Kickstarting Aussie Startups - Crowdfunding

This post is the third in a series on kickstarting Aussie startups.  The first post is here.

“Crowd funding” is a new way for startups to raise funding from smaller investors who do not qualify as so-called “sophisticated investors” and would otherwise be ineligible to invest.  President Obama's “Startup Act” proposes a crowd funding model that allows businesses to raise up to $1 million a year using regulated online investment platforms that permit smaller investors to participate in capital markets offerings. The US SEC would be tasked with providing protections to investors who would be limited to investments of no more than $10,000 or 10% of annual income.

Opportunity #3:  Leverage Australia’s broad investor base

Australians are avid investors in the stock market, and have among the highest per-capita ownership of shares in the world. We also have small business trading platforms, such as ASSOB, but such platforms do not favour unsophisticated investors.  That is because companies seeking investment are still constrained by the so-called “20/12 rule", which allows only $2m to be raised over any 12 month period from a maximum of 20 retail investors (specified under Section 708 of the Australian Corporations Act).

Proposal # 3: Crowd fund Qualified Small Businesses

Relax the 20/12 rule to enable crowd funding of Australian Qualified Small Businesses (QSBs). This would enable ordinary Australians to make investments in startup companies, within reasonable limits.  For example, along the lines of the proposed US guidelines, investments could be limited $10,000 per investor or 10% of annual income.

Imagine what we could do with a whole nation investing in startups?