Law opens new pipelines for crowdfund capital - Foss

By Ben Chapman-Smith

Kiwis Doug Barber and Jimmy Hayes have already raised $190,670 on Kickstarter for their travel gear business.
Kiwis Doug Barber and Jimmy Hayes have already raised $190,670 on Kickstarter for their travel gear business.

Kiwi entrepreneurs will find it easier to raise capital when new crowdfunding rules come into effect next year, says Commerce Minister Craig Foss.

Under the Financial Markets Conduct Act, individuals and firms will be able to access capital through crowdfunding and peer-to-peer lending without having to issue a formal prospectus.

Foss told accountants at the CPA Congress in Auckland today that the new law included mechanisms to create secondary or "stepping stone" exchanges.

"The compliance cost of listing on NZX can often be a bit of a challenge for firms looking for new capital," Foss said.

"These new markets are intended as a way to help those businesses grow without incurring significant costs and also to provide signals to investors that they may be worthy of some risk-taking endeavour."

The FMC Act, described as a "once-in-a-generation law change", recently passed its third reading in Parliament and will be phased in from April next year.

Foss said the new rules would make equity financing possible through crowdfunding - where people turn to a large network for backing.

"It's very hard for investors to find that good idea and it's very hard for that person to get that good idea down, or at least it used to be. Via the net, there will be aggregators who link entrepreneurs with investors from anywhere in the world," he said.

"It's a matching agency of ideas to capital at a very low level."

Crowdfunding would help those Kiwis who had "the great idea" but not the money to take that idea to market, he said.

Kiwi entrepreneurs Doug Barber and Jimmy Hayes are currently running a funding campaign on US site Kickstarter for their start-up travel gear company Minaal.

The pair set out to raise $US30,000 but have just passed $190,670, with a week still to go.

There are a number of crowdfunding platforms running in New Zealand, such as PledgeMe and Boosted, and Kickstarter recently announced plans to open up to Kiwi projects.

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