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The Crowdfunding Market in New Zealand

MAX PROPERTY GROUP ARTICLE

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You have probably read and heard a lot about crowdfunding. As the name would suggest, with crowdfunding the ‘crowd’ is investing money in a project or object. Since there are no requirements, the investors could be anyone. For example, the person who is seeking funding will present their business idea online and set a target of the amount of money they would like to collect for realizing their idea or model. However, in the modern era crowdfunding is becoming a great phenomenon. It’s easy to find anyone on social media and if they don’t have any social media channels, they are likely to have a smartphone.

Another reason why crowdfunding is becoming more popular is that some banks are very reluctant when it comes to financing projects for smaller entrepreneurs. Crowdfunding is a great alternative for financing your projects. 

In 2020, $34 billion was raised globally through crowdfunding. The success rate of the crowdfunding campaigns was 78%. An individual crowdfunding campaign raised an average of $568. The average crowdfunding campaign had a duration of 9 weeks. 

This article will focus on the crowdfunding market in New Zealand.  On the first of April of 2014, a new licensing regime for crowdfunding service providers (CSPs) was introduced into New Zealand Law. This was the start of the crowdfunding market in New Zealand how it is nowadays. 

Types of crowdfunding

It’s relevant to know which types of crowdfunding there are. After this, we can zoom into the crowdfunding market in New Zealand. There are four different types of crowdfunding:

  1. Donating to charity. The lender gives their money to a good cause and has an immediate view of where their money is going.
  2. Sponsoring or reward-based crowdfunding. The lender is supporting a project for a (non-financial) consideration. The financial aspect is subordinate to this and the lenders feel attached to the objective pursued by the crowdfund applicant.
  3. Equity-based crowdfunding. The lender is investing in a company. With the promise of dividend and an increase in the value of the shares or bonds for example. The return on investment is important with this kind of crowdfunding.
  4. Debt-based crowdfunding. Individuals or companies can borrow money from a group of people who provide the loan together. Meaning, the investors lend their money to a company to receive interest.
    • A new rising trend in the real estate industry is gaining investment via crowdfunding. For instance, with property crowdfunding, many people can put their money together to invest in real estate. It allows investors to build or diversify their portfolios. People can get on the property investment ladder for just a few hundred New Zealand dollars.
    • Another form of Debt-based crowdfunding is Peer-to-Peer Lending. The investor is lending money to a project in return for interests.

New Zealand has quite a few different crowdfunding platforms, considering the size of the country. The most popular and thus most successful crowdfunding platforms will be discussed below.

1. Snowball Effect

This was the first equity crowdfunding platform to launch in New Zealand. Snowball Effect is New Zealand’s leading private equity investment marketplace. In August 2014, they launched the first equity crowdfunding offer. They have since facilitated more investments in the country than all other equity crowdfunding marketplaces together.

In November of 2020, NZ$ 75 million has been raised on the platform. The investor audience of Snowball Effect contains 23.000 investors. The number of completed offers is 60.

2. PledgeMe

PledgeMe was the first crowdfunding platform in New Zealand. Since 2012, they have expanded the possibilities of crowdfunding for New Zealanders by providing three different ways to crowdfund. These three different ways can be divided into project campaigns, equity campaigns, and lending campaigns.

The platform has funded over 1.542 successful campaigns. The crowdfunding platform PledgeMe is one of the first crowdfunding platforms in New Zealand that hits $ 50 million in August of 2020.

3. Equitise

Equitise has its origin in Australia. The Australian equity crowdfunding legislation has been a slow start, so the platform has been trying out its platform in New Zealand. Equitise is a trusted investment platform that raises capital for extraordinary companies through investors looking to back innovative founders.

Equitise has raised $28 million over 33 successful equity crowdfunding offers.  Most importantly, the investor community has more than 50.000 investors. The largest investment that one of the investors has made was $300.000. They have a success rate of 85%. 

4. The Property Crowd

The Property Crowd provides an online service, where investors can buy and sell PropertyShares, which are shares in companies that own investment properties. It’s an interesting platform for people who would like to build or diversify their portfolios. There are no hidden fees or costs, the platform is completely transparent.

The Property Crowd launched in April 2019, offering shares for two properties. However, in May 2019 the company suddenly withdrew the properties, the platform was closed for further investment. The investors got their money back. The Property Crowd hasn’t put any property on the platform.

Crowdfunding statistics of New Zealand

Since the approval in 2014 the crowdfunding market, especially equity-based crowdfunding, has had an immediate impact on New Zealand’s investment landscape. In its first year, NZ$ 12 million was raised by 21 companies through equity crowdfunding. In 2017, the growth continued and an amount of NZ$ 13.4 million was raised.

If we compare the crowdfunding statistics of 2019 with 2018, a few things stand out. Firstly, in 2018 there were 4 providers that facilitated offers when there were 5 providers in 2019.  Secondly, the total capital raised was $ 22,3 million in 2019, this was 12,9% lower in comparison with 2018. In 2019, a total of 21 crowdfunding offers were made. Of those 21 offers, 19 were successful. In 2018, 32 crowdfunding offers were made, whereby 28 offers were successful. A fraction more of the offers made in 2019 were successful.

In conclusion

The crowdfunding market of New Zealand is still relatively small in comparison with other countries. However, since the new crowdfunding regime went into effect in 2014, the growth of the crowdfunding market of New Zealand has not been showing any signs of slowing down. There have been a few very successful crowdfunding platforms that are profiting from this growth, like Snowball Effect. Not only crowdfunding platforms have been enjoying the benefits of a growing market. Investors in New Zealand are enjoying the significant benefits that new technologies like online real estate investments are bringing to the table. Investors are going from old-fashioned property investments to investing small amounts (starting from around NZ$ 100) through crowdfunding online.

Max Crowdfund is making use of this growth by expanding to New Zealand. The fintech platform built on blockchain technology is launching in New Zealand under the name Max Crowdfund NZ Agency Limited.

Written by: Julia van der Kooij

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