A multimillion-dollar business growth fund is set to begin investing in ambitious companies through a crowdfunding initiative.

Using the newly launched crowdfunding platform Snowball Effect, the University of Auckland Business School Entrepreneurs' Challenge has evolved this year to offer handouts to boost governance available to young entrepreneurs.

Challenge investment committee chairman Greg Cross said applicants need to be raising more than $250,000 through the crowdfunding platform, with the Entrepreneurs' Challenge tipping in investment on the same terms offered through the Snowball Effect.

As with the main Challenge, competition applicants cannot be property or banking related, and must have half or more of their capital raise target committed on the crowdfunding platform.

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Companies must have established governance structures, at least five investors on board and debt levels not exceeding 25 per cent of the capital raising.

"We are confident that this new offering will create some excitement in the crowdfunding market and look forward to reviewing applications from innovative and global-thinking entrepreneurs," said Cross.

Currently the Snowball Effect has only a couple of listings for investment - a fully-funded offer from brewery Renaissance and a pitch for film funding by director Lee Tamahori.

Hamilton said that unlike the main competition, which announces its finalists today, the initiative won't run to a set timetable, instead waiting for the right investment opportunity.

"We see that equity crowdfunding may touch another part of the SME community. It's attractive to the Challenge to be able to back a business that has got validation of funding through the crowdfunding campaign."