Franceska Banga, the Chief Executive Officer of the New Zealand Venture Investment Fund, believes that the rule change in the Financial Markets Conduct Act that would allow crowdfunding would be beneficial to startups, Fairfax NZ News reported.
The change is slated to take effect on April 1. Under the present crowdfunding rules, using the crowdfunding platform to offer shares would need to meet a lot of disclosure requirements. Under the new rule, however, a new category of "licensed intermediaries" was created which could encompass crowdfunding platforms. Intermediaries may be allowed to provide shares offers reaching as much as $2 million yearly which would not fall under regular requirements for compliance, the report said.
Banga said that they have closely monitored the development of crowdfunding in the US and think that could positively affect startups in New Zealand. She added, "The early-stage investment community, and particularly angel networks and investors, need to consider how crowd-funding can be integrated with existing investment platforms in order to increase the capital available to young start-up companies."
In the US, platforms like AngelList would allow startups that have already obtained investment from angel investors to still raise more capital from crowdfunding efforts. According to Banga, this kind of arrangement is beneficial because it allows startups supported by angel investors to a wider investor pool.
Banga added, "People keen to invest through a crowd-funding platform might be more attracted to an investment proposition which has already attracted angel investors and due diligence has been done. They might also want the assurance that the investment is properly executed, and includes appropriate investor protections."
According to a report on The New Zealand Herald about the matter, Snowball Effect, an equity crowdfunding platform based in New Zealand is readying to roll out after the law takes effect on April 1. Snowball Effect Director Simeon Burnett said they have already received interest from startups who would like to raise funds and from possible investors as well, the report said.
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