Posted on January 28, 2014 By iPledg With 0 comments

Crowd Funding – Lessons Learned in 8 Years of Equity Crowd Funding

iPledg - Logo - Low-ResolutionAs the equity crowd funding fraternity prepares to enter the starting blocks or (at best) begins emerging from them, there is one organisation which has years of experience under its belt, and from whom the rest of the equity crowd funding world can learn. Some say the shortest distance between two points is a straight line, but many would argue that the quickest route to any destination is a well worn path, as a straight line may include having to navigate some tricky and slow terrain. It is ASSOB (Australian Small Scale Offerings Board) from whom much can be learned.

ASSOB has been funding startups through equity investments since 2005. Deemed “Small Scale” due to issues being limited to only 20 unaccredited investors per year, offers are not limited when it comes to accredited and overseas investors. The relevant regulators strictly monitor all activity on the site, especially around the issuer and the way and the extent to which they accept investment from unaccredited investors. As such, issuers need to ensure they choose the 20 largest suitable applications to get the greatest leverage under the regulations.

This may not be entirely the same as the equity crowdfunding emerging in the U.S., but since 2005 when they decided to take an offline unaccredited and accredited capital raising business online, ASSOB has had eight years of experience which has seen over 300 raises with more than 2,500 investors having invested, and nearly $140 million has been raised to date. During this time, they have addressed many of the concerns that are only just now being considered by countries hoping to change their current legislation to allow for equity crowd funding.

ASSOB has set up internal probity measures such as legal monitoring for people, entities and offering compliance, appointing trained sponsors (like Time Masters Pty Ltd) to guide issuers through the capital raising process, and templated many of the processes to make it easier for capital raisers. In addition, they have helped shape the equity raising landscaping in Australia by lobbying and engaging with regulators to build an environment that allows for capital raising in a controlled yet not onerous environment.

Despite this, there have been some key learnings in all of those years, with all of the raises, and with all of the funds raised. Perhaps the biggest matters uncovered include not initially having oversight of the issuers share registry, originally thinking it could be all done online, and expecting issuers could manage large parts of the process themselves. Just as many companies currently starting to embark on running equity crowd funding platforms are finding out about these problems, ASSOB has had years of addressing these issues, and have developed workable, equitable solutions.

At present the average investment per investor on the ASSOB platform is around $30,000. Like many other countries, Australia is considering changing regulations to allow for broad scale equity crowd funding. With such proposed changes, it is hoped that the number of unaccredited investors per raise will move from around 20 to 100 or 200. This will allow platforms to scale and that is where the capital raising sector will change forever.

Already, some of the more astute platform operators around the world are realizing the benefit of experience in getting early and profitable traction in the equity crowd funding space as their governments allow it to come into being. ASSOB has already licensed the platform to Offerboard.com in the USA. They will be using the ASSOB capital raising engine, but their implementation will be different than ASSOB’s — understandably so. Each country’s legislation will vary slightly, so whilst the skeleton of the platform remains the same, the way it is fleshed out will need to be altered slightly in each case.

Despite the access to experience of operators like ASSOB, equity crowd funding will always carry some uncertainty and hope. The investor hopes that when they invest they will get their money back or better, but it is uncertain as to when this will happen. As with all investment, there is a degree of risk that needs to be recognized by all parties – regulators, issuers, investors and platform operators. But whilst such risk will never be completely eliminated, it is through recognizing and adopting the practical experience of organizations like ASSOB that risks can be mitigated and the equity crowd funding experience can be more successful and enjoyable for all.

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