StartupSmart explainer: What’s the deal with equity crowdfunding, and should I do it?

Last week, the Australian government passed new legislation extending equity crowdfunding to private businesses and therefore considerably more startups.

But what has actually changed, and should startups be taking advantage?

Equity crowdfunding allows investors to pledge relatively small amounts of investment into a company in exchange for equity in the business. Initial equity crowdfunding legislation passed in March last year, however, at that point the funding method was only available to unlisted public companies.

This meant startups — typically private companies — had to go through an onerous process of converting to an unlisted public company in order to take advantage of the new opportunity.

At the time, Labor MP and then shadow minister for the digital economy Ed Husic said the bill excluded more than 99% of small businesses and startups in Australia.

The amendment to extend the framework to eligible private companies was announced in the 2017 Federal Budget. However, while it was first introduced into parliament in September last year, it has taken more than a year to be passed.

Despite the restrictions, however, several startups, including digital banking startup Xinja and solar energy startup DC Power Co, have run successful campaigns. Read more

Stephanie Palmer-Derrien - Startup Smart - 17 Sep 2018