THE POWER OF CROWDFUNDING

THE POWER OF CROWDFUNDING

Source: Australian and NZ Property Journal September 2013 Innovative funding methods are finding their way into all kinds of projects from the arts (music albums, book publishing, to community projects – parks, child care centres and gyms.) In Rotterdam, Holland, separated by a railway line and a motorway and faced with government inaction, a group of the city’s residents banded together to co-fund a wooden pedestrian walkway. International examples of crowdfunded local projects guide the way to a potential revolution in investment and development. Also known as peer-to-peer or P2P, crowd-funding is essentially about using the internet to raise funds from many people to support a specific project or business idea. Australian crowd-funding websites include Pozible (funding mainly artistic projects) and Sproutback. Crowdfunding involves potentially millions of investors contributing small amounts of money, as little as AU$1, to fund the development of products or services. It is effective because in theory it’s easy to set up, has low compliance and reporting requirements and requires only pocket change on the part of the investor. Many of the entrepreneurs that use crowdfunding would otherwise struggle to raise necessary capital, with banks and traditional investors finding their start-ups too risky or too small. In spite of the potential of crowdfunding Australia is lagging behind other countries as regulation is not geared to this sort of investment yet because of limits within existing financial regulations. (New Zealand, US, Canada, Italy and France have already re-drafted their legistlation to allow crowdfunding to flourish). Recognising a growing interest in crowdfunding, ASIC issued a

guidance aimed at better informing the market of its position in August 2012. In June2013 former communications minister Stephen Conroy announced that the government would undertake a review to determine a ‘best practice framework for crowdsourced equity funding’ with a report due soon in April 2014.

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