Ocho smashes PledgeMe record, hits $2 million – but is it a sign New Zealand’s crowdfunding rules need to change?
Dunedin-based craft bean-to-bar chocolate maker Ocho launched its campaign on crowdfunding platform PledgeMe last week and was a roaring success, hitting the maximum $2 million mark only 30 hours it launched.
It even surpassed Parrotdog’s previously held record on PledgeMe in 2016, where it hit $2 million in two days (however, Parrotdog has the opportunity to snatch its title back with another PledgeMe campaign it’s launching soon).
Part of Ocho’s success came down to public upset at the Dunedin Cadbury Chocolate Factory closing, and the desire to keep chocolate manufacturing in the region.
While Ocho was originally a very small operation started out of general manager Liz Rowe’s garage, it scaled up by joining forces with Own the Factory, a volunteer group working to keep chocolate manufacturing in the region.
The public volunteered more than $5 million in indicative pledges (not actual pledges) to Own the Factory in a bid to buy part of the Cadbury Chocolate Factory off global food giant Mondelez. However, after encountering difficulties, it decided to join forces with Ocho instead to focus its efforts on a locally led, premium chocolate initiative.
Rowe said this show of support in the community gave the team the confidence to launch the actual crowdfunding campaign on PledgeMe, which struck a chord with locals.
Own the Factory leader Jim O’Malley said people had told him they invested in Ocho to ensure Dunedin kept its proud history alive of chocolate production, while creating new jobs in the city. Rowe agreed keeping the local economy alive was a driving factor.
“Everybody involved in the project really believes in the value of keeping jobs and manufacturing ability in the regions. We all love living and working in Dunedin and we need jobs here to keep the city alive,” she says.
But with the obvious groundswell of support behind Ocho – and the $5 million or so that was volunteered in indicative pledges before that – it begs the question, could more have been raised, had there not been the $2 million limit set on the crowdfunding campaign?
PledgeMe CEO Anna Guenther thinks so.
“I think [the $2 million limit] made sense at the time when legislation was written to set a maximum and see how it worked, but especially with the Ocho example, they could’ve gone a lot higher and it would’ve been useful for their company,” Guenther says. “It was similar thing with Parrotdog [in 2016].”
“We totally do believe the cap should be discussed. There are conversations occurring with the government around increasing the maximum amount for equity crowdfunding.”
By international standards, New Zealand’s crowdfunding rules are relatively liberal. They came into effect in 2014 when crowdfunding was relatively new territory globally and are regulated through the Financial Markets Conduct Act.
The rules definitely are more liberal than our counterparts across the ditch when it comes to the cap on how much money investors can put into shares, which is unlimited. In Australia, this is capped at AU$10,000 per investor.
However, New Zealand’s rules are less liberal in the amount that can be raised through a company or individual crowdfunding in 12 months. The limit is $2 million over a one-year period, compared to Australia’s limit of $5 million.
Guenther says there’s now enough of a case for raising it, especially considering Australia’s higher limit and the likes of Invivo Wines, Parrotdog and Ocho’s campaigns all hitting the $2 million mark.
“The one piece of Australian legislation where I think they got it right is they set the maximum cap to $5 million, so I think New Zealand could start discussing that, given we’ve been operating in the equity crowdfunding space for three years,” she says.
Other crowdfunding platforms like The Snowball Effect have also called for the current limit to be raised.
Its co-founder Josh Daniell previously told Idealog the current $2 million limit in place needed to be tweaked.
“$2 million is a good place to start, but policy makers will be watching this space to see if the efficiencies of equity crowdfunding should be extended to larger offers,” he said.