Frequently asked questions

General

• What is Snowball Effect?

  Snowball Effect is New Zealand’s leading private equity marketplace. We launched in New Zealand in late 2014, and since then have raised over NZ$53m of equity for a wide variety of companies. 

  We don't provide financial or investment advice. We provide vetted deal flow so you can discover and invest in interesting New Zealand growth companies that match the stage, industry or sector that you’re interested in investing into. You do your own due diligence, and make your own investment decisions. You may choose to follow investors who have already committed to the round. 

  Snowball Effect provides companies with a range of capital raising options, from private placement with family offices or high net worth investors, through to facilitation of a raise that is also open to members of the public.

• What is equity crowdfunding?

  The equity crowdfunding rules are contained in the Financial Markets Conduct Act 2013 and corresponding regulations. The regulations allow for each company to raise up to $2m from retail investors in any 12 month period. The key change in the regulations was to remove the requirement for a regulated “product disclosure statement” when offering shares to retail investors. This change drastically reduced the cost of making a public offer, and therefore opened up the wider equity capital market to cash-hungry early stage growth companies.
  

• Is Snowball Effect licensed and regulated by the Financial Markets Authority?

  Yes. Snowball Effect was one of the first two providers to be granted a licence by the Financial Markets Authority in July 2014, and the first to facilitate an offer under the equity crowdfunding regulations.

• What is a share register?

  A share register is a list of the owners of shares in a company. The share register is the official record of who owns which shares in a particular company. Companies are required by the Companies Act 1993 to maintain a share register. A company must maintain a share register that records the shares issued by the company and which records a list of the shareholders' names with their addresses, and the number of shares held.

• How do I change my email address?

  To change your Snowball Effect account email address, visit your visit your dashboard once logged in. Upon updating your email, you will be sent a confirmation email. Your email address will not be updated unless you confirm your new address.

• How do I change my rewards address?

  If your address has changed, you can change your rewards address by visiting your investor dashboard. Each entity can be assigned a unique rewards address.

• How do I close my Snowball Effect account?

  To close your account, visit your investor dashboard. Once closed, you will no longer be able to access your account, and we will no longer distribute communications to you.

Investors

• Who can invest in offers on Snowball Effect?

  Public offers are available to anyone over the age of 18, provided you comply with all legal obligations in accessing and making the investment. Private offers are available to those who meet the previous criteria and receive an invitation to the private offer. Wholesale investor offers are available to "wholesale investors" only (as defined in the Financial Markets Conduct Act 2013).

• What are the benefits of Snowball Effect for investors?

  Snowball Effect offers the opportunity to invest, support, and share in the success of high growth Kiwi companies.

  The benefits for investors include:

  • Deal flow: Investors get exposure to a consistent and varied flow of growth-oriented companies looking for funding.
  • Simplicity: The process of investing through Snowball Effect is simple, online, and secure.
  • No fees: Investing through Snowball Effect is free of charge.
  • Investor community: You can find out what other investors find interesting and appealing. Comparing your views against the views of other investors can be a useful cross-check on your own intuitions.
  • Engagement: Investors can ask questions and interact directly with a company throughout its offer period. Shareholders will continue to receive communications from the company if they invest.
  • Credibility: Companies listed on Snowball Effect follow our processes to ensure that they give proper consideration to offer information.
  • Protection: Investors receive a range of protections through securities law, company law, and often a shareholder agreement. There is no need to negotiate terms yourself.

  Snowball Effect is a marketplace. We don't provide financial or investment advice. We provide vetted deal flow so you can discover and invest in a range of interesting growth companies. You do your own due diligence, and make your own investment decisions.

• What is the Snowball Effect investment process?

  Snowball Effect's investment process is as follows:

  • Registration: Registration on our website is the first step and can be completed here
  • Browse offers: Browse both previous and current offers on the site.
  • Select investment: If you see an offer that appeals and you understand the investment, simply click ‘invest now’ and complete the required information. Once you have provided information to verify your identity, we will then debit the funds from your account and hold these in trust until the close of the offer.
  • Offer closes. When an offer closes, we will notify investors of whether or not the offer has reached its minimum target. Companies that reach their funding target receive the funds and shares are issued to investors. If a company does not reach its minimum target, all funds held in trust are returned in full (without interest) to investors.
  • Post-offer. As a shareholder you can expect ongoing communications from the companies you invest in – they have statutory obligations, but also have an incentive to keep you engaged as part of their “crowd”. Snowball Effect does not manage these communications, but we offer assistance to companies to facilitate and encourage ongoing flows of information to investors.

• What happens if the minimum target is not reached?

  If the minimum target is not reached within the offer period, the offer will expire and the invested money will be returned to the relevant investors’ bank accounts.

• Are these investments risky?

  New Zealand law prescribes the following “Warning statement about crowd funding”:

  • Equity crowd funding is risky.
  • Issuers (companies issuing shares) using Snowball Effect’s facility include new or rapidly growing ventures. Investment in these types of businesses is very speculative and carries high risks.
  • You may lose your entire investment, and must be in a position to bear this risk without undue hardship.
  • New Zealand law normally requires people who offer financial products to give information to investors before they invest. This requires those offering financial products to have disclosed information that is important for investors to make an informed decision. The usual rules do not apply to offers by issuers using Snowball Effect to raise funds. As a result, you may not be given all the information usually required. You will also have fewer other legal protections for this investment.
  • Ask questions, read all information given carefully, and seek independent financial advice before committing yourself to any investment.

  Snowball Effect thinks that the warning statement above is important – we want investors to be aware of the risks associated with investing in early stage companies.

  For further information on the risks, please see our equity crowdfunding warning statement.

• What protections are there from the risks of investing?

  Snowball Effect is a marketplace. Investors using our marketplace are responsible for assessing the risks of investing in each offer.

  In addition to the assessment which each investor undertakes themselves, a number of other processes are in place to mitigate risk:

  • Snowball Effect facilitates investors obtaining clear and concise information to assist them to decide whether to purchase shares. Investors can also ask companies to clarify or provide additional information.
  • Snowball Effect uses secure payment systems. Your money is held in trust from the moment we receive it until it is transferred to the company upon the completion of an offer.
  • Investors have protections through company law and securities law in New Zealand. Investors may also have additional and enhanced protections through a shareholder agreement relating to each company they invest in. This agreement is provided as part of the full information suite prior to being able to transact.
  • Snowball Effect reduces the risk of fraud through checking, against publicly available information, the identity of the company and information provided by the company relating to the identity and character of its directors and senior managers.
  • Snowball Effect excludes any company from our services if we are not satisfied as to the identity of the company or of the company’s directors and senior managers, if we have reason to believe that any of the company’s directors or senior managers are not of good character, or if we have reason to believe that the company is not likely to comply with the obligations imposed on it under the service Snowball Effect provides.
    
  • Snowball Effect will exclude any company from our services that engages in conduct that is misleading or deceptive, or likely to mislead or deceive.

  While risk can never be eliminated, Snowball Effect aims to be the best in the market at outlining risks to investors and helping to reduce risk where possible.

• What are the fees for investors?

  Investing through Snowball Effect is free of charge.

  Snowball Effect retains any interest that is earned on investor funds for the period that they are held in Snowball Effect's trust account during an offer period. This interest is retained as an administration fee.

• Do you need to be a New Zealand citizen or permanent resident to invest?

  No, citizens of most countries are able to invest in Snowball Effect offers. In doing so, however, international investors must not breach any law or regulation applicable to that investor by accessing, or subscribing for shares in, any offer. We also have a minimum investment for international investors of $10,000.

• What due diligence does Snowball Effect do?

  Snowball Effect is a marketplace. We don't provide financial advice or investment advice. We provide vetted deal flow so you can discover and invest in a range of interesting growth companies.

  Snowball Effect does not carry out "due diligence" as that term is normally used.

  Please see the Disclosure Statement for a description of the checks that Snowball Effect carries out on each company.

• Liquidity - How do I sell my shares after I have invested?

  There is no guarantee that you will be able to sell your shares when you want to, or at all.

  Investments in early stage companies are generally long term, and you should not invest money if you are likely to need that money in the near or medium term. The timing and nature of your return is typically uncertain.

  Returns can be realised in 4 ways:

  • Exit – a company may be acquired by a third party and distribute the proceeds to shareholders.
  • Listing – a company may list on a stock exchange like the NZX, providing a market for shareholders to sell their shares.
  • Dividends - a company may choose to distribute profits to shareholders in the form of dividends.
  • Private share sale – selling shares privately is generally lawful, however some companies may not facilitate it.

• What is a shareholder agreement?

  A shareholder agreement is an agreement between the shareholders of a company. You may be required to sign a shareholder agreement when you become a shareholder in a company through Snowball Effect.

  A shareholder agreement contains very important information, and is likely to set out how some aspects of the company should be operated, shareholder rights and obligations, information on the regulation of shareholder relationships with each other, and how management will communicate with shareholders.

• When will I get a return?

  Investments in early stage companies are generally long term, and you should not invest money if you are likely to need that money in the near or medium term. The timing and nature of your return is typically uncertain.

  Returns can be realised in 4 ways:

  • Exit – a company may be acquired by a third party and distribute the proceeds to shareholders.
  • Listing – a company may list on a stock exchange like NZX, providing a market for shareholders to sell their shares.
  • Dividends - a company may choose to distribute profits to shareholders in the form of dividends.
  • Private share sale – selling shares privately is generally lawful, however some companies may not facilitate it. There is no guarantee that you will be able to sell your shares when you want to, or at all.

  Investors may also receive non-cash rewards or incentives for investing in a company - these will be specified in each company's offer.
  

• What rights do I have as a shareholder?

  Your rights as a shareholder will vary from offer to offer, and will be outlined in the company’s shareholder agreement and/or company constitution, as well as arising through general company law. Please make sure that you read and understand all relevant documents before making any investment.

  Some of the key rights usually attached to shares include:

  • The right to vote (unless they are non-voting shares).
  • The right to an equal share in dividends.
  • The right to an equal share in the distribution of the surplus assets of the company upon liquidation.

• What should I do if I have a problem or complaint with Snowball Effect?

  If you have any complaints or queries about the services we provide, please feel free to contact us on 0800 766 922 or [email protected] to let us know. We care about the service we provide, and are committing to resolving any issues you have.

  If you are not satisfied with our response to your issue, you may be able to refer the complaint to the Financial Services Complaints Limited, an approved dispute resolution scheme under the Financial Service Providers (Registration and Dispute Resolution) Act 2008. They can be contacted at PO Box 5967, Wellington 6145 or [email protected] or 0800 347 257.

Companies

• What are the benefits of online capital raising?

  The types of capital raising offers on Snowball Effect include public offers, private offers, and wholesale investor offers. Each option benefits from the efficiency of an online process, and includes the following administrative functions:

  • Investor onboarding and compliance with anti-money laundering obligations.
  • Electronic signing of legal documents by investors.
  • Collection of payments.
  • Validation of wholesale investor status (if necessary).

  Snowball Effect is New Zealand's leading private equity investment marketplace. We launched New Zealand’s first equity crowdfunding offer in August 2014, and have since raised more funds than all of the other equity crowdfunding marketplaces put together (over 70% market share). We have a track record of raising capital for a wide variety of companies, and we pride ourselves on our high success rate to date. Our key advantage is offering companies the best chance of successfully raising funds. We do that in the following ways:

  • Support
    Quality offer materials are critical to capital raising success. We provide support as you develop your offer and offer marketing plan.
  • Investors
    We put a lot of effort into building a quality audience of potential investors, and our investor members are people who are here for the purpose of investing in growth companies.
  • Credibility
    Snowball Effect is seen as the market leader in New Zealand. Offers on Snowball Effect attract the attention of experienced investors.
  • Process
    We have designed the lowest cost and most efficient process possible for both investors and companies. This enables us to provide excellent value for our fee, and ensures a fast and simple capital raising process.
  • Judgement
    We understand online capital raising better than anyone in New Zealand. If we think that our capital raising options aren’t right for you, we'll tell you at the earliest opportunity so that nobody is wasting time and you aren’t risking your brand and reputation on an offer with little chance of success.

  We look to work with standout companies because we want Snowball Effect to be known for quality deal flow.

• Is my company suitable for Snowball Effect?

  Online capital raising isn’t right for every company. Low-growth businesses, and businesses in their very early stages of development that have not yet generated any revenue, are generally not suitable.

  Another consideration is that you're selling a stake in your company to outside investors who will need to see a return on their investment and may have different goals than your own. It’s important that you, and all the existing shareholders in your company, are aware of the implications. Snowball Effect, and our legal partner Wynn Williams, will work with you and your own legal advisors to help you decide whether you’re making the right capital raising decisions for your company.

• What is the Snowball Effect funding process?

  Our offering includes public offers, private offers, wholesale investor offers, and bespoke capital raising assistance. A summary of these options can be found here.

  Each of these options has a flexible process depending on what's best for your company.

  Contact our team to learn more, or to request our Company Guide which explains the typical process in detail.

• How much can my company raise through Snowball Effect?

  The equity crowdfunding regulations allow for each company to raise up to $2m from retail investors in any 12 month period. The key point of these regulations is to remove the requirement for a regulated “product disclosure statement” when offering shares to retail investors. This change drastically reduced the cost of making a public offer, and therefore opens up your offer to the wider equity capital market.
  

  A company can raise more than $2m if the balance comes from “wholesale investors”. For example Squirrel Group raised over $3.4m through Snowball Effect, with up to $2m allocated to retail investors and the rest from wholesale investors.
  

• Is there a minimum raise amount through Snowball Effect?

  Snowball Effect has no minimum target, and assesses each company on its merits.

• How long is the offer period?

  The offer is listed on Snowball Effect for a period determined by the company.

  In some circumstances the offer may be extended for a further period of time at the discretion of Snowball Effect and the company raising funds.

  An offer may be closed early in a number of circumstances, for example if the maximum target is reached within the offer period.

• Who is responsible for marketing and promoting my offer?

  Promoting an offer to potential investors is the responsibility of the company making the offer. We will help you create an offer marketing plan, and will provide you with marketing and promotional advice, but we do not actively promote individual offers – as there are legal restrictions as to what we can and can’t do.

• What happens once a successful offer has closed?

  Once the final legal documentation is completed, the money will be transferred to the company's bank account and shares will be issued to investors.

• How long will it take to get my offer live and for me to receive the funds?

  We split of offer process into 3 periods - offer preparation, offer period, and closing.

  Some companies have had their offers live within 2 weeks. However, we expect that most companies will require an average of 12 weeks to prepare their offer before listing on Snowball Effect.

  Most offers run for an average of 30 days.

  The closing process takes an average of 2 weeks.

• What happens if the minimum target is not reached?

  If the minimum target is not reached within the offer period, the offer will expire and the invested money will be returned to the relevant investors’ bank accounts.

• Can I raise more than my minimum target?

  Each company sets a minimum target, and has the option of setting a higher maximum target. If a minimum target has been reached, any amount up to and including the maximum target can be raised during your offer period.

  The equity offered to investors must be scaled up proportionately if an amount above the minimum target is raised.

• How much will raising funds through Snowball Effect cost my company?

  Please refer to the 'Raise' page on our website to learn more about the different capital raising services we offer. Snowball Effect's fees are dependent on the capital raising services provided

• What is the Takeovers Code and will it apply to my company?

  The Takeovers Code applies to Kiwi companies that have 50 or more voting share parcels.

  Any company meeting that criteria is deemed to be a "code company". The Takeovers Code governs certain transactions and events that impact on the voting rights attaching to the shares owned by shareholders of "code companies".

  The role of the Takeovers Panel and the Code is to ensure that all shareholders have a fair opportunity to participate in control-change transactions in Code companies (such as takeovers and certain allotments or acquisitions of parcels of shares). The Code also ensures that shareholders have adequate information to assist their decision-making for these transactions.

  The Takeovers Panel has indicated that they are not averse to companies deciding to structure their holdings so that they do not fall under the definition of “code company”, provided that the structuring is undertaken in a manner that complies with the Code. They have also released a partial exemption for small companies.

  There are a number of structural options available to companies to avoid being classified as a "code company". If you would like to discuss this further, or would like to receive additional information please get in contact with us

• Will my offer be accepted by Snowball Effect?

  Snowball Effect reserves the absolute right to accept or refuse offers before they are released on the marketplace. We will assess your company and key people against a number of eligibility criteria, as described in the Disclosure Statement.

• What is a shareholder agreement?

  A shareholder agreement is an agreement between the shareholders of a company. You may put together a shareholder agreement for investors to sign when they become shareholders in the company.

  A shareholder agreement contains very important information, and is likely to set out how some aspects of the company should be operated, shareholder rights and obligations, information on the regulation of shareholder relationships with each other, and how management will communicate with shareholders.

• Does Snowball Effect have partners to help me develop my offer?

  Yes, the Snowball team has strong partnerships with many organisations who offer a variety of package deals to help you get your offer in the best shape possible for launch. These include legal, financial, video, design, and PR experts.

  Our focus has been on making these packages as cost effective as possible so that you don't need to do the legwork.
  .

• How do I manage dozens of investors?

  Companies that raise capital through Snowball Effect utilise the stakeholder management tools provided by Orchestra. Orchestra provides shareholders with an online record of their shareholding in the companies they invest in, along with access to investor communications and company documentation, all in one place.

  We also offer a nominee shareholding service. A nominee structure simplifies the share register and prevents your company from becoming a “Code Company” for the purposes of the Takeovers Code by allowing you to have a large number of investors under one parent shareholding.

• How much impact will having hundreds of shareholders have on my company?

  How much influence your new shareholders will have on your company depends to a considerable degree on what is included in the governing documents, how you structure your offer, and how much of your company is sold. Minority shareholders generally have little direct influence on how the company develops. Companies are ruled by simple majority for most decisions. For example, minority shareholders will not determine who the directors are unless the majority of shareholders who vote on an issue agree with them.

• Who can make an offer?

  Any company can apply to make an offer through Snowball Effect. Companies that do well with online capital raising usually have demonstrated market validation, meaningful and growing revenue, and potential for significant growth in the future.

• Can I invest in my own offer?

  Yes, absolutely, provided that doing so does not breach any law or regulation applicable to you as an investor.