Crowd Sourced Funding Helps Small Companies Raise Capital!

Only Unlisted Public Companies Can Use crowd Sourced Funding Equity Raising?

This is a MYTH!

Whilst it is true that eligible ‘Unlisted Public Companies’ are able to utilise ‘Crowd Sourced Funding Equity Raising’ to raise capital, but very importantly, so can ‘Private Companies’.

When the legislation Corporations Amendment Act was introduced (September 2017), only ‘Unlisted Public Companies’ were able to utilise this process for raising capital from the public.

However, the Government soon realised that the overwhelming number of companies wanting to raise capital, without incurring the significant costs of undertaking an ‘Initial Public Offer’ (IPO) were ‘Private Companies’.  Amendments to the legislation were passed in September 2018, enabling qualifying ‘Private Companies’ to utilise ‘Crowd Sourced Funding Equity Raising’ to raise capital.

Private Companies are now the largest users of ‘Crowd Sourced Funding Equity Raising’, with over $289M having been raised for companies with annual turnovers less than $25M since 2018.

If your company has a worldwide turnover of less than $25M and gross value of assets of less than $25M, and you need funds for the ongoing ‘scaling up’ of your company, then ‘Crowd Sourced Funding Equity Raising’ presents an opportunity to raise capital without incurring the significant costs involved with an IPO.

In this edition we are presenting a series of observations discussing the preparation that companies need to undertake and the assistance that the vast majority of companies will require, if the vision of being able to raise capital from the public is going to be achieved.

Small companies are embracing the concept of being able to raise funds of up to $5M in twelve months by the issue of shares in the company, thus avoiding having to offer security to lenders.

After a slow start, Crowd Sourced Funding Equity Raising is growing, with an increasing number of companies finding that the process works and that they can raise capital direct from the public.

But before getting to that joyful position of raising funds, there is a lot of work to be done to ensure that the company has the required systems in place, Leadership Team appointments made, Director appointments made and has prepared realistic plans for at least the next five years which include:

• Business Plan
• Predictive Accounting Reports – Budgets, Cash Flow Forecasts and Projected Balance Sheets
• Key Performance Indicators/metrics systems to give regular analysis on the business performance
• Training/professional development material for the Leadership Team relating to: corporate governance; reporting to a Board of Directors; creating a ‘rhythm of meetings’ to ensure appropriate due diligence is implemented
• Crowd Sourced Funding Offer Document – required by law

It is pleasing to note that capital has been raised by companies whose business activities embrace a wide range of endeavours.

Birchal, the leading Crowd Sourced Funding Intermediary reported in their 2023 year book:

• Company Directors and Leadership Team are encouraged to meet with potential investors before the offer is opened
• Companies already generating more than $1M in revenue made up 41% of the companies raising capital
• 26% of the companies raising capital already had ‘positive earnings’
• The percentage of businesses that were pre-revenue made up only 29% of raises

The leading Crowd Sourced Funding Intermediary, Birchal, released the “CSF Yearbook for 2023” this week.  According to the report, over 380 companies have raised a total of $289M since the Crowd Sourced Funding Regime commenced in 2018.

Birchal has been a Crowd Sourced Funding Intermediary appointed by Australian Securities and Investments Commission (ASIC) since 2018.

If your company is seeking funding to complete the “innovation journey” of a product, or to expand your current business operations or to “scale up” your business, Crowd Sourced Funding Equity Raising could be a cost effective process for your company to utilise.

In 2023, capital was raised by companies from the following sectors:

• Food and beverage
• Healthcare
• Sustainability
• Consumer goods
• Manufacturing
• Agriculture and farming
• Transportation
• Financial services
• Clothing and apparel
• Apps
• Travel and tourism
• Real estate
• Media and entertainment
• Software

Companies that wish to raise capital could initially establish a website to include details about the company, its product, vision and profiles of the Directors and Leadership Team members.  The benefit of the website is that it enables the company to be “seen”, particularly by people who have an association with the industry in which the company is involved.

The aim should be to communicate with people who will gain an ‘understanding of the company’ and what the company is attempting to achieve.

When the company has satisfied the CSF Intermediary, for the company to be approved for the Crowd Sourced Funding Equity Raising Process and the okay has been given for marketing to potential investors to commence, some of these people may decide to invest to become shareholders, because they already have an understanding of the company’s vision.  This makes it a lot easier for the company to be able to raise its targeted amount from this capital raising process.

If your company/business is interested in raising capital utilising the ‘Crowd Sourced Funding Equity Raising’ process, it is essential to appoint an experienced Advisor who can perform the ‘Chief Financial Officer role’ to prepare the company’s documentation and to mentor the Directors and Leadership Team on the Crowd Sourced Funding Process.

The importance of appointing an Advisor who understands the Crowd Sourced Funding Process was highlighted in “Equitise’s 2021 Year in Review”, which indicated that, “we have always focused on providing the highest quality deals to our investor base, turning away over 95% of companies that we see each year.”

This is why the process is important.  You would want to be part of the 5% that the Intermediary was happy to work with, wouldn’t you?

The process is as follows:

• The Directors appoint a CSF Intermediary who will work with the Directors, to assist them in the capital raising process and as the ‘Gatekeeper’ decide whether to approve the company to be able to utilise Crowd Sourced Funding Equity Raising.
• The Company has the ability to raise a maximum of $5M from the public in a twelve month period.
• Your company/business needs a VISION of its future which would normally involve ‘scaling up’ or your company may have developed a new product, process or service and needs funding to commercialise this technology, however the company’s age, turnover and expenditure rule out raising capital as an Early Stage Innovation Company.
• You acknowledge that the team needs to be mentored on the legislation which applies to Crowd Sourced Funding, particularly the role of the Intermediaries.
• The Directors and Leadership Team should meet with your Advisor for the preparation of Business Plan, Budgets, Cash Flow Forecast, Projected Balance Sheets, Corporate Chart, KPIis/Metrics Chart.
• Preparation of the ‘Crowd Sourced Funding Offer Document’ containing:
  1. Risk Warning
  2. Information about the Company
  3. Information about the Offer
  4. Investor Rights

• “Equitise take on fewer than 5% of the hundreds of companies that reach out to them each year and only 70.6% are then actually successful in raising their minimum capital target” (Equitise Industry Report 2021)
• You wouldn’t want to be in the 95% rejection group would you?
• This highlights the necessity for sound preparation and the appointment of an experienced Advisor to assist the Directors and Leadership Team through the capital raising process.
• It can be done over 380 companies have been successful.

You can access the ESS BIZTOOLS (our associated entity) “Crowd Sourced Funding Equity Raising Overview Paper” by clicking here.

Towers Business Development (www.towersbusiness.com.au) can assist with can assist with Advisory Services to assist companies to be able to utilise the Crowd Sourced Funding Equity Raising opportunities to raise capital for your company.  To find out more, contact us on 1800 232 088 or email

If you would like to have a discussion about any of these issues, we would be happy to talk to you, please call Peter Towers on 1800 232 088 to arrange a Zoom meeting or send an email to .