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Hope’s role in Equity Crowdfunding

At a recent Angel Investor event I overheard an entrepreneur seeking capital ask an Angel Investor the following question.

“What sectors do you specialise in when selecting investments?”

The Angel Investor said he had no special preference as he was primarily after “anything that had enough in it to back up a 10 times return”.

That got me thinking.

Maybe a “Hope Matrix” like the one below would be a quick way for an entrepreneur or founder to work out where there particular opportunity is best pitched.

If they definitely have something that fits squarely in the top right then why bother with equity crowdfunding. Just go straight for the money!

  • Top right: Near 10 times return and all the paperwork to back up a rational decision
  • Top left: We believe you’ll get up to 10 times your money back but we have not got all the proof you need
  • Bottom right: There will be a good return, maybe 5 times your money back and here is the proof
  • Bottom left: We believe you’ll do well investing but we have no proof at this stage other than our self-belief


In my experience, after over 300 equity crowdfunding raises, most issuers seeking capital believe that they are firmly in the top right square and sincerely believe that just putting the raise on the platform will have well-heeled investors flocking.

If you look closely at the matrix though there are two things that are needed to achieve this:

  1. The perception that their opportunity will deliver a 10 times return (the easy part)
  2. The figures, evidence, support, credibility etc to back up this belief. (the hard part)

It is in the second “hard” part that they usually fall short. Thus despite persistent pitches to those in the top right no investment results.

It would save the issuer and prospective investors a lot of time if they realised where they were in the matrix, improved their position where they could, then pitched accordingly.

This is where equity crowdfunding and unaccredited investors come in.

Where there is hope and no evidence … passionate supportive followers are needed for a successful equity crowdfunding raise. These backers wont be from the top right unless they have a strong emotional connection with the people, technology or geography of the raise.

In the U.S.,  Title II platforms (Accredited Investors), pretty much operate in the top right and their is fierce competition for the good deals. It is also an easier road to travel to find investors. In countries where unaccredited investor platforms are operating the raises that reach the platforms are sometimes in the top right but more often in one of the other quadrants.

In anywhere but top right the founders, the capital raising team and the platform need to roll up their sleeves and direct as many followers as they can to the profile page on the web site. In our experience around 600 on average per raise.

Plus during the raises journey any information or updates that can move the perception of the raise along the line from emotional to rational will increase the odds of getting investment.

To me, this is true equity crowdfunding. Top right / Title II platforms follow a mechanisation of investment processes built on analysis and terms sheets. Other quadrants are built on hope, trust, connection, belief and continual communication.

After the money from an equity crowdfunding raise is invested in the business it is often likely that they can then move to the top right quadrant and get the expansion capital they need. Until then it is best that the founders work out where they are in the matrix, pitch accordingly, choose the right platform and flourish.

This BRW article by Adir Shiffman inspired this post! “Why equity crowdfunding for start-ups is wrong for Australia: entrepreneur Adir Schiffman”

Whenever I read “alternative investment class” and “crowdfunding” in the same sentence I get nervous.

Having been invited and discussed equity crowdfunding with many overseas security regulators, including the U.S. SEC and FINRA, the regulators are all trying to protect retail investors using a trading protection mindset. Obviously the majority of their time and the financial  journalist’s time is spent in the listed / traded stocks space so that is where their knowledge and expertise is. In reality they should look at how startup, early stage and growth businesses actually get funded, who funds them, in what amounts keeping their focus on the ones that are NOT destined to be the next Facebook.

Take these quotes from the article:
1) “allowing retail investors to place small bets on start-up businesses”
2) “a retrograde step to permit totally inexperienced and unqualified individuals to personally invest in risky assets”
3) a “curated” list of opportunities

As Matthew Henninger, CEO of CEDI-US, Inc. (The Collaborative Economic Development Initiative) said recently ”We have gone from an investing society to a trading society and we need to get back to being an investing society”


Only 5% of the ASX transaction volume actually ends up in actual businesses. The rest is “pass the parcel” or gambling. Before trading dominance took over we had 12 Stock Exchanges in Australia where their primary purposes was matching investors and entrepreneurs.The figures were probably tilted the other way back then. 95% investing 5% trading.

Regulators, legislators and most articles in financial publications are written from the viewpoint that crowdfunding will be a new asset class and it is best that someone else uses mum and dad’s money to invest in this new asset class.

However this doesn’t recognise the fact that most businesses actually start with the “friends and family” money. No-one else will fund them in these early stages. In the U.S.38% of Startup funding or $60 billion comes from this source. Contrast this with VC’s $22 billion, Angels $20 billion and Banks $14 Billion.

Not everyone that “invests” is after a 10x return and the opportunity isn’t curated because the investor has some connection with the business and the investor isn’t after flipping the investment in the near future. They invest because they are supporting someone or something they know or care about. It is in the legitimisation of this investor type that fairer investments and job creation lies.


Australia has adopted the term “crowd sourced equity funding” rather that equity crowdfunding but let’s break it down.

1) C = Crowd  = Equity crowdfunding statistics show that this is primarily the entities crowd not random mum and dads
2) S = Sourced = The investors are sourced from that crowd
3) E = Equity = Shares are issued directly in the entity
4) F = Funding  = Funding comes from share sales

ASSOB, an Australian company, has the best stats on this. Some were used in the recent World Bank report on Crowdfunding. What we see is that the majority of companies raising funds through equity crowdfunding would never make a “curated” list, or would never raise funds if they relied on “small bets on start-up businesses”.

They are businesses eager to make their way in the world but they need the support of a network of people around the business to get traction.


I agree with the Adir Shiffman’s last paragraph as I have written extensively on this topic.

“Instead, the government must ……. take advantage of Australia’s strong existing frameworks.”

Small Scale Equity Offerings are equity crowdfunding raises. ASSOB stats show that on average a personal “crowd” of around 660 are gathered around a start-up seeking funds. Of those around 200 download the offer document and 20 invest. Statistics worldwide from Crowdcube, Seedrs and ASSOB show that most raises have under 200 investors so this is not a situation where there will be thousands of investors.

Australia has a “strong existing framework” in it’s Small Scale Offerings legislation and adjusting that to allow more than 20 retail investors per annum would do far more for “crowdfunding” than the expectation that thousands of people will queue up to invest $2,500 each. Flawed thinking.

And as to investor numbers. VC’s and Angels often say we don’t want to deal with lots of investors but they forget that without them the business they are thinking of investing in of wouldn’t exist!

Without equity crowdfunding in Australia in the form of Small Scale Offerings people would not be able to buy Preshafruit’s awesome triangular shaped juices in just about every supermarket in Australia, or the U.S. military wouldn’t be using Ocular Robotics cameras, or Opmantek’s 20,000 users worldwide including some of the largest telecoms wouldn’t have add on modules for their network software. There was no curated list for these companies when they started on ASSOB. They gathered their crowd, raised the funds and moved on to the point where they are now on these “curated lists” for the type of investment vehicles mentioned in the article above.

Solution? The government should instruct the regulator to use its “strong existing framework” and update the small scale offering legislation by increasing the 20 to 49, 100 or 200 for the year 2015 instead of as Adir rightly says “following a flawed US model”

Australia’s ‘Small Scale Offerings’ legislation combined with our regulator ASIC’s ‘Class Order’ or exemption to the rules regarding the promotion of these types of equity offers is, inarguably the first equity crowdfunding legislation in the world.

Both the Small Scale Offerings legislation that was enshrined into our Commonwealth Corporations Act in 2000 and the ASIC Class Order 02/273 which came into effect on 11 March 2002 work together to provide an exemption from the prescriptive fundraising provisions of our corporate legislations for companies making direct offers to persons within their network or for those involved in ‘making or calling attention to offers of securities’ through a Business Introduction or Matching Service.

The legislation was purpose designed as part of the government’s policy to encourage small and medium business to more easily raise funds from personal contacts, management, employees and those assisting to raise the capital, with less red tape and financial burden to produce disclosure documents.

The word “crowdfunding” wasn’t trending in 2000 – in fact, it hadn’t even been invented by merging 2 concepts together – but if we look at a Small Scale Equity Offering coupled with the Class Order (the ASSOB way) and today’s Equity crowdfunding raise, they both have similarities…

  • You need an issuer offering equity in its company
  • You need a platform to publish and promote the issuer and its offering
  • You need a number of people (crowd) to deliver the resultant investment

Of course, on the 11th of March 2002 when the Class Order was introduced “personal contacts” were a lot different than they are today. Back in the day, personal contacts were a set of human contacts known to an individual, with whom that individual would interact with at specific intervals for mutually beneficial reasons.

Nowadays, the internet has enabled people desirous of flocking around all types of meaningful activities to gather far more easily and effectively, extending the ‘personal contact’ concept beyond the immediate peer group. The internet has also provided enhanced abilities for the dissemination of information so that those contacts can be directly communicated and kept in the loop about activities they have expressed interest in.

It can be said that our Small Scale Equity Offerings legislation has not kept pace with changes in technology that has resulted in the evolution of our personal connections.

ASSOB’s experience is that around every small scale offering equity raise, a “crowd” gathers. Statistics for the last 14 successful raises on the ASSOB platform show that the average raise was $800,000 and the crowd size or ‘followers’ for each of these ranged between  335 and 991 people. The average being 667, meaning the “crowd” for each raise was 667 on average.

For those who say “equity crowdfunding” legislation doesn’t exist in Australia, it is easy to get fixated on the fact that only 20 ‘personal contacts’ (retail) investors are permitted to invest in an equity raise. However, this is not a limit on the size of the crowd, it is a limit on the number of retail investors you can accept from that crowd in any 12 month period.

If we revisit what is needed for a crowdfunding raise:

  • You need an issuer offering equity in its company
  • You need a platform to publish and promote the issuer and its offering
  • You need a number of people (crowd) to deliver the resultant investment

Is it the size of the prospective investor crowd that legislators should focus on, or the number of investors that are able to invest, that it is important? Meaning should we build a system for hundreds and thousands of potential investors to invest, or a reasonable number of actual investors?

Taking off our rose-coloured glasses, let’s look at reality …
Both ASSOB and Crowdcube’s equity funding platforms have been operating for a number of years with retail (“unaccredited”) investors. In ASSOB’s case 63% of investors are retail or unaccredited.

Recently I scrolled through 101 completed raises on Crowdcube. Most companies that had raised the funds they sought had obtained under 100 investors to achieve their targets. And with Crowdcube you can invest as little as a hundred pounds if you choose!  Seedrs the U.K. platform that works on a slightly different equity crowdfunding model where investors in the entity raising capital don’t receive shares directly in the entity but are represented by single shareholder nominee structure but even in their case the average number of investors is around 180. Compare this with reward raises.

1) Star Citizen 34,397 backers

2) Coolest Cooler 62,642 backers

3) Ubuntu Edge 27,635 backers

4) Pebble Watch 68,929 backers

5) Pono Music 18,220 backers  (Neil Young)

6) Wish I was here 46,520 backers (Zach Braff)

7) Veronica Mars 91,585 backers (Rob Thomas & Kristen Bell)

The reality is … equity crowdfunding is small scale equity offerings with low investor numbers an area in which Australia and its regulator ASIC is a world leader, underpinned by our Class Order regulations to strengthen investor confidence in these types of raises.

In small scale offerings, friends, fans, family and followers buy equity as retail investors to support the business, while later the high net-worth investors (sophisticated / professional / angels) join in. There is no evidence of “the crowd” flocking to invest in these types of equity raises, however according to American statistics 38% of investment in small businesses come from friends, fans, family and followers and it is on the legitimisation of this that regulators should be focussing.

One of New Zealand’s first raises under its new equity crowdfunding legislation, facilitated on the platform Snowball Effect has an overfunded status. High profile movie stars were involved in the promotion of “The Patriarch“.  $391,000 raised from 157 investors. No stampede from the crowd here in the region of hundreds and thousands of investors waving $100 notes! The numbers would probably have worked under a system where the 20/12 was expanded to 100/12 and 60 more people from the crowd took part under whatever “crowdfunding” appropriate legislation based around CAMAC eventuated.

Having monitored our own 310 raises for $140 million in this area and kept an eye on the only other platform in the world working directly in this area (UK – Crowdcube) there is no evidence that the hundreds and thousands of investors CAMAC have allowed for in their recommendations will ever materialise. The belief CAMAC embraced has manifested a response that doesn’t accord with the reality.

Equity offerings, with retail investors, seldom have over 100 investors.

And … why would they want to?

How would a startup or early stage company manage the governance processes of hundreds of investors on a startup or early stage company budget?

Is that wise practice when directors should be focused on growing the company, not the politics of investment?

Should it be supported?

Especially with an exempt public company that doesn’t even need to report for 3 years.

The “Crowd” with reward crowdfunding is generally believed to be people in the world at large.
However if you listen to  Slava Rubin of IndieGoGo or other leading reward platforms participants, they all maintain that there is no point putting up the project unless you know where 40% of your funders come from straight up. The rest of the funding is hoped to be generated by additional marketing efforts.

Slava Rubin … ” Some people want to believe that there are leprechauns with buckets of gold that just start jumping around from campaign to campaign and they just fill your baskets with gold. Now that’s not to say that you can’t get a stranger that you’ve never met to give you money. That happens all the time.  But what you need to do is move that snowball down the hill. You need to get that first 30 or 40% through your own effort or your own work and lots of contacting people”.

My view after many conversations with leaders worldwide, the consensus is that if ASIC shifted the 20/12 to 100/12 and permitted platforms like ASSOB to display limited information about the offerings, we would be 90% of the way towards the best equity crowdfunding legislation in the world. CAMAC recommendation by themselves wont work but would be a bonus of perhaps 20% of each raise with the 100/12 in place.

At the end of the day our experience shows that if you had to rely on hundreds of people investing up to $2,500 each, in say a $500k raising, you would need around 400 of them which simply won’t eventuate unless you are Neil Young or Zach Braff!

However if you really think about who is investing from the crowd, if you can secure 80 investors (Friends, Fans, Family & Followers) at say, $10k average under a 100/12 rule small scale offering, even securing 20% from accredited investors who are not included in the count, a simple raise could secure up to a million dollars, all workable under existing legislation.

20/12 no longer works as it was envisaged due to technology advancements, however before we completely disband legislation and exemptions that achieve the fundamental goal of retaining investor confidence relying upon platforms like ASSOB, wouldn’t it be more efficient for the tax payer and quicker for those businesses desperate to access this type of funding, to simply change the 20 to 100?

Because reward crowdfunding came first most regulators are fashioning their equity crowdfunding legislation for unaccredited investors around the pathway and figures reward crowdfunding has trodden.

They are two different animals though.

1) Reward crowdfunding is based on instant gratification (You get the DVD, watch, cooler etc as a reward)

2) Equity crowdfunding is based on hope. (You will wait years for an outcome and in the meantime you live on hope.)

However regulators, including advisory bodies like CAMAC in Australia, are building legislation recommendations that are built to handle volume (extrapolation from rewards) rather than recognising that the equity raises built on hope and protected by securities legislations will seldom have hundreds and thousands of investors. Why? If you pump up hope you mislead investors and there is plenty of legislation to prevent this. Directors are liable for misleading statements.

What start up or growth SME wants hundreds and thousands of investors and more importantly what would they need to say (pump up) to get hundreds and thousands of “retail” or “unaccredited investors.

Both Crowdcube and ASSOB’s equity funding platforms have been operating for a number of years with “retail” or “unaccredited” investors. In ASSOB’s case 63% of investors are “retail” or “unaccredited.

Recently I scrolled through 101 completed raises on Crowdcube. Most companies that had raised the funds they sought had obtained under 100 investors to achieve their targets. And with Crowdcube you can invest as little as a hundred pounds if you choose!

So why spend months working out how to build legislation to allow for hundreds and thousands of investors? Why not focus instead on the 95% of raises that will have under 100 shareholders, will create jobs and benefit society.

If we look at the American statistics for external funding sources the $60 Billion from Friends and Family is as much as all the other sources put together. It is in the legitimisation of these funds through proper share certificates and holding statements and loan documents that the bulk of equity crowdfunding potential lies for society. Yes there will be additional investors beyond this due to the raise being empowered by “equity crowdfunding” but for a raise based on hope I doubt it will be over 20% of the funds raised for 95% of raises. Friends and family funding will still provide the majority of funds raised.


Startup_Funding___FundableThis is where the regulators should be focussing. On the reality of equity crowdfunding as evidenced by existing platforms.

How can regulators empower startups and growth companies so that they can accept legitimate investment from friends, family, fans and followers of businesses plus say an additional 10 to 25% more from “the crowd”.

In Australia’s case there is over 20 years experience with friends and family funding through the small scale offerings legislation. Why not just modify it tomorrow, as you would in any lean startup environment, and and see if shifting from 20 to 100 retail investors per annum is a good start.

Ask any advocate of the lean startup.

Bringing in totally new legislation for equity crowdfunding based on the best unproven equity crowdfunding  legislation around the world is high risk.

It may only suit the 1 to 5% of companies that get thousands of investors and thus be a failure.

These  1 to 5% of companies would probably have been picked up by angels or VC’s anyway.

Surely regulations should be focussed on the companies that make up the 95% that will have less than 100 shareholders.

Equity Crowdfunding and Regions

A hundred years or so ago regional funding was all the rage. Crowdfunding legislation is again looking at regions as one state after another legitimises intra-state crowdfunding.

In the video below I detail the shift in funding from regions to one central point and back again.

Stock Exchanges used to be primarily funding matchmakers

The future of economies will be determined by the success of its new businesses developing from the nursery into fully-fledged functional businesses.

In the mid-1800’s there were six stock exchanges, one in each of Australia’s state capital cities, Melbourne, Sydney, Brisbane, Adelaide, Perth and Hobart in Tasmania.

There were also smaller exchanges born out of the gold rush days of the 1860’s such as the Bendigo and Ballarat exchanges in Victoria. Then there was the Newcastle Stock Exchange founded in 1937 that in the past had listed as many as 300 local and regional companies. A number of these went on to become significant businesses.

These regional stock exchanges were all serving their local communities and fulfilling their original purpose as an exchange. Not to trade shares, but rather to raise money for local businesses in the most cost-efficient and effective way.

Since then all these regional stock exchanges have disappeared, being merged into a single entity, the Australian Securities Exchange (ASX) affectively closed them as they didn’t have a huge volume of transactions, and trading is now centered on the ASX.

However, like the 1860’s the need for capital to grow new businesses and create jobs, particularly in rural and regional Australia is greater then ever. The mission of the Regional Funding Hubs is to assist local small and medium sized enterprises gain better access to growth capital.

It’s my opinion that, in the future, there are other avenues we can explore to raise capital for new businesses. Why not harness local funding from private investors who want to invest just a portion of their portfolio locally.


Establishing a network of Regional Funding Hubs

I believe this can be achieved by establishing a network of Regional Funding Hubs across Australia to list evaluated companies needing investment and link them with local investors willing to participate.

Local people are encouraged to invest in their own community because their mothers, fathers, sisters and brothers could work there.

So, for example, take a thousand investors in a region each with say $10,000, this would provide a pool of $10 million dollars for a region, without the need of a bank to support it and avoiding the high cost of floating and listing on a stock exchange.

Effectively then, we’re almost recreating these regional sources of investment without the need for volumes of trading.

Once established, Regional Funding Hubs, not only retain investment in an area, but also start attracting inward investment as well.

There are tens of thousands of unlisted “small” companies involved in industrial production on a local and regional scale throughout Australia. Through the establishment of Regional Funding Hubs we can enable direct investment into these to grow productivity and increase employment in Australia.


Without straining the public (tax payer’s) purse

Result? Well, small companies get access to local lower-cost funding from more reliable investors. Regions retain and attract investment capital, and investors gain access to local investment opportunities.

Governments also win, as Regional Funding Hubs nurture entrepreneurship, business building and local job creation without straining the public (tax payer’s) purse.

So what’s not to like?

6000aDay.001Success leaves clues.

I wondered, what is “Best in Class” in raising funds from predominantly retail or unaccredited investors.

Best way to find out was to look at 16 of the most successful, recent Startup equity raises on the ASSOB Equity funding Capital Raising platform. These 16 raised over 11 million dollars together on ASSOB.

Most of these companies were after their first capital, meaning there was usually some sweat equity already, maybe some family money, but most were not ready for Angels or VC’s. Thats why they came to ASSOB.   Bootstrap, then ASSOB, then Angels then VC’s.

Lets determine what is “Best in Class” from the sixteen recent ASSOB raises that raised on total $11.4 million.

  • Raise size. $425,000 to $1,592,000 with an average of $637,666. You may seek to raise less or more than $600k but our experience has shown that an opportunity with a convincing, compelling and credible story, coupled with a balanced, passionate and likeable team generally raises from $500k upward for an equity raise.
  • Average amount raised daily. $680 to $6,076 with an average of $1685. So if you are out to raise some equity funding from unaccredited investors $1685 per day is a good figure to start with to work out how long you will need to raise your money. Best in class $6,076 a day. Lets say $6000.
  • Crowd size. Generally the larger your crowd  the more you raise. Gathering a crowd is essential to a raise. The stats show that the crowd size is usually between 335 and 991 people. These are people that have visited your profile page and have had more than just a brief look. The average crowd size is 667 people. Of these 667 people around 40% actually download details about the offer including the offer document. On average 8% of them invest. Best in class is a crowd of 991. Lets round that off at 1000.
  • Investor locality. 60% of investment comes from the same state or province so geography matters.
  • Investor type. Over half of investment came from retail or unaccredited investors. While the average was 56% the number of retail investors in raises ranged from 32% to 79% Usually the first $200,000 to $300,000 came exclusively from this group. Here is the breakdown.
    • Retail  / Unaccredited investors 56%
    • Existing Shareholders 17%
    • Sophisticated / Accredited investors 15%
    • Overseas investors 6%
    • Associates of he business 4%
    • Professional / Accredited investors 2%
  • Raise Sectors. Not every company is headed for a Silicon Valley exit. Most are not as exciting as the SnapChats and Ubers of this world. The 16 raises included here covered a broad range of sectors. All companies were Australian with Australian innovation. Fitness, Pharmaceutical, Welding technology, Cloud technology, Designer Furniture, Robotics, Wealth Management, Risk Management, Dental Technology, Online Photos, Open Source Software and Senior Welfare.

So what does all this mean if you are seeking equity capital?

If you are preparing for an equity crowdfunding raise, including retail/unaccredited investors, then it is well worth playing around with these “Best in Class” stats to get a feel about where your investment could come from and in what amounts.

Say you want to raise $600,000 based on performing like the “Best in Class”.

  1. If you do a good job, and work hard, the fastest you should be able to wrap it up is in 100 days
  2. You need to gather a crowd of just under 1000. That means you need to drive 1000 interested people to your profile page on the equity funding platform.
  3. Focus at least 60% of your effort on local investors.
  4. Retail investors are needed to get initial traction. By the end of the raise you will have at least 32% of your investment from this group and in some cases as high as 79%.

In a sentence ?

$600k in 100 days from a gathered crowd of 1000 with 60% local investors and over half retail/unaccredited investors.

Andrew Ward and Startup88 recently hosted a discussion on the recent CAMAC Australian report on Crowdfunding.

Here are the closing summaries from Paul Niederer and John Kluver.

The full discussion can be accessed here!

My view is that the report was well researched and well written. However unless there are other changes in the early stage funding environment like more condusive employee share ownership in  startups and lifting the 20/12 to 50/12 or 100/12 it may be legislation that will be largely unused by the majority of startups.

Crowd is a broad word and it can be your crowd (or tribe), someone else’s crowd (their tribe) or an awaiting crowd in the big wide world.

While many a crowdfunding raise yearns to leap into volumes of people that the offering has no contact with at the start of the raise, in reality, not a great many are successful in this leap.

For the purpose of this blog post’s subject … “Crowd” … is what Kevin Berg, a great Crowdfunding researcher, formerly from massolution, termed third level survivorship participants. I know that 1st and 2nd level contacts are part of the crowd but bear with me.

While reading the latest publication in the crowdfunding world, the Australian CAMAC report, I thought how much it was structured around the crowd at the third level. People with no connections to the capital seeker at raise start. This is not a bad thing but to get a raise away for say $500k to people that you don’t know, with little or no curation by the platform is a tough gig for an opportunity that hasn’t any runs on the board and is in startup stage.

Yes there are some really really attractive startups at a very very early stage that raise investors pulses but most don’t fit into this category. Most need lots of 1st level and 2nd level contributors to kick them off. To reach say $500k these people (friends, fans and followers) need the ability to contribute more than $2,500 per annum. With the adoption of the CAMAC regulations there will still be a restriction that only 20 of these investor types (1st level and 2nd level) can contribute over $2,500 unless they are accredited investors.

The Australian Government report on Crowdfunding, produced by CAMAC, is a well researched, well written, balanced and convincing document. They did a good job.

However many submissions requested that the small scale offerings exemption be lifted above 20 investors so that those known to the company (their tribe), that don’t belong to the third level “crowd”, can support their mates endeavour. These important players in many raises were not addressed in the report.

The stats below show that most raises have under 100 investors and the ones that do truly leap over to the third level is about six in one hundred.  CAMAC stuck strictly to their brief, no issue there, its just that the eventual implementation by the government needs to be a bit more holistic so that it matches those that are not professional and sophisticated investors but due to their contact and connection need to be in a position to invest more than $2,500.

The reports fundamental premise in CAMAC’s words is that “The terms of the equity offer may permit acceptances by potentially hundreds of investors, or more, who may have the choice of contributing very small amounts in return for equity”.

However this fundamental premise can be in contrast to what often happens in reality with many raises.

To reach “the crowd”,  as part of an equity raise, where “hundreds of investors or more” reside,  the startup needs to reach, third level survival. (see diagram below)

  • Level One: Friends, Family, Fans and Followers (Your Tribe)
  • Level Two: Friends of “Friends, Family, Fans and Followers”  (Their Tribes)
  • Level Three: People with no connections to the capital seeker when the raise goes live.

In the CAMAC case, the crowd (or third level) will be made up of “retail” or “unaccredited” or “mum and dad” investors. This report was not about professional and sophisticated investors.

Both Crowdcube and ASSOB’s equity funding platforms have been operating for a number of years with “retail” or “unaccredited” or “mum and dad” investors. In ASSOB’s case 63% of investors come from this category.

If you scroll through the 101 completed raises on Crowdcube most companies have obtained under 100 investors to achieve their targets. And here you can invest as little as a  hundred pounds if you choose!

Only six of Crowdcube’s raises have over 200 investors and these stats are pushed higher relative to Australia because of an incentive to invest. In the United Kingdom they have tax laws where losses you make on approved early stage investments are tax deductible.

While existing 20/12 regulations in Australia result in ASSOB’s average number of investors being much lower, after 300 or so raises, based on our extensive experience, less than 5% of those raising capital would have reached the “crowd” with success. Meaning third level survival.

Yes Reward Crowdfunding can have a crowd of hundreds and thousands of contributors , and does, and yes many of them reach third level survival, but not many retail investor / unaccredited equity crowdfunding raises do.

This means that the belief that “hundreds of investors, or more” will be involved with these raises has skewed the solution put forward by CAMAC. The resulting legislation will be mostly beneficial to  those startups that are attractive to the third level “crowd investors”. The report almost suggests this itself.

“However, the success of CSEF for issuers rests on one key factor, which is outside their control or the control of advocates of CSEF or of intermediaries, namely, the level of take up of equity offers by crowd investors. Sustainable growth, productivity and competitiveness through CSEF are only possible if investors have confidence in investing through that process.”

In a BRW article John Kluver CAMAC executive director  says he remained unsure of whether there was pent-up demand from individuals for the ability to invest in start-ups. “If we look at it globally, it’s still an unanswered question because in so many jurisdictions, crowdsourced equity funding has not yet commenced,” he says

However there are enough emerging statistics worldwide from ASSOB, Crowdcube and virtually every State in the USA that has brought in it’s own regulations for equity crowdfunding that the players in unaccredited/retail investor crowds, that end up investing are much smaller than those in the reward crowdfunding space and they are usually not a great distance (one or two levels) from the entity and people and technology seeking capital.

In reality the focus should also be on how legislation can assist those near and dear and interested in the enterprise to contribute to the people and technology they passionately believe in. This was the main driver in our submission to CAMAC. While the “crowd” aspect has been very well handled in CAMAC’s report the following categories urgently need attention:

  • Employees that support the business with their labour and often sacrifice their income to be on board but under existing legislation can’t afford the tax if they are awarded shares under existing legislation
  • Associates of the business. Spouses, Parents, Children, Brothers, Sisters, Uncles, Aunties, Grandfathers, Grandmothers, Accountants, Lawyers, Engaged Business Consultants and existing Shareholders. Existing 20/12 legislation means for a $500k raise they have to put in $25k each.
  • Friends, Fans and Followers of the enterprise, people and technology. For them also existing 20/12 legislation means for a $500k raise they have to put in $25k each.

In summary, CAMAC framework is a very good solution for raises that are “crowd” based. However most raises have a blend of investor type.

If you want $500k or less for your startup there needs to be a more viable and practical way to achieve it.

An adjunct to the CAMAC approach was suggested by the writer here in a pre-CAMAC report suggestion.

Some minor changes will enable Australia to fully embrace Equity Crowdfunding

Diagram developed after extensive discussion with Kevin Berg of massolution and subsequent University based research. More information on Third Level Survivorship here.


Country after country, state after state are introducing regulations to facilitate equity crowdfunding for entrepreneurs and investors. This is normally sold by the implementers as a combination of ways to create more jobs and fund businesses that are finding it more difficult in the post GFC era to get funding.

Unfortunately Australia isn’t even yet at the starting gate for more broadly permitting equity crowdfunding except for ASSOB. ($138 million raised for StartUps and SME’s facilitated to date for around 300 companies)

ASSOB operates under existing legislation to match entrepreneurs and investors for startup and early stage companies.  It has managed to carve a position as the oldest and longest running equity crowdfunding platform in the world.

Conversations I’ve had with regulators around the world have enabled me to share with them the benefits and learnings from data gathered during ASSOB’s 8 years operation as an equity crowdfunding platform. Regulators appreciated the practicality of the data and I believe some of it has shaped better options in other countries around the world than just relying on taking a shot at what might work. Universities and the World Bank have written about the ASSOB journey and findings from data.

Over the last three years I’ve spoken at a score of international events on equity crowdfunding and I thought it was about time I focussed my expertise on changes that would enable Australia to embrace the evolving equity crowdfunding  space better. Some were included in ASSOB’s submission to CAMAC but there have been a number of countries come on stream, and a number of new learnings since the submission date of Friday 29 November 2013. For a further look into the future see my previous post what can we expect crowdfunding to be in 2020″.

My suggested ‘best practice’ pathway is outlined below as a A) “quick summary“, as a B) “graphic summary” and C) “in detail“.

I hope that you will be on board with my suggestions for embracing the concept of equity crowdfunding in Australia and the regulatory changes needed. I’ve tried to blend my extensive practical experience in this area with a holistic approach to implementation. At the end of the day most of this is about legitimising transactions that take place every day but are often not properly done or clearly defined. By far the most money invested into the early stage space comes from friends, family, fans and followers. They deserve better recognition and legitimacy for their transactions. Equity Crowdfunding can reduce family and friend tension.

A recent article in Forbes started “For the vast majority of people, money is raised from banks, from personal savings, and from family and friends.” Lets properly legitimise this.

As I’ve said in an early article … Equity Crowdfunding is not just about bagging accredited and high net worth individuals and running a diversified investment portfolio on their behalf.


Australian regulators are able to modify the fundraising provisions of the Act for ‘minor and technical relief’ without the need of a full parliamentary enquiry. Here are some of the changes that would enable Australia to embrace two huge trends that are driving crowdfunding. “Technological Disruption” and “Meaningful Investing”.

  • Broaden the definition of Associates. This group is not fully handled sufficiently in existing legislation.
  • Add  category of “Experienced” investors. These could be for example people that have reached a certain level in Angel and Director organisations
  • Recognise that consultants can accept shares for services rendered but cannot invest funds. This will assist cash-strapped companies in obtaining the corporate advice they need, without burdening operational cashflow requirements.
  • Portals cannot give advice or have a pecuniary interest but can curate offerings.
  • Small Scale Offerings 20 retail investors in a twelve month period should be lifted to 100 but there should be a cap of $25,000 per investor per annum. A maximum of $2 million can be raised per annum including the “CSEF” exclusion.
  • A new category of Equity Funding Portal be established for “Crowd Sourced Equity Funding” CSEF. Maximum $1 million per company per annum with a $2,500 max per investor.
  • Registered Portals can disclose summaries of the offer information to the public but prospective investors need to log in to see full deal details


WayForwardTriangle.001The explanation of this diagram is broken up into the following areas:

1.     Types of investors

2.    Limitations by Investor Type

3.    Promotion of Offers

4.    Changes needed


1) Types of investors

In an entrepreneurial journey many people contribute. Many prospective investors want to contribute, but with existing Australian regulations it is a challenge.

If we consider first degree connections to a company – say a startup or growth company that needs to raise $800,000 to grow – maybe there are a few mates that would like to contribute a couple of thousand each. However with the existing 20 retail investors in a 12 month period they would have to stump up with around $40k each to actually make it work for their entrepreneurial mate.

Strange though when this is a “small scale offering” exemption at an average investment of $40,000 when the average ASX share transaction is heading for $5,000 a trade!  This seems counter to the idea of risk aversion, when a fully disclosed company can accept small amounts, but an undisclosed company has no choice but to ask for large investments.

So what is this worldwide equity crowdfunding trend really about? Well, its basically people that are passionate about a “friend’s” opportunity who want to be able to easily invest and be involved.

Let’s now look closer at the various types of people who really want to support an entrepreneurial endeavor:


After the Founders, early staff are often next to invest. In Australia this is not easy to do due to the tax effect on employee share schemes and consequently seldom happens. The tip of the triangle above is really, really important and we hope that before year’s end the Australian government recognises this with legislation changes to Employee Share Schemes.


This group is not fully handled sufficiently in existing legislation. Many people have direct experience and knowledge of an investment offering that doesn’t usually make it into an investment document.

The types of people in this category should include the full gambit of associates. These are normally executive officers of a company, spouse, parent, child, brother, sister, uncle, auntie, grandfather, grandmother, accountant, lawyer, engaged business consultant and a shareholder for at least a year. You could say, those having genuine knowledge about the people responsible for running the company.

Professional Investors

This category is already provided for in legislation. The one type  that is not covered adequately is people like Angel or Experienced Investors that are informed and competent enough, but may not meet the monetary cut-offs. Just because someone has a lot of money doesn’t make them a “sophisticated” investor!

Angel investors have often learnt the hard way, as have Company Directors. Two examples of Experienced Investors are Fellows of the AAAI (Australian Association of Angel Investors) and Fellows of the Australian Institute of Company Directors. For this reason I believe Fellows of the AAAI  and Fellows of the Australian Institute of Company Directors, and any other equally qualified  people should be added to the professional investor category.


A Startup entity and growth company has lots of contacts and connections. Many would like to invest but are prevented by existing regulation. At the moment 20 can invest in 12 months, but these concessions would all be used up if 20 people invested $2,000 giving $40,000 in total. This would be OK if the entity only needed $40,000 but this is mostly not the case.

Connections are people known to the capital raising entity, know its product, and/or those directly assisting the Company to raise capital. In my experience through ASSOB, around 80% of investment comes from this group, but many who wish to invest (and be involved) miss out due to present regulations. They have some connection with the entity, its location, its people, its technology or the business to make an informed investment decision. As regulations stand, these investor types, having knowledge of the company, its people and the opportunity, are often not acceptable as investors due to the often smaller size of the investment they can afford.


Not everyone has $20,000 to invest. Some people may be passionate about supporting an activity but may only have hundreds or a few thousand dollars to contribute. Thus, the notion of equity crowdfunding is evolving to include these people that want to take a small punt on an investment of their choosing and hope it will one day come to fruition – having been part of something from the ground up.

2) Limitations by Investor Type

Most jurisdictions have introduced investor categories and included limitations of investment primarily to prevent fraud. Some though have adjusted or are in the process of adjusting limitations for practicality. Title III of the Jobs Act in the U.S.A. is weighed down with so many limitations that new Acts are being introduced to lighten the legislation.

I believe the following limitations are workable in the Australian environment and ASSOB’s 8 years of operation give me the sense that they are sufficient to prevent fraud.


The main limitation at present is that it is not attractive, nor affordable for staff to take shares in startup and growth entities. Our present government has stated that it is going to address this. When this is changed there need not be any limitation as to how many shares a staff member can have in the entity they work for.


There should be no limits here as those at this level of contact, and are known to the directors personally, should have the actual knowledge to know whether the investment opportunity is real or otherwise.

Professional Investors

There should be no limits here as investors have assumed knowledge through their experience, professional advisors and bank balance to afford to take a hit (if the unfortunate situation arises).


The existing small scale offering legislation allows 20 investors per annum. Lifting this to 100 new investors per annum will allow the average investment in this category to move from $30,000 to $40,000 per investor to a lesser amount, still attaining the overall target funding goal needed for the company to grow and deliver its promises to investors.

To ensure that individuals, who are not professional investors, do not over stretch themselves by investing in this ‘connected’ company, prudence suggests that the  individual investment per annum should be capped at $25,000 for this investor type, per annum.

Under this category a maximum $2 million (retail) per annum can be raised for the 12 month period (as it is today). This amount also includes any “crowd”investment raised (as noted below) but not the investment amounts from those stated above from other excluded investors.


For each crowd raise there is a maximum of $1 million per annum per company with a maximum of $2,500 per investor per annum.  This is sufficient to assuage any financial risk that a random investor may take without knowing the company or its directors to the same extent as the other investor categories.


3) Permitted Promotion

Time has shown that the present promotion restrictions in Australia have functioned well to avoid fraudulent activities, taking into account the needs of consumer protection legislation.

In general we see no reason to change these significantly other than allowing the funding portal to show an “offering summary” on its primary pages without the need for the visitor to be logged in.

An example from Crowdcube is below. If the person wants to know more about the investment opportunity they would have to subscribe / log into the portal, acknowledge the investor warnings, to then have access to the full offering details. There can be no harm from reading an “offering summary” to those who do not go the distance.



Shares in this category would not be promoted outside of the organisation but would be handled by face-to-face presentation and negotiation and usually tied to an employment contract or ESS.


Shares in this category would not be promoted outside of the organisation but would be handled by face-to-face presentation and negotiation at the directorship level.

Professional Investors

Any promotions must specify that the offering is for sophisticated, professional or wholesale investors only and the investor must be qualified prior to receiving details in relation to the investment opportunity. This would be no different than the legislation now.


Promotion in this category will be covered by the existing regulation in Section 708 for ‘personal offers’, which is as follows:

personal offer is one that:

(a)  may only be accepted by the person to whom it is made; and

(b)  is made to a person who is likely to be interested in the offer, having regard to:

(i)  previous contact between the person making the offer and that person; or

(ii)  some professional or other connection between the person making the offer and that person; or

(iii)  statements or actions by that person that indicate that they are interested in offers of that kind.

For Promotional purposes Registered Portals can disclose summaries of the offer information to the public but prospective investors, who are the connections and other investor types, still need to log in to see full deal details.


Registered Portals can disclose summaries of the offer information to the public but prospective investors need to log in to see full deal details, as noted above.  Their investment is limited to $2,500 as a “crowd” investor type, and promotion is only by the registered portal which is a controlled environment.

4) Changes needed

This is not an exhaustive list of changes but provides a guide as to what needs to be done to improve the startup and early stage investment environment for investor types that need changing now:


Associates > change the offers of securities to peoples associated with the company legislation at s708(12) to include ‘family, friends and business associates’, as follows:

Family have a pre‐existing relationship with the issuer which would provide them with access to information about the issuer to be able to assess that person’s capabilities and trustworthiness.

 A close business associate is someone who has had sufficient prior business dealings with the founder, director, executive officer or control person of the issuer to be able to assess that person’s capabilities and trustworthiness.

Connections > change the small scale offerings legislation at s708(1)(a) from 20 persons to 100 persons remembering the directors are to advise the capacity the Associate is known for their own company records.

A close personal friend is someone who has known the founder, director, executive officer or control person of the issuer for a sufficient period of time to be able to assess that person’s capabilities and trustworthiness. The directors are to advise the company and anyone assisting in the capital raise that the investor is a close personal friend.

Crowd > crowdfunding offerings must be conducted through an intermediary funding portal, like the ASSOB Platform.  Their investment is limited to $2,500 as a “crowd” investor type with maximum $1 million per year. The funding portal is to advise the crowd investor type.

Permitted promotion> Registered portals can display investment summaries without the visitor logging in

Intermediaries>  Consultants can accept shares for services rendered but cannot invest funds. This will assist cash-strapped companies in obtaining the corporate advice they need, without burdening operational cashflow requirements.

Corporate structure>  An existing Pty Ltd company is usually not in a form to be investor ready. With crowdfunding they are very likely to get over 50 shareholders. If a Pty company through crowd sourced equity funding attracts over 50 investors then for the larger number they need have at least 2 Directors, one of which is independent of the Founders and adopt a governance charter to ensure their company is more investor friendly. A suggested governance policy is as follows:

  1. recognise that their primary responsibility is to  [Company]  Pty Ltd and all of its shareholders. However, directors must also be aware of legal responsibilities to other stakeholders, including creditors and employees and ensure that they and the company meet these responsibilities.
  2. act honestly, in good faith and in the best interests of  [Company]  Pty Ltd.
  3. use due care and diligence in fulfilling the functions and exercising the powers of directors. All director actions are to be for a proper purpose, in the best interests of the company.
  4. notify the board of directors of any conflict of interest that arises and not allow personal interests or those of any associated person, to conflict with the interests of the company.
  5. not take any improper advantage of their position as a director and not make improper use of information acquired as a director. Confidential information received as a director regarding the company remains the property of the company and directors must not disclose, or allow to be disclosed, such information unless the disclosure is authorised by the company or required by law.
  6. be independent in judgment and actions and to take all reasonable steps to be satisfied as to the soundness of all decisions made by the board. This includes reading all information provided to directors for board meetings and attending all board meetings where possible.
  7. ensure all  [Company]  Pty Ltd’s registers and financial records are properly maintained.
  8. read  [Company]  Pty Ltd’s financial reports regularly enough to satisfy themselves that the company is not trading insolvently or likely to become insolvent.
  9. produce an annual financial report within five (5) months of the financial year end and provide this to all shareholders.
  10. hold an annual shareholder meeting within six (6) months of the financial year end.
  11. not engage in conduct likely to bring discredit upon the company.
  12. comply at all times with the spirit, as well as the letter of the law and with the principles of this Code of Conduct.

All the changes above can be implemented by the granting of relief from the relevant provisions of the Corporations Act, consistent with ASICs power under s741 (ASIC’s power to exempt and modify) and 1020F (Exemptions and modifications by ASIC) to modify the fundraising provisions of the Act for ‘minor and technical relief’ without the need of a full parliamentary enquiry.

For those wondering about the type of learnings ASSOB has gained in the startup / early stage investment space to support the recommendations we have made I list the following:

1) 63% of investors on the ASSOB platform are retail. It is only in the later rounds that sophisticated (accredited) investors join the raise. The “smart money” needs to see that those near and dear to the founders, IP, location and technology have backed them. ASSOB has always been a mixed accredited / unaccredited investor platform.

2) Each of our raises has on average a crowd of around 1000 followers that are gathered and congregated around each offering. Each offering draws its own crowd including some from the 26,000 subscribers ASSOB has. From the fund raising entities 1000 person crowd around 200 followers on average download the offer document resulting in about 20 investors.

3) Small scale offerings is just a legislative term. In reality it is companies offering their shares to their friends, fans, families and followers (Their Crowd). It is in reality their platform for the raise and it is only “private” to the degree that people have to log in which they have to do with most crowdfunding platforms in the world.

4) ASSOB’s average raise size is around $500k. Nearly all raises are between $500k and $1.5 million. We seldom have raises over $2 million.

5) Of the 300 companies that have raised money on the ASSOB platform around 70% are startups. You just need to look at recent raises to see this. Opmantek an open source startup raised around $700k. Selfwealth that raised $1.65 million is a superannuation portal that hadnt written a line of code when they started their raise. Cocoon data that are listing on the ASX shortly were a startup when they raised funds on ASSOB.

6) Over the past eight years over $138 million has been raised for just over 300 companies.

7) Around 60% of investors are in the same state as the company raising capital.

8) Raises normally take between four month and eight months to raise the majority of the funds.

9) ASSOB operates with a high bar for offering compliance. Through our many years of experience and monitoring compliance in the area of small scale offers and excluded investment opportunities, we have first-hand knowledge of issues that directly affect crowdfunding in any form. These include:

  1. Failure to adequately reflect or substantiate Founder cash investment or conversely overstate unsubstantiated Founder investment.
  2. Failure to transfer intellectual property into capital raising entity or subsidiary holding.
  3. Failure to monitor registered intellectual property (e.g. TM expired, patents lapsed).
  4. Failure to enter into any contractual agreements to transfer intellectual property (or stamp contracts at all).
  5. Failure to properly disclosure contracts not at arms-length (i.e. Founder owns intellectual property, sells property, etc.).
  6. Material changes which occur to the business not reflected properly or conversely, replacement documents needed but not done properly to ensure adequate investor disclosure of material changes.
  7. Issuing equity during a capital raising which comes from the shares allocated for the raising.
  8. Failure to observe basic corporate governance obligations – lodging share notifications, holding AGM, preparing audited financials – some even change the name at their own desire.
  9. Failure to send share certificates to investors.
  10. Material events occurring and directors not keeping investors updated, e.g. intellectual property expired, material contracts fallen through.
  11. Manipulation of share allocation through undisclosed debt for equity transactions, equity for services.
  12. Non-disclosure of heavy leverage by Founders in which money is being repaid from capital raised which includes debt for equity conversions during the capital raising.

ASSOB CrowdcubeWhile equity crowdfunding for unaccredited investors is not yet legal in the U.S.A. until Title III is passed,  it is alive and well in other jurisdictions. Capital raising from unaccredited investors takes place every day.

The two most active countries in equity crowdfunding or raising capital with the support of unaccredited investors are Australia (8 years) and the United Kingdom (3 years).

ASSOB in Australia and Crowdcube in the United Kingdom have enough runs on the board to pass on some capital raising lessons to us.

Each operates equity crowdfunding under differing legislation but in reality both have established and operate the largest platforms in each of their countries, ASSOB has facilitated capital raisings of $138 million and Crowdcube $36 million.

One of the best ways to understand the learnings from the platforms is to look at some examples of successful capital raisings.

1. Preshafood (ASSOB) – $3.3 million raised from 29 accredited and unaccredited investors


Preshafood Limited is a food and beverage company using a revolutionary High Pressure Processing (HPP) method to produce fruit juices and food products of an exceptional quality.

Funding Needs

The initial capital raising was for $1.5 million to increase production six times. Subsequently further funds were sought to further expand production and distribution.


The initial raise of $1.5 million was oversubscribed by $1 million. Eventually $3.3 million was raised

Going Forward

Preshafood won first prize in both the ‘Best New Juice or Juice Drink’ and the ‘Best New Beverage Concept’ categories, from over 340 entries from 40 countries. The awards served to cement Preshafood’s position as a growing competitor in the quickly developing non-alcoholic beverages industry. The also won Telstra Small Business of the year award and are now profitable, growing and will probably exit to a major drinks industry player

2. E-Car Club (CROWDCUBE) - £100,000 raised from 62 accredited and unaccredited investors


E-Car Club, the UK’s first entirely electric car club, was formed in September 2011 and was funded via the Sustainable Venture Development Partners.  The company also had a grant from the Technology Strategy Board (TSB)

Funding Needs

Following the successful launch of three Nissan LEAF cars in Wolverton and Milton Keynes, a capital raising of £100,000 was sought to fund operations, including establishment of additional hubs in Southern England and development of strategic partnerships.

Rewards involved free E-Car Club membership, free driving credit, an invitation to join the E-Car Advisory Committee and lifetime community membership (worth £15/month).


E-Car Club successfully raised £100,000 from 62 investors allowing them to continue to develop the business.

Going Forward

In February 2014, E-Car Club secured £500,000 of funding from Ignite Social Enterprise LP, the social impact fund backed by Centrica Plc. The additional funding will allow E-Car Club to pursue its social mission, delivering access to lower cost transport solutions and improving the quality of life for local communities in up to twenty new locations.

3. Opmantek (ASSOB) – $700,000 raised from 28 accredited and unaccredited investors


Opmantek Ltd is an Australian business that develops, markets, packages and distributes software in the network management field.

Funding Needs

They were seeking $600,000 in exchange for 25% equity in the company, to launch commercial modules and services to the existing customer base.

The funds raised through this offer were predominantly to:

  • Hire a Chief Technology Offices and two Developers to support and develop parallel innovations;
  • Fund the commercialisation and marketing of NMIS v8;
  • Apply for patent protection of intellectual property.


$700,000 was raised and due to continued demand in the shares secondary sales eventuated

Going Forward

Opmantek Ltd has confirmed that another major Latin American telecommunications provider has licensed its award winning Network Management Software – NMIS .he company continues to grow and will probably exit to a major telecommunications player

4. Righteous (CROWDCUBE) – £225,000 raised from accredited and unaccredited investors


Righteous, the ‘all natural’ salad dressing brand was set up by ex-Unilever marketer Gem Misa in 2011.

Funding Needs

In 2012 Gem raised £75,000 to create a marketing campaign and nurture growth. At the end of 2013 Misa a capital raising for further £150,000 to expand into overseas markets, including Canada via Costco and the USA via Whole Foods distributor KEHE.


The potential for this London-based business is huge, with the USA condiments market worth ten times that of the UK (£11 billion).

Going Forward

Righteous products are now sold in over 600 supermarkets in the UK (Tesco, Waitrose, Ocado, Boots, Sainsburys) and more than 500 in North America. Business turnover has grown by 1,260% in three years (from £122,500 in 2012).

5. SelfWealth (ASSOB) – $1.65 million raised from 32 accredited and unaccredited investors


SelfWealth is:

  • The new paradigm in investing;
  • A community of self investors; and
  • “Self Investment Made Simple”.

SelfWealth offers a low-cost, holistic solution to self-directed investors delivered seamlessly on-line, enabling investors to take greater control of their own wealth creation for an annual subscription fee without commissions.

Funding Needs

SelfWealth sought $1,492,551 to build their on-line offering to self-directed investors.


$1.65 million was raised with two angel investors starting the raise off with $200,000 each.

Going Forward

The Company has developed a  social network for investors. Instead of paying fees and commissions to professionals, SelfWealth enables pension fund owners to collaborate with the community and construct their own portfolio. SelfWealth is providing portfolios, performance, reporting and great research tools – all in one place.

Each of the above equity crowdfunding raises needed a compliant professional equity funding platform but more importantly each needed a story, team and followers.

For companies considering raising funds they should self-assess to check they have:

  1. A Convincing, Compelling, Credible Story coupled with a perceived viable business model
  2. A Balanced, Passionate, Capable and Likeable Team
  3. Lots of Suitable People to share the story with and engage


Each of the examples above had a great story, good business and capital raising teams and lots of followers.

In regard to followers, ASSOB’s experience is that the campaign manager and the capital raising team must motivate their own networks and drive support and investments from friends, family, fans and followers.

The capital raising teams (including intermediaries) for each of the above raises will have personally engaged with 80% of the eventual investors. Experience shows that around 50 to 60 percent of the investors usually come from people 1 to 2 levels out from the entity raising capital. That is friends, family, fans and followers. A further 20 to 30 percent come from the second level contacts. Friends of 1st level contacts. Finally the rest, and usually later in the raise and often by far the most money comes from so called “smart money”. People the raisers initially have no contact with but these people wait to see that people are supporting the offering which give it legitimacy.

To successfully raise the capital, capital raising teams need to roll up their sleeves. The need to point their 1st and 2nd level contacts towards the profile page on the capital raising platform and once they are there they need to reach out, nurture and convert investors at each level of contact. Online marketing isnt enough. Frequent updates and personal interactions are essential.

Once Title III is enacted these examples will be multiplied many fold.