New Zealand: The Equity Crowdfunding Revolution

Crowdfunding in New Zealand has been efficient in generating large amounts of investment capital as well as avoiding fraudulent offers, in comparison to overseas jurisdictions.

What is equity crowdfunding?

Equity crowdfunding is an alternative method for businesses to raise money by issuing shares. Instead of a formal public offering of shares on the New Zealand Stock Exchange in New Zealand or making a private offer to a limited number, a business can use a licensed equity crowdfunding platform to offer shares to retail and/or wholesale investors.

The purpose of equity crowdfunding is to match multiple investors seeking to invest relatively small amounts with companies who wish to raise funds. Equity crowdfunding allows businesses to raise money without burdensome compliance obligations and investors to spread their risk by investing in multiple different businesses. It provides a way for start-up and existing businesses to raise money with reduced costs and requirements in circumstances where institutional funding may not be available.

Crowdfunding in New Zealand

According to academic Andrew Schwartz, Professor of Law at University of Colorado Law School [1]:

“…crowdfunding in New Zealand is much more successful than in the United States, in part because that country [New Zealand] was willing to forego inclusivity in the name of efficiency. In the United States, our crowdfunding system is much less efficient than New Zealand, but we have achieved some significant level of inclusivity.”

The Crowdfunding model in New Zealand, which started in mid-2014 has been efficient in generating large amounts of investment capital (relative to the small economy size) as well as avoiding fraudulent offers, in comparison to overseas jurisdictions.

Schwartz’s draft compares New Zealand and the United States in their first year of equity crowdfunding. Given that the United States economy is approximately 100 times larger than the New Zealand economy, the figures below are impressive and demonstrates a highly efficient regime [2].

 New Zealand [3] United States [4]
1st year2nd year3rd year1st year
Dates1 August 2014 – 31 July 20151 August 2015 – 31 July 20161 August 2016 – 31 July 2017Mid 2016 – mid 2017
Number of crowdfunding campaigns272828211
Number of successful campaigns 21 (78%)16 (57%)18 (64%)112 (53%)
Cumulative amount raised in successful campaigns*NZ$12 million (US$10 million)NZ$11 million (US$7.1 million)NZ$13 million (US$9.7 million)US$35 million (NZ$49 million)
Average amount raised per successful campaign*NZ$590,000 (US$470,000)NZ$720,000 (US$480,000)NZ$750,000 (US$540,000)US$300,000 (NZ$420,000)
Number of investors3,5031,4702,840
Average number of investors per successful campaign15282101
Average investment amount per investor in all campaignsNZ$4,300NZ$9,600NZ$6,100

New Zealand's crowdfunding equity market

Eight licensed equity crowdfunding platforms currently operate in New Zealand, seven of which are active (as at 29 September 2017).

PlatformPlatform investment requirementsTotal number of offers*
AlphacrowdFocuses exclusively on digital and technology businesses.

Investor: minimum investment is NZ$1,000.

Issuer: minimum amount to be raised is either NZ$50,000 at Seed stage, NZ$200,000 at Start-up stage and NZ$500,000 at Expansion or Growth stage.

1 (opening soon) 6 (closed, 3 are fully funded)
Collinson CrowdfundingNo information availableNo information available
CrowdsphereInvestor: minimum investment depends on the offer.

Issuer: No minimum amount to be raised, but the suggested minimum amount to be raised is NZ$100,000

1 (open)
EquitiseTrans-Tasman platform, but only wholesale or sophisticated investors from Australia can invest currently.

Investor: minimum investment depends on the offer, recommended minimum NZ$500 for public offers by companies.

Issuer: companies typically must raise a minimum of NZ$100,000.

4 (open)

3 (opening soon)

25 (closed)

FulQrumFocuses on bringing investors and property developers together.

Investor: minimum investment depends on the offer but is at least NZ$2,000.

Issuer: ideal developments are those with construction periods between 12-24 months and NZ$2-$10 million residential developments.

1 (opening soon)
PledgeMe (equity)Investor: No minimum investment or minimum amount to be raised. Wholesale investors from outside New Zealand can use the platform.

PledgeMe also has a peer-to-peer lending licence allowing businesses to raise money by offering debt securities as well as equity.

27 (closed; 17 are fully funded)
Crowd88Investor: minimum and maximum amount depends on the offer.

Issuer: minimum amount is NZ$200,000.

1 (open)
Snowball EffectOffering on platform includes public offers, private offers, wholesale investor offers and bespoke capital raising assistance.

Investor: no minimum amount to be raised, but international investors, trusts or companies have a minimum investment of NZ$10,000.

Issuer: no minimum amount.

2 (open); 26 (closed)

No information available for private offers

New Zealand's legal framework

The Financial Markets Conduct Act 2013 (FMC Act), which was passed in 2013 as an overhaul of the existing securities regime governs equity crowdfunding in New Zealand. The FMC Act came into force on 1 April 2014. The Financial Markets Authority (FMA) is the primary regulator for equity crowdfunding providers.

The regime imposes few restrictions on equity crowdfunding platforms, summarised below:

  • equity crowdfunding providers must be licensed by the FMA;
  • equity crowdfunding offers are limited to raising up to NZ$2 million in any 12-month period (this cap applies to an issuer using any combination of equity crowdfunding, peer-to-peer lending and the small personal offers regime over any rolling 12-month period);
  • offers using a licensed equity crowdfunding platform must also use a short warning statement; and
  • offerors must comply with the general fair dealing provisions in the FMC Act (i.e. relating to representations and misleading or deceptive conduct, but are not otherwise subject to the same disclosure obligations as normal equity offers; no product disclosure statement or online Disclose offer register entry is required).

To operate an equity crowdfunding platform, the platform provider must first obtain a licence from the FMA. The application for a licence must set out details of the proposed platform and how the minimum standards and conditions for crowdfunding service licences will be met. Individual offers are not required to be reviewed or approved by the FMA.

To obtain a licence, providers must demonstrate to the FMA that they have fair, orderly and transparent systems and procedures, anti-fraud policy; and adequate systems and procedures for ensuring that the platform does not exceed the statutory limit of raising more than NZ$2 million in a 12 month period.

The FMA will decide whether to grant a licence and may impose specific conditions. Once a licence is granted companies can use the platform to offer shares relying on an exemption in the FMC Act from the normal retail offer obligations.

“New technologies bring significant benefits to investors and businesses” - Financial Markets Authority, Strategic Risk Outlook 2017

Legal structures

Many offers on licensed crowdfunding platforms to date have used non-voting shares. One advantage of this is that non-voting shares are not counted in determining whether a company reaches the threshold of 50 shareholdings which triggers application of the New Zealand Takeovers Code (NZTC).

Alternatively, companies may use a nominee vehicle (either provided by the platform or the company itself) to group crowdfunding shareholders together. This also has the benefit of the underlying individual shareholders counting as one towards the application of the NZTC.

Equity crowdfunding risks

The primary risks with equity crowdfunding derive from the reduced compliance obligations on the businesses offering investment. Investors do not receive the same level of information as would usually be provided through a public offering of shares. Critics have, for example, focussed on forward-looking financial information, projections and forecasts to date in some crowdfunding offers as lacking the rigour and reliability that a formal and regulated IPO process would require.

Often the businesses utilising equity crowdfunding are start-ups i.e. highly speculative investments for investors. Investors must be well-placed to bear the risk of losing their investment without any undue hardship.

There is also no ready secondary market for the shares as the shares are not generally listed on a stock exchange (with some exceptions). Shareholder arrangements may also restrict the ability to on-sell shares (e.g. pre-emptive rights).

The legal regime does allow for platforms to create secondary markets for their own offers without the need for a separate authorisation as a financial product market. To date, although under construction by some platforms, no such secondary market has launched.

Further reading

  • Andrew A. Schwartz, The Gatekeepers of Crowdfunding, 75 Wash. and Lee L. Rev. __ (forthcoming 2018) [draft]
  • The Financial Markets Authority has a web-page with dedicated information on equity crowdfunding in New Zealand for consumers, see here.
  • For those wishing to set up an equity crowdfunding platform, the Financial Markets Authority’s website contains compliance guidance, see here.
  • New Zealand crowdfunding stories also feature regularly on various news platforms, see here, here, here and here.
  • You can also sign up for our (MinterEllisonRuddWatts) financial services updates, which occasionally feature items on the equity crowdfunding regime, by emailing any of our experts below.


[1] Andrew A. Schwartz, The Gatekeepers of Crowdfunding [draft] , 75 Wash. and Lee L. Rev. __ (forthcoming 2018).

[2] At 29.

[3] Data from: “New Zealand Equity Crowdfunding – 1st Year in Review” (18 August 2015) Crowdready.

[4] “New Zealand Equity Crowdfunding – 2nd Year in Review” (16 October 2016) Crowdready. “New Zealand Equity Crowdfunding – 3rd Year in Review” (12 September 2017) Crowdready.

[5] Data from: Schwartz, above n 1, sourced from Wefunder .

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