Equity crowdfunding could give Australian startups a big financial boost

When it comes to tech companies, there are many Australian entrepreneurs punching above their weight.

From Atlassian to Freelancer, 99designs to Bigcommerce and Envato, Australian entrepreneurs have produced a number of world class tech companies. The likes of Nitro and Halfbrick Studios show that Australian tech innovation has what it takes to make it big globally.

Certainly, there is no shortage of Australian tech thinkers and tinkerers keen to solve the next wave of challenges.

For example, there’s Propeller Aerobotics, which is figuring out how to make it easy to connect drones to the cloud. In the wearables space, there’s AntCorp with its Ant-o Energy bands. Phenomec is working on virtual reality headsets. Vixtel Unity is working on redefining the tablet.

Then there’s Catapult Sports, the elite athlete tracking device maker that boasts AC Milan, Aston Villa, the New York Knicks, every AFL and NRL club, as well as almost half of the 32 teams in the NFL as customers.

And that’s just scratching the surface of Australian tech innovation. If I were to list every interesting Australian app developer, online retailer or cloud service provider, I’d be here all week!

So with all this innovation out there, what’s preventing the next big tech giant – the next Apple, Google, Facebook, Twitter, Samsung or Microsoft – being launched in Australia?

The perennial problem for Aussie tech companies, as in many other businesses, has been finance. However, a solution could be just around the corner, in the form of equity crowdfunding.

By now, most people will be familiar with crowdfunding sites such as Kickstarter, Pozible or Indiegogo. On these sites, people, community groups and businesses raising funds for a project can raise funds for a project by collecting small amounts of money as pledges from a large community of users. If a project raises a target, the users pledging a donation get a reward.

The problem is that these sites, at least in Australia, cannot offer equity as a reward, except to “sophisticated” investors. And to be a sophisticated investor, you need more than $2.5 million in investable assets or annual earnings of around $250,000.

A recent review conducted by Corporations and Markets Advisory Committee (CAMAC) on behalf of the federal government, released in early June, recommended opening up investment to anyone over 18, with a cap for “unsophisticated” investors of $2500 per company, to a total of $10,000 each year.

In my opinion, it’s a sensible suggestion. The cap protects people from investing all their money in a high-risk venture, while at the same time potentially unlocking thousands or millions of dollars for emerging Australian businesses.

Already, a growing number of countries, including the US, UK and New Zealand, have taken steps to unlock equity crowdfunding as a source of finance for businesses.

The federal government is considering the recommendations, and is expected to announce its official position in October or November.

And already, Australian businesses are developing crowdfunding platforms in anticipation of a possible change. A good example is Equitise, which discussed its proposed platform with Fi Bendall last month.

So all the pieces are in place to open up a new source of funding for Australian businesses – both in the tech sector and otherwise. Likewise, the innovation and entrepreneurialism needed for a strong tech sector is in place.

It’s now time for the federal government to step up to the plate with the legislation to make it a reality.

This article originally appeared on SmartCompany.