Equity crowdfunding will have an immediate impact on New Zealand SMEs by making capital markets far more accessible to those raising funds. This new process expands the size, constitution, and capability of the capital markets for New Zealand companies. The reduced cost associated with capital raising, in both time and money, will encourage more SMEs to think bigger, scale faster, and seek out global markets. However, the benefits run deeper, and I believe that equity crowdfunding will affect investors in a more profound way than the companies seeking funding.
Aside from improving deal flow for current investors, equity crowdfunding has the potential to encourage a new wave of previously untapped individuals to invest in New Zealand’s future. The large and underutilised pool of potential investors in New Zealand will make a huge impact on the future of many of our young ventures. The emergence of equity crowdfunding will create the environment for wider involvement.
Equity crowdfunding improves the investment paradigm. An increase in the accessibility and transparency of investment opportunities, and a reduction in the risk profile through smaller minimum investment levels, means that less experienced investors can learn through doing. As long as investors understand the risks, and realise that they should not invest more than they can afford to lose, this should be a really positive development. The new regulatory environment and its transparency will encourage wider participation, as another channel opens up through which to make informed and educated investment decisions.
The investor pool will become more diverse. Women currently make up only around 12% of active investors, but the new pathway has the potential to encourage more women into the industry.
The initial indications are positive. Of the nearly 1,000 people who have registered as potential investors on Snowball Effect, approximately 40% of them are women. Women will share their experiences as investors or as entrepreneurs through their personal networks and on social media, and this will give other women the confidence they need to enter what has traditionally been seen as a male dominated domain.
Through my experience as an entrepreneur in New Zealand, I’m aware of the unique skills that women can bring to help businesses accelerate their growth. Equity crowdfunding can change the way we look at starting, growing, and investing in new companies. If it brings in more talented people, including more women, then that’s a good thing for all of us.