Crowdfunding platforms probably won’t replace investment banks, but they will shake things up a bit
Last year, Australia’s crowd funding platforms raised 116 per cent more cash than the year before.
The $31.2 million total easily surpassed 2018’s total of $14.4 million.
“What we like is that it [crowd funding] is democratising what is traditionally an exclusive sector – and that is wealth and investment,” AgUnity chief operating officer Angus Keck told Stockhead last year.
“Usually you need to be a high net worth [investor] or a family office to get to make these [early-stage] investments.
“Now it isn’t a bad thing to be one of these, but a regular person with some money who is passionate about a product can participate in investing in this product – becoming part of that journey.”
Login to these platforms and you’ll find there’s no shortage of deals in 2020, including some for upcoming IPOs.
OnMarket, for example, is listing thedocyard and ARMnet – two technology stocks which will list on the ASX next month.
And yes, even investment banks are beginning to use these platforms.
These listings do not count among the equity crowd funding figures; banks still led the IPOs, they just used platforms to remove the hassle of paper forms.
While this $31.2m figure pales in comparison to the $5.3 billion raised by sub-$500m, ASX-listed market cap companies in 2019, this trend could be one of several rapid shifts in the financial industry. Another example is commission-free trading – when it began in America, more established brokers quickly followed suit.
When this process is done through platforms, it is not unreasonable to ask — what further value would be added by using an investment bank to “lead” an offer? Could ASX-listed companies go straight to the platforms?
Stockhead spoke with Jonny Wilkinson, co-founder of Equitise, which has hosted several notable crowd funds since it began, like Xinja.
Wilkinson sees his platform as supplementing rather than replacing investment banks.
“Technology and platforms are definitely growing and further enabling traditional Financial Services and Banking,” he said.
“We do not see ourselves as competition or replacement to traditional investment banks. Our model and ethos is about working with great partners that we like doing business with to add value to investors and companies.
“There’s definitely potential for a lot of the investment banks to utilise tech better, particularly for distribution and scale. We are always happy to work with potential partners to improve the capital raising process.”
Platforms cannot truly compete with and replace full service investment banks, especially those that have deposits and retail arms like Citi or Macquarie, Wilkinson said.
“That being said platforms will definitely shake up the industry and push out some old school low-tech players who aren’t diversified or are leaders in their space,” he said.
“We do believe that as the market becomes more established and efficient that we would push out some of the corporate advisers who do not add a lot of value to companies raising funds.”