With equity crowdfunding still being a relatively new concept in Australia, there are a lot of questions that get asked during both your Expression of Interest (EOI) campaign and your Live Offer.
What we've learnt running over 40 campaigns is that questions tend to fall into two buckets: general equity crowdfunding questions and specific crowdfunding questions (relating to your campaign).
General Equity Crowdfunding Questions
What is equity crowdfunding?
It’s similar to the crowdfunding you see on Pozible, Kickstarter, etc, but instead of putting money in and receiving a thing (like a product, film etc), you put money into an operating business and you receive shares, becoming a part-owner. Businesses that want to expand rapidly or raise funding for (ie) more equipment/a new venue are well suited to equity crowdfunding.
What’s the EOI (Expression of Interest)?
This is a non-binding indication where people can indicate that they’d be keen to invest into the company. During an EOI campaign, potential investors can see your story, get to know the people behind the company and state the minimum they might invest and the maximum they might invest. This also means that companies can chat to interested investors before the raise goes live. People who EOI get exclusive first access to an offer before it is officially 'released' to the public.
How is it possible that an unlisted company can have more than 50 shareholders?
Investors that come in through a CSF own ordinary shares in the company but are listed as CSF investors in the share registry. As stated by ASIC RG 261, CSF shareholders don't count towards the 50 cap, even if you have thousands of shareholders in this category.
Is this an equity purchase?
Yes, investors will be buying real equity (aka ordinary shares) in the company hosting the offer. The amount of equity they receive is based on the amount they invest. The shares are typically the same class of shares as the founders and other shareholders.
What rules and legislation governs equity crowdfunding?
Crowdsourced Equity Funding (also known as Equity Crowdfunding) is governed by legislation that is covered by ASIC (RG 261) and can only be facilitated through licensed intermediaries (ie. birchal.com).
Can I sell my shares?
Shares in private businesses are not easily transferred and generally illiquid. However, once the 12 month holding period has passed after the raise it could be possible to sell to other shareholders or to move shares during company buy-back, employee buy-out or 3rd party purchase. This is dependent on the unique terms set out in each company's constitution and offer document. In most cases, investors divest of their shares during a future exit event - like a sale, IPO or follow-on capital raise.
Specific Equity Crowdfunding Questions (your campaign)
Below are likely questions your business will be asked during your capital raise with Birchal. Reach out to your Campaign Manager for advice and examples on how some companies have responded to the following:
- Will there be a dividend?
- What price will be set for the shares?
- What will the funding raised be spent on?