Young Guns: Suited-up Daniell plays by the rules

Josh Daniell has brought investors and early-stage firms together with his platform Snowball Effect.

Josh Daniell says he doesn't have any trouble being taken seriously as a millennial running a finance business.

But the 28-year-old, who co-founded crowdfunding platform Snowball Effect, still puts on a nice suit.

"One of the reasons I always wear a suit is I think there's some people who would feel disrespected if you didn't play by the rules that are normally there in the financial markets," Daniell said. "I think the backing of our wider team has been really important for credibility. The other founding members are older and our directors are very well respected in the markets."

Snowball Effect launched last August with a funding campaign for Blenheim-based craft brewery Renaissance Brewing.

Since then, the platform has successfully raised more than $8 million for eight companies.

Daniell said the firm identified a gap in the market around early-stage funding.

"We could see that there were companies that really struggled with access to finance and we could see that there was interest there from investors," he said. "And those groups were struggling to meet."

The capital-raising method, which became possible in this country last year through a once-in-a-generation overhaul of securities legislation, allows companies to issue shares to the public through online platforms.

Daniell said there was potential for broadening the range of companies that used equity crowdfunding.

"So far we've seen a bit of a range of stages and types of companies, but they're all early-stage, high-growth companies," he said. "We think that this method of funding will work for more yield-type investments - lower growth, maybe property-based investments. We think we'll see a broadening of types of companies that use it."

Some commentators have raised concerns about whether New Zealand investors fully understand the risks around equity crowdfunding. Daniell said some companies would fail to meet forecasts, or even "simply fall over".

"I think the first thing we try to do is make sure the expectations are right when investors go into this," he said. "What we can do from a platform perspective is have cold, sober information about the nature of these kinds of investments and make it clear about what the risks are going into it. Then it's really up to investors to decide whether they're happy with that risk-and-return profile."

Daniell said a couple of companies that had raised cash through equity crowdfunding had already failed in Britain, where platforms have been operating since 2011.

"The response [to those failures] has been pretty mature," he said. "People have accepted the fact that within this asset class there will be failures ... I think where there deserves to be fuss is where there has been people misrepresenting the potential of a company in the offer. I think that's where the real risk is.

"Another thing we can do as a platform is make sure that companies are aware of the risk of making false or misleading statements in that offer and making sure they're being pretty sober about the information they're putting out, too."

Daniell said Snowball Effect is considering launching a secondary trading platform for trading shares in companies that have raised money through equity crowdfunding.

As things stand now, it would be difficult - if not impossible - to get out of a crowdfunding investment because there is no exchange for trading shares as there is for stock exchange-listed firms.

Daniell said Snowball Effect was considering a secondary platform that would allow trading in shares during a short period each year.

"That way the company does its annual report, does its financials and some forward-looking information and then people can trade on the back of that."