Support for new approach to raise capital

5 June 2014
The Australian Financial Review
Copyright 2014. Fairfax Media Management Pty Limited.   

Small companies should be allowed to raise capital in the same way websites such as Kickstarter encourage consumers to commit funding to new products, qualifying them to become share­holders in the company, according to a ­government review.

Investors and start-ups said the scheme would close a funding gap for start-ups seeking between $1 million and $3 million to launch their product or idea. But they warned the move would need caution, to avoid start-ups becoming inundated with thousands of new shareholders.

Mark Carnegie, one of several investors preparing to launch an equity crowdfunding scheme in anticipation of the changes, said the recommendations were a "great step" and believed it would open start-up funding to self-managed super funds.

"The whole point is how we break the venture capital logjam; the answer is not institutional money," he said.

"The truth of the matter is, Australian venture capital as an industry has been an unmitigated disaster. A trained monkey could have done better than the professional venture capital ­industry in Australia."

The federal government is expected to respond to the review when it releases a review of investment schemes later this year.