkins from StartSomeGood explained how their international platform helps fund social entrepreneurs and changemakers solve social issues in diverse communities.  Richard Briggs from Sportaroo set out how crowdfunding was being used to support both amateur clubs and elite sportspeople through sponsorship, merchandise or experiences.  Chris Gilbert from Equitise, an equity crowdfunding start up from AWI Ventures explained that their approach to the delay in Australia adopting rules for equity crowdfunding was to set up first in New Zealand.  Paul Schell from IconPark outlined how their innovative crowdfunding platform – indeed it is a World First – helps establish new restaurants and bars. They use a rewards based crowdfunding campaign to select a winner from shortlisted teams, who then gets a season running their restaurant concept in their Stanley Street facility in Sydney. (Note: INITIATE will need to ensure a visit to one of their venues is part of its next Australian event!)

In a slight change of tack, one of Australia’s academic authorities on crowdfunding, Professor Deb Verhoeven provided insights into its use by Deakin University to fund research projects. Its Research My World launched on Pozible in April 2013 & resulted in 6 of its 8 projects being funded. It brought $61,592 new research dollars in and generated about 200 media stories. The evaluation of this pilot has shown some interesting results.  In particular it has shown that Twitter was particuarly important in getting the message out, with the data analysis showing a strong correlation between retweets and funding commitments. Using this research Deb provided some useful lessons on communciations in crowdfunding in another session. In particular the successful campaigns involved the researcher showing the benefits of research to communities – as opposed to other academics. This in turn required both individual academics and their institutions to improve their ‘digital capacity’ and and ensure their video and social media communications connected with broader communities.

Visualisation of data from Research My World

Visualisation of Twitter data from Research My World

The gathering benefitted from the wisdom of one of the co-authors of the World Bank’s report on the potential of crowdfunding & the US JOBS Act, Jason Best from Crowd Capital Advisors. Jason gave a video presentation on issues in global crowdfunding, in which he highlighted the developments in the Asia Pacific region as governments such as Malaysia move to regulate for equity crowdfunding.  He pointed out that crowdfunding was consistent with Islamic finance principles and thus promised to be revolutionary in these societies.

Another internationally renowned speaker in the field, Paul Niederer CEO of ASSOB, the world’s first equity crowdfunding platform, provided a wide ranging presentation on equity crowdfunding. After touching upon Neil Young’s highly successful Pono player campaign on Crowdfunder, which raised over US$7M, following an earlier fundraise of US$6M through Kickstarter, he ran through a series of successful equity raises on the ASSOB platform. These included Preshafood ($A3.3M from 29 investors), Opmantek (A$0.7M from 28 investors), Flextank (A$0.8M from 36 investors) and K-Tig (A$1.5M from 20 investors).  Paul explained that successful equity fund raising required three key elements similar to reward-based crowdfunding; a compelling story, a strong team and good support base of followers.  Reflecting on both equity and rewards crowdfunding Christine Kaine from Business Angels,  an early pioneer of angel investing in Australia, reflected that rewards crowdfunding was a good solution for many of her start-up clients. It enabled them to prove their business concept, which would help them raise funds from angels or through equity crowdfunding.

The final session of the day examined crowdfunding for equity and loans. John Kluwer of CAMAC provided a detailed explanation of the thinking within their report on equity crowdfunding, or crowd-sourced equity funding as it has been termed within the Australian Government. CAMAC’s report analysed developments around the world and is worth a read. It recommends a special regime for Australia that would allow up the A$2M to be raised by a new form of exempt public company offering ordinary shares.  They recommended an annual investment cap of $10,000 with a maximum of $2,500 in any one company.  Equity crowdfunding platforms would have to be licensed by the Australian Security Commission, who they have suggested should develop some industry standard templates for disclosure. In their view platforms themselves would have to provide risk warnings – as they do in New Zealand and the United Kingdom – and provide only basic background checks on issuers rather than full due diligence.

Paul Niederer returned to explain in detail the key differences between rewards based crowdfunding and equity crowdfunding, and in particular how most equity raises have fewer than 100 funders. This means that the concept of a large crowd is not really appropriate to the regulation of this form of crowdfunding.  In this respect Paul considered the approach taken in the CAMAC report focused too heavily on raising funds from strangers, when ASSOB’s experience was that most equity  funding came from friends and family and their networks. There is also a different timeframe for the return from equity crowdfunding compared with that of rewards-based crowdfunding, which influences crowd behaviour.

Daniel Foggo, the CEO of Ratesetter Australia wrapped up by summarising how crowd-lending, or peer-to-peer lending works and the significant growth in this form of financing overseas.  This involves raising funds from investors through on-line platforms. Ratesetter is the largest peer-to-peer lender in the UK and is about to open for business in Australia, where it will join another new local platform, SocietyOne.

INITIATE 2 was the first occasion when many of Australia’s crowdfunding founders and experts came together to explore the common aspects of crowdfunding and current issues. It proved to be a fascinating day that highlighted its immense potential as well as providing a valuable networking opportunity for the pioneers of this emerging form of funding.  The next Australian INITIATE event will be held in Melbourne in the first half of next year.

 

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