It’s only been a few years (since 2017) that Australian startups, innovators and businesses could raise capital through crowd-sourced funding.

Since that time, the industry has gone on to become a key part of the financial system for early-stage businesses—with a total of $219m raised over 298 successful crowd-sourced funding (CSF) offers from 128k+ investments.

Its success has received a tonne of media attention. First, as founders began to successfully raise through equity crowdfunding, and next, as startups went on to break record after record as more investors jumped on board.

Some of the more notable events have included:

• ZeroCo being the first company in Australia to raise the maximum of $5m in 2021
• Activated Nutrients (Biome Australia Ltd) becoming the first CSF funded company to IPO and list on the ASX, successfully completing an oversubscribed $8m IPO
• Thriday completing a follow on $6m venture capital raise with NAB Ventures
• Montu growing by a massive 20,728% over the three years to 2022 – to become the fastest growth of any on Deloitte Fastest growing Tech list since 2004
• Birchal was the first and only crowd-sourced funding platform to complete an offer on its own platform in 2022—raising its max target in just hours
• Your Mates Brewery breaking the speed record, and hitting its maximum funding target of $2.5m in just 1 hr and 54 mins
  

With so much buzz around crowd-sourced funding, it’s easy to see why curious investors ask us all the time about how to get involved.

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To help, we’ve compiled a list of the most common questions that investors ask about crowd-sourced funding when they are looking to get started — and join the crowd in backing brands they want to share a future in.

1. What is crowd-sourced funding?

Crowd-sourced funding (aka equity crowdfunding) allows startups and small businesses to raise capital from a large number of investors through an online platform. CSF provides an alternative funding source for startups, with the benefits of tapping into a wider pool of potential investors while at the same time building a community of engaged supporters.

2. What types of companies can I invest in?

A huge range of businesses now use crowd-sourced funding, with popular sectors including Food & Beverage, Sustainability & Impact brands, Financial Services and Consumer Goods. Get the latest industry report Yearbook 2022 for more insights. Under the Australian CSF regime, eligible private and unlisted public companies can raise up to $5 million per year through licensed crowd-sourced funding platforms, like Birchal.

3. How much can I invest?

Anyone over the age of 18 years can invest from as little as $50 and up to $5m, depending on the terms of the offer. To invest over $10k, you need to be a wholesale client, which you commonly qualify for by having at least $2.5m+ in assets or $250k+ gross income for the past two financial years, evidenced by your accountant.

4. How do I get a return on my investment?

Many companies using crowd-sourced funding are early stage or rapidly growing ventures. Typically, they have many years of hard work ahead to grow the business and execute on their strategy. The funds raised and any ongoing profits are typically reinvested back into the business.However, there may be various events or ways to receive a potential return on your investment, although not guaranteed.

For example:

• The company undertakes an IPO and lists on a securities exchange
• The company undertakes an exit event, like a sale of the company
• You transfer your shares to a third party and a price for the shares is agreed
• The company declares dividends
• The company undertakes a share-buy back
• The company participates in a trade facility, like Birchal Trade

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5. What is the expression of interest campaign?

Each crowd-sourced funding campaign on Birchal begins with an expression of interest, where companies ask for non-binding indications of interest from the public. It gives potential investors the chance to review the company’s pitch profile and video, attend a webinar, get updates from the founders and gain information on results-to-date and the plans for raising. It also gives investors the chance to receive priority access when the offer goes live, and avoid possibly missing out should the offer reach its max target during the priority access period. Other benefits may also be offered by individual companies.

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6. What is a CSF offer campaign?

A crowd-sourced funding offer campaign follows the expression of interest campaign. It is when companies make an offer of fully-paid ordinary shares in the company via Birchal's platform. During the Offer campaign potential investors to review the details of the CSF offer document, and ask questions directly to the founders. There are usually two parts to every CSF offer campaign — a 'priority access' phase given to those that submitted an expression of interest, and a public phase, when anyone can gain access to the deal.

7. What is the CSF offer document?

To make a CSF offer, companies must prepare and publish a CSF offer document. It is a regulated disclosure document intended to give potential investors enough information to make an assessment on whether or not to invest in the company.‍

Here's what it includes:

• Description of the business, business model & business strategy
• Proposed use of funds raised under the CSF offer and how that ties to the business strategy
• Financial statements for the last financial year prepared in accordance with accounting standards
• Information on directors, senior managers & other key staff
• Corporate structure, including any subsidiaries or holding companies
• A description of the rights associated with the shares and the company's corporate governance obligations
• Key risks facing the business
• A description of investor rights, including information about cooling-off rights and the communication facility for the offer
• Capital structure, including a description of all securities issued before an after the CSF offer
• Key terms of the offer, including the min and max subscription amounts
• Other relevant information

Investors must read the CSF risk warning and offer document before investing, and investors are encouraged to seek further independent professional advice if needed.

8. How do I begin investing?

You can begin reviewing investment opportunities on Birchal’s Browse Companies page. When you’re ready to invest, you’ll need to sign up to create a Birchal account if you haven’t already. Next, from the company’s campaign page, you simply select the ‘invest’ tab and follow the prompts to complete an investment application. The company needs to meet its minimum target for the deal to go ahead, but once the campaign closes, you’ll receive further instructions about paying and receiving your shares. Retail investors also have a five business day cooling off period to cancel the investment, after you making an application.

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9. When and how will I get my shareholder certificate?

You'll get your share certificates about two weeks after the campaign finishes, once funds are collected. The company you've invested issues the shares using a share registry provider, so you'll get an email about it following the close of the campaign.

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10. Can I invest through a self managed super fund (SMSF)?

The short answer is yes! There are some nuances to be aware of but the process is pretty straight forward. Learn more by clicking here.