As crowdfunding continues to spread across the globe, Australia will acquire its first equity crowdfunding platform in February of 2014.
A venture capital firm named Artesian is plotting the launch of the new platform, which will be named VentureCrowd. The site will follow what is now becoming a traditional formula – having to pass a screening process before pitching an idea to the crowd.
Artesian managing partner Jeremy Colless said that the platform-to-be will encourage investors to build a diversified portfolio of startups in order to maximize return and mitigate the inherent risks of investing in seed-stage projects. Mr Colless clarified:
“More than 50 per cent of startups fail, and the distribution of outcomes is asymmetrical. Approximately 90 per cent of the returns in a diversified portfolio come from 10 per cent of the startups. This is the reason that a filtered deal flow and a diversified portfolio are critical strategies for early stage venture investors.”
The Australian Government’s Corporations and Markets Advisory Committee is currently conducting a review of the law surrounding equity fundraising. There is an expectation that the practice of equity crowdfunding will be legalized, but VentureCrowd have taken a calculated risk by jumping-the-gun. The platform will target sophisticated investors for the time-being, thus complying with existing laws. If there is an alteration in the law, however, Mr Colless confirmed that VentureCrowd would likely open up to retail investors.
Mr Colless further suggested that Australians would relish the chance to shift a substantial percentage of high risk capital away from junior miners and explorers given the chance:
“Australians have a reasonably high appetite for risks but that hasn’t been focused on technology start-ups or the start-up scene in general, it’s very much been focused on junior miners and explorers. With that sector undergoing an enormous cooling-off period there’s an enormous opportunity for a great deal of that asset to be redirected into the technology space, which is going to be, on the macro-level, a hot space for the next three to five years.”