This lack of a secondary market – that is, a means of reselling shares in crowd-funded projects after the initial issue – has been an impediment for crowd-based equity investors, essentially locking them into their investments, unless they can find, though their own enquiry, someone willing to buy them out when it comes time to realise their investment.
That changed last week however, with the launch of Kiwi start-up Syndex, an online trading platform that aims to provide just such a secondary market for equity crowdfunded companies and their investors via an online peer-to-peer marketplace for those assets.
The company says it aims to provide companies and syndicators with an “independent trading platform” and “access to new investment communities”, “helping to stimulate trade in secondary markets and generate more interest in crowdfunding and other direct investment opportunities.”
Though the company has only launched in New Zealand thus far, they’ve got one eye on the international market, especially looking to access the booming global real estate syndicate market.
Idealog spoke to Syndex’s managing director, Mike Jenkins, to find out just what Syndex brings to the New Zealand investment milieu, what the future holds for crowdfunding in general, and, of course, the company's plans for world domination.
Idealog: Hi Mike. So Syndex launched last Tuesday. Congrats. Tell us a little bit about what Syndex is and what it does.
Mike Jenkins: We are an online trading platform that provides investors with a marketplace to buy, manage and sell their assets. With Syndex, investors can log into the portal, they can see financial statements, notes from general meetings and generally enjoy a high level of transparency around their investments. They can log-in at any time and we’re device agnostic.
For syndicates, Syndex offers the ability to manage these relationships [with investors] and provide a high level of transparency and interact in a contemporary way. That is something that has been missing.
Image: Syndex’s managing director, Mike Jenkins
So how does this work with the current Kiwi crowdfunding players? What’s the relationship with those platforms?
We don’t want to compete with crowdfunding, we see them as partners, with us adding to the overall crowdfunding proposition.
At the moment, once the crowdfunding has been done, the crowdfunding platform’s role is done too. But with Syndex we will be transferring all that information onto our platform, so it will be a symbiotic relationship.
One of the key things for us is this disclosure – we’re trying to make as much information available to investors as possible. What we’re looking for from the syndicates is more operational reporting. We want them to give us a quarterly update and all the information that is pertinent to investment. New investors will able to access that information that shows how the company is tracking currently. That’s missing at the moment.
So this is a legal, commercial relationship you’re commencing with New Zealand’s crowdfunding platforms?
It will be. We will form a commercial relationship with [those platforms] so that the client is offered [an investment solution] that goes the full distance. We’re trying to create a trusted investment environment that promotes confidence.
So you’ve got investment company MyFarm on board, and now you’re soliciting investors, right?
That’s right, we’ve got our first market up, MyFarm Investments. They’ve got two offers in the market at the moment. That’s our first client and our first couple of trades, so now we’re looking to introduce additional markets.
Are there other investment companies you’re looking to bring onboard?
Fair to say were covering a number of them, but it’s a little bit tricky to talk about that at the moment.
Fair enough. So you’ve launched here with the intention of rolling this out globally, right?
We’ve launched in New Zealand and we’ve got all the required functionality onboard for investors here, from a legislation perspective. All of the other [overseas] markets, were talking to them, but it’s a case of making those jurisdictional adjustments to the platform [to meet overseas compliance issues].
Right now, New Zealand is a fantastic opportunity for us – good, contemporary legislation, the property market is great, so New Zealand ticks all the boxes for us. We’re going live, we’ve got the first client and we’ve got the functionality.
But if we start to talk about real estate, the global real estate market is going to be huge. It’s already an incredibly large market. We’re backing ourselves on what we’ve built with this model and our goal is to get into those larger markets.
And what’s on the agenda for the short term?
We’ve got to get licensed. That section of the Financial Markets Conduct Act, 310, is not enforced at the moment so that’s why we’ve been able to launch at this time. But being licensed is the ultimate goal.
Okay, crystal ball time. What’s the next hot thing in investment? Where is the action going to be happening in the next few years?
I think we’re seeing the exponential growth of crowdfunding globally. In the past, apart from being seen as a disruption, it was also perceived as going to be short-lived, but it’s growing exponentially. As the infrastructure, which Syndex is a part of, emerges, it’s going to stimulate that market.
Investors are really interested in doing business online, so it’s going to be interesting to see how that market is going to change. Up until now you’ve only been able to have wholesale funders participating in this space, but that’s only 2% of the population. Crowdfunding opens this up to everyone, as more and more people come into it and it goes mainstream.
A lot of it’s about the individual wanting more say and more control over where their dollar goes. People are taking charge of where they place their investment dollar, and that’s a good thing.