Australia’s first academy launches for businesses wanting to ride crowdfunding wave in 2019

Australia’s first academy launches for businesses wanting to ride crowdfunding wave in 2019

Australian businesses will learn how to become crowdfunding champions – thereby helping to avoid an emerging ‘credit crunch’ – as part of a government-supported private academy to be addressed by two international experts.

Sydney-based ReadyFundGo has launched a crowdfunding academy – which is the first of its type in the country – to operate across Australia during early February. The academy has received funding from the Australian Government’s Entrepreneurs’ Programme.

The academy launch comes amid evidence that 2019 will be a turning point for the business crowdfunding sector, thanks to new regulatory changes, credit shortages and rising interest in the fundraising option.

In October last year, the Australian Government commenced its new legal framework to support equity crowdfunding, under which public and private companies can crowd-source up to $5 million in funds a year by selling shares to retail investors.

ReadyFundGo operates a different model – known as rewards-based crowdfunding – under which businesses raise growth funds from existing or potential customers, in return for delivering special privileges for these customers in the future.

The 3rd Asia Pacific Region Alternative Finance Industry Report, which was released in November 2018, found that rewards-based crowdfunding is the most popular form of crowdfunding in Australia.

Some $26.7 million was raised via rewards-based crowdfunding in Australia in 2017 – more than any other country ranked in the Asia-Pacific region (excluding China).

The shift towards crowdfunding follows recent reports of tighter lending restrictions by banks in the wake of the Royal Commission findings, which is making it more difficult for businesses to borrow money. These restrictions are forcing some businesses towards high interest rate alternative lenders.

The most well-known company to use rewards-based crowdfunding in Australia is northern NSW’s Flow Hive, which raised AUD$16.9m by pre-selling ‘new age’ bee hives which make it easier to harvest honey. The company has now sold 51,000 hives to 130 countries.

ReadyFundGo chief executive officer Jill Storey said the number of people starting campaigns on her company’s platform increased from 666 in 2017 to 947 in 2018 – a jump of 42 per cent. She expects to also see an increase in demand in 2019.

Businesses in the food & beverage, health, technology and environment & sustainability sectors were the most prolific and successful users of the platform in 2018.

Ms Storey said 67 food & beverage businesses used the platform in 2018 (up 56 per cent from 43 in 2017). This included three breweries which all hit their proposed funding targets – illustrating the ongoing pulling power of craft beer.

“We’re launching this academy to teach businesses about how to maximise their chances of success from crowdfunding campaigns, at a time when many businesses are looking for new and innovative ways to raise funds,” Ms Storey said.

“Importantly, rewards-based crowdfunding can help create an immediate cash-flow and customer base and allows businesses to test the potential of new products and services, without getting into debt. This is particularly important, given that it appears to be getting harder and increasingly expensive to get business loans.

“Rewards-based crowdfunding can also lead to, and complement, other forms of business growth funding, in particular seed or angel funding and equity crowdfunding.”

ReadyFundGo has invited international crowdfunding campaign experts Bojan Smiljanic and Claudio Melfi – who have collectively helped businesses crowdfund $4.6m around the world – to run workshops to be held in Sydney, Melbourne and Brisbane during early February. The workshops will teach businesses about both equity and rewards-based crowdfunding.

Mr Smiljanic said he would be teaching students about overall campaign management, while Mr Melfi said he would focus on the importance of digital marketing.

In 2017, entrepreneur Lindsay Davis raised $38,000 as part of the build of Brisbane’s first indoor snow sport and adventure centre, through a rewards-based crowdfunding campaign on ReadyFundGo. The campaign sold early bird passes to customers.

Lindsay raised a further $1.8m from investors, with the centre launching in October 2018. Ms Davis’ company Urban Xtreme is now running an equity crowdfunding campaign to help expand the Brisbane centre and support a national expansion.

“The rewards-based campaign we ran through ReadyFundGo was helpful on so many levels – not only did it help us with initial operational costs and cashflow before launch but it also proved to investors that we had broad-based customer support for our idea,” Ms Davis said.

Matthew Pinter, Chair of the Crowd Funding Institute of Australia, said the academy’s launch could not have been better timed, with 2019 expected to the year that crowdfunding became a mainstream fundraising option for businesses.

“With legislation finally in place to support equity crowdfunding and the strong track record of rewards-based crowdfunding, I expect that 2019 will be the year that crowdfunding comes into its own as a fund-raising tool,” Mr Pinter said. “Do not leave your crowdfunding campaign to chance, build a crowd, back some campaigns, learn all you can, and take advantage of the academy while you can”.

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