When Aussie Jonny Wilkinson first moved to New Zealand from across the ditch to get crowdfunding provider Equitise off the ground, he didn’t get checked into a posh hotel with silver service.
He fronted up to youth hostels in the city, lived with a few weird fellow borders (serial ideas pitchers) and people who might steal your food left in the communal kitchen.
There he learnt valuable startup skills: how to work in communities, pitch ideas, share resources and most importantly, make the dollar go just a little further.
Wilkinson has since moved into a comfortable suburbia. But for 11 months, he worked from ground zero to put Equitise in shape in New Zealand.
His personal money is invested in the business, so is his mate’s Chris Gilbert, and Gilbert’s mate Panche Gjorgjevski. Gjorgjevski is a Macedonian-based development engineer.
“We quit our jobs, we had no salaries, and we were living off our savings, chasing the dream,” Wilkinson told Idealog.
Chasing the dream has taken a lot of hard work so far. “I hadn’t had a weekend off for 10 months, up to December last year,” Wilkinson says.
Empathy for SMEs
The Equitise guys are passionate about making the platform work. “We are guys heavily invested in the business, so we want to help other SMEs succeed as much as possible.”
Wilkinson met Gilbert at a function. Gilbert has a background in corporate advisory work, while Wilkinson has a strong background in equities. The two own 27% each in Equitise with AWI, a wealth investment company listed on the Australian stock exchange, having a 7.7% in the company and Gjorgjevski 3.85%.
What Equitise hopes to tap into is the more sophisticated private capital floating around in Australasia. The Australian authorities have been slow to move their feet on allowing equity crowdfunders to operate. This put New Zealand in the pole position, when the Financial Markets Authority gave its greenlight for equity crowdfunding in early 2014.
Equitise scored its maiden successful project when its first candidate TRNZ Digital Travel Guide (TRNZ) closed its fundraising campaign with pledges amounting to $211,000 (it was seeking $200,000). TRNZ offers location-based information to tourists including those with motor homes and rental cars. It generates revenues from advertisements built into the content for travellers.
The TRNZ campaign had some kinks along the way with challenges made to the claim of patent technology’s ownership. Wilkinson says the issue was eventually sorted, with changes made to how the ownership was worded.
Investors in TRNZ made sizeable pledges, they were not the average mom and pop with $1000.This fits in nicely with the profile of Equitise’s target market -- investors who are not investing money for the first time, Wilkinson says.
Money from Australasians
What holds the most appeal for Equitise’s promoters is a combined investment market -- NZ and Australia. When Australia finally approves crowdfunding (it is deemed the last country in the civilised world yet to approve crowdfunding), the company can cross over two markets to tap money both ways – making it the first trans-Tasman equity crowdfunding platform. Australian private equity firms alone have an estimated annual turnover of A$64 billion (NZ$68b).
“We see this as our point of difference. Both have the macroeconomic backgrounds; the investment markets are quite similar. There is a high level of money invested in properties, there is also potential to grow private investments as an asset class.” This would provide a more diversified asset ownership mix, he reckons.
Jonny Wilkinson from Equitise (left) with TRNZ CEO Hayden Braddock
Dealing with smaller companies
Historically, investing in small-cap companies has been a challenging endeavour. Disclosures and governance from smaller companies aren’t necessarily brilliant, Wilkinson says.
Crowdfunding platforms place onus on the companies seeking money to back up their financial information.
And while some in the market would say smaller investors are not well equipped to deal filter financial information offered by crowdfunding candidates, Wilkinson says there are “a lot of intelligent people out there who are perceptive in uncovering information.”
The robust process which crowdfunding platform promoters undergo, helps facilitate investment-making decisions, he says.
What Equitise realised earlier on was it needed momentum to get investors interested. This was why it roped in a substantial investment of $45,0000 from entrepreneur Aaron Ridgway. Ridgway founded, grew and sold an independent-owned Vodafone mobile phone dealership company, First Mobile Takapuna. He also last year bought into Vadacom, a telecommunications company providing internet-based phone systems.
Know who you are buying into
For investors looking to test out crowdfunding, Wilkinson has this advice: you need to understand the companies, what they do, what affects their profits and how their business succeeded.
For early stage businesses, investors often have to trust or make assumptions of what the business will be like. Often, what investors are relying on are the founders’ capability and experience, he adds.
“For startups especially, great significance is placed on the people running the company, so it is important to understand the people you are investing in.”
This year, Equitise bought into Rabble, a Kiwi-owned online business directory founded by Southgate Labs. The deal gives Equitise access into a directory of over 600 tech companies, investors and advisors.