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Crowd funding gets serious, but there is still chance of potato salad

Aug 31st, 2014 | By | Category: Editor's Picks, Front Page Layout, Lead Story, News

 

Co-founder of PledgeMe, Anne Guenther

PLEDGEME: Anna Guenther. IMAGE: Mike Metcalfe

PLEDGEME has entered the world of business equity funding – and even raising $55,000 for a potato salad is a possibility.

Almost 7000 people contributed $55,492 to a United States Kickstarter campaign to make potato salad earlier in August.

PledgeMe’s Anna Guenther says the potential exists for a similar campaign in New Zealand, which only reinforces the idea behind crowd funding – the crowd deciding what to support.

An equity crowd funding license, issued by the Financial Markets Authority this month (August), makes PledgeMe among the first in New Zealand to host campaigns offering financial rewards.

Kiwi entrepreneurs will be able to raise capital up to $2 million a year by selling shares on the crowd funding platform.

“Equity crowd funding means companies can now raise capital more easily, transparently, and interactively than making a public offering of shares or running a private seed round through friends,” says Guenther in an interview with Techday.

However, Pattrick Smellie, from The Business Desk, is sceptical about equity crowd funding.

He says start-up companies are not likely to be raising enough capital to really make a difference in their prospects, and managing a large number of small first-time investors will add extra work.

The amount of disclosure required of companies seeking crowd-funding is very low compared to most investments.

“That’s the idea, of course, and reflects the generally small sums they are seeking to raise and the small individual sums that are likely to be invested by individuals,” Mr Smellie says.

He says investors need to recognise what they want to achieve by investing, and that there is risk involved.

“If their aim is not to invest for a return but to support a business or cause that they like, then that won’t matter.

“But if it’s in the hope of making a return, they would need to go into it with open eyes and an expectation of high risk that they won’t see their money again,” Mr Smellie says.

PledgeMe does basic background checks on company directors to ensure they have not had shady dealings in the past.

Investors will also need to register in acknowledgement that start-up investment is risky.

Ms Guenther says it is not up to PledgeMe to determine if a project is good or bad.

“We just check if it’s legal and the rest is up to the creator and their crowd,” Ms Guenther says.

She says the other growth area for crowd funding is matched funding.

This initiative pairs campaigns with organisations that will match the funding raised.

Two campaigns have already successfully worked with matched funding this year – documentary filmmaking, and smart energy solutions in Wellington.

There are no equity campaigns currently running.

PledgeMe has raised nearly $2.7 million with 644 successful projects since its creation in 2011.

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