Australia will follow US lead on crowdfunding, says Pozible

Local crowdfunding company Pozible expects Australia to follow the US lead in allowing start-ups to raise money from big numbers of investors over the internet, known as crowdfunding.

The US laws are designed to make it easier for small business to raise capital and conduct an initial public offering.

They laws received bipartisan support and the thumbs up from the US Chamber of Commerce, although they have been amended to boost protections for investors.

Under the bill that has recently passed the US Senate, crowdfunders have to post their offering on third-party websites that are registered with the securities regulator.

Rick Chen, co-founder of local crowdfunding platform Pozible, says he believes the US laws are the first of their kind and he expects Australia will follow suit.

“I think Australia will hold on a bit and see how the US goes,” Chen told Smart Company.

“The US is really the world leader in innovation and the rest of the world tries to adopt what it’s doing.”

Chen says increasing the number of investors a small company or start-up can have would broaden the investment pool to smaller investors.

At the moment, Australian start-ups can raise money from a maximum of 20 investors, with investment capped at $2 million over a 12-month period. These rules apply to regular investors, not sophisticated investors.

“Restrictions on how many investors can invest in a particular company doesn’t give a chance for everyday people to get involved,” he says.

“It would be a fundamental change; it won’t just be the big boys with the big boys [able to invest].”

Pozible is Australia’s first and largest crowdfunding company. Chen says since its launch about 18 months ago, about 1100 projects have gone through the process of getting crowdfunding, with $2 million raised on its site.

Pozible raises money for projects with a creative outcome, although Chen says in the future it might launch a platform for business.

This story first appeared on SmartCompany.