Coming of age: Australian crowdfunding platforms raised $8.7m in the March quarter
Investing results for the March quarter suggest that when it comes to investing, Australians don’t appear to be too afraid of crowds.
Among the major crowd-sourced funding (CSF) platform, Birchal led the way raising a total of $4,780,700 across four companies, from a total of 3,294 investors (another two closed successfully in April). It was a similar story at Equitise, which raised just shy of $3.9 million from 2099 investors.
More broadly, $8.7m worth of crowd-funded capital raises were closed off in Q1 across the sector as a whole.
Of that amount, two funding rounds stood out; Birchal’s $3m raise for Shebah’s all-female ridesharing platform which set the record for an Australian crowd-funding raise, and digital bank Xinja, which raised $2,568,870 from 1,545 investors on Equitise.
Birchal co-founder Matt Vitale called it a “break out” quarter for the company and the sector more broadly, after legislation was passed last September which allowed crowd-funding platforms to provide services for private companies.
“I think the industry is tracking ahead of where UK market was at the same stage. But in terms of maturity, I think the local market is still in its infancy,” Vitale told Stockhead.
The makes the outlook a bit hard to predict much further out than a quarter-on-quarter basis. But in a broader environment where Australia’s economic growth appears to be slowing, it’s been a promising start for the ECF sector, which provides a unique alternative to traditional funding models in private markets.
A key theme running through the sector so far is that the bulk of companies using the crowd-funding model offer products or services pitched directly at the consumer.
That differs somewhat to the trends seen in other private markets such as Australia’s VC space, where investors increasingly lean towards companies that offer B2B platforms.
In that sense, the sector is carving out a bit of a niche for companies looking for innovative ways to increase customer engagement. In the case of the Xinja raise, for example, many of the company’s investors were already customers in the company.
A similar situation played out for Shebah, which didn’t have much luck on the traditional investor circuit.
“Prior to its Birchal CSF campaign, Shebah had been dismissed by Australia’s angel and VC investors,” Vitale said.
He called it a “perfect case study” for crowd-funding in Australia, where a company can initiate a fund-raising drive that’s “clearly supported by customers”.
Shebah’s round also included a monster $1m investment from an investor introduced to the company through Birchal’s Expression of Interest process.
At the same time, crowd-funding isn’t just an option of last resort if traditional routes don’t come off.
“I think there were some concerns levelled at the crowdfunding industry that astute investors, or the smart money, don’t participate in this area,” Vitale said.
“But that’s not necessarily true, particularly for company’s with a strong B2C proposition. I think a good example of that for us is the Speakeasy Group — this was a company that already had a profitable business model, and they still saw the potential advantages of raising funds via crowdfunding”.
So, in addition to a growing number of new companies, will the existing players on Birchal’s platform return in future to raise more capital?
For the bigger raises, a return to the market is capped slightly by the fact that legislation only permits companies to raise a maximum of $5 million every 12 months.
In that sense, “it really depends on the company”, Vitale said.
“Particularly for some of the smaller companies, we encourage them to use our platform to raise a manageable amount of capital, execute their strategy, and then return to the platform when they’re ready to scale up a bit.
“I think the cost-effective nature of crowdfunding platforms is particularly useful in that respect. You don’t have up-front management fees and external costs associated with other private funding routes.”