Opportunities being lost as crowdfunding debate rumbles on

The ongoing debate regarding the introduction of crowd-sourced funding legislation appears to have lost sight of the essential point. Start-ups, investors and the economy continue to miss out on valuable opportunities while people argue.

While other countries, including New Zealand and the US, already permit companies to raise capital under a crowd-sourced offer, the Australian legislation allowing public companies to do so has not yet come into effect.

The government is now proposing to also allow proprietary companies to raise capital by means of a crowd-sourced offer, with draft legislation currently under consideration.

Once implemented, these new measures will expand the scope of the legislation and allow more start-ups to raise the capital needed to fund new business opportunities.

The ensuing innovations will benefit the economy overall through job creation, and the sale of goods and services both locally and globally.

The changes will also open up opportunities for a greater number of Australians to invest in a sector that has been a leader in wealth creation in recent years.

Under the current regime, only those investors capable of being classified as “sophisticated investors” are able to invest in innovative companies. Less “sophisticated” investors have to wait until the company lists on the stock exchange before they are able to invest.

So-called “mum and dad investors” are unable to access the initial value creation, which is only available to those investors who were able to get in at an earlier stage.

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Source: Opportunities being lost as crowdfunding debate rumbles on | afr.com