Some Company Directors and Leadership Teams were very happy in 2021 as approximately 65 companies raised $46,000,000, an increase of 125%, on the investment capital raised by companies utilising “Crowd Sourced Funding Equity Raising” in the previous financial year.
This was great news for the companies which raised capital – but these companies only represented less than 4% of the companies that started the journey in 2020/21 to raise capital as a Crowd Sourced Funding Equity Raising Company.
Unfortunately, approximately 96% (1,560) of the companies that set out to raise capital (1,625) were unsuccessful – why?
This high failure rate is a question that Accountants should be exploring and determining whether sufficient encouragement was given to companies who obviously embarked on the capital raising journey but were judged by the Crowd Sourced Funding Intermediaries as not been sufficiently prepared to admit them to the Crowd Sourced Funding Equity Raising Program.
This failure represents a significant cost to SME businesses. What can be done to reduce this waste of human resources and money?
To raise capital utilising Crowd Sourced Funding Equity Raising there is a process that needs to be followed. Most companies embarking on this journey need assistance from Accountants, Business Advisors and Chief Financial Officers to prepare the initial documentation that every company should be able to produce if they aspire to raise capital:
- Business Plan for 3 – 5 years.
- Predictive Accounting Reports – Budgets – Cash Flow Forecast – Projected Balance Sheets for 3 – 5 years.
- Corporate Chart.
- Market Report relating to the company’s activities.
- Marketing Plan that is linked to the Business Plan and has been utilised for the preparation of the Budgets and Cash Flow Forecasts.
- Spreadsheet showing the calculation of the present valuation of the company and the number of shares to be issued and the percentage ownership attached to those shares.
- A good website.
- A strong social media presence.
- “Fans” and customers of the company.
- The Directors and Leadership Team members need a good appreciation of corporate governance.
- The Directors and Leadership Team should be mentored on the Crowd Sourced Funding Equity Raising process:
- Eligibility – group turnover under $25,000,000;
- Gross value of group assets under $25,000,000;
- Not registered on a Stock Exchange anywhere in the world.
- Directors – if admitted as a Crowd Sourced Funding Equity Raising company, the company will be required to have at least two directors with the majority living in Australia.
- Crowd Sourced Funding Intermediaries – 16 firms have been appointed by Australian Securities and Investments Commission (ASIC).
- The Intermediaries wear “2 hats” – “Gatekeeper” on behalf of ASIC and “Promoter” on behalf of thousands of potential investors who have listed on individual Intermediaries’ websites.
- Meetings with Intermediaries – Accountants can organise face-to-face or Zoom meetings with individual Intermediaries so that the client can judge whether they have empathy with the company’s strategies.
- Appointment of an Intermediary – the Company Directors appoint the Intermediary and agree on the payments to be made to the Intermediary.
- Crowd Sourced Funding Offer Document – this is the key document that the company has to produce (most companies will need an Accountant’s assistance to prepare this document) and it is then submitted to the appointed Intermediary for due diligence review.
- When the Intermediary approves the Crowd Sourced Funding Offer Document, the Intermediary then uploads the Crowd Sourced Funding Offer Document, videos and other information on the company to the Intermediary’s website.
- The capital raising process can be open for a maximum of 90 days – however the capital raising ceases when the Intermediary declares that the nominated amount of capital stated in the Crowd Sourced Funding Offer Document has been raised.
- If the nominated amount of capital has been raised (maximum is $5,000,000 in a twelve month period) the Intermediary transfers the net amount raised after deduction of the agreed fee to the company’s nominated bank account.
- The company is then responsible for the preparation of Share Certificates to be sent to the new shareholders and the return of allotment of Crowd Sourced Funding Equity Raising shares to ASIC.
- There is possible other work that the company may be able to negotiate – virtual Chief Financial Officer Services and Share Registry Services.
This is new interesting and challenging work that accountancy firms could be providing to assist their clients to Add Value and helping to retain good professionals within your firm and also assisting in recruitment activities because your firm will be seen as undertaking diversified, interesting and challenging work and there is plenty of work opportunity because approximately 1,560 companies that started this journey were not successful in their capital raising endeavours – we suspect because they were not properly prepared.
ESS BIZTOOLS has developed a complete Crowd Sourced Funding Equity Raising Product Package to enable Accountants, Business Advisors and Chief Financial Officers all of the tools that are needed to offer Crowd Sourced Funding Equity Raising Consultancy Services to your clients and you will also receive 2 x 1 hours mentoring sessions.
The ESS BIZTOOLS “Tools to Create Opportunities” package includes the Crowd Sourced Funding Equity Raising Tools.
The “Tools to Create Opportunities” package is available at a 50% discount as part of ESS BIZTOOLS celebration of the end of the COVID-19 lockdowns around Australia. Your subscription for 12 months 24 x 7 access is $795 including GST.
Would you like to receive the details of the “Tools to Create Opportunities” package and the subscription form?
If so, please send an email to peter@essbiztools.com.au and we will forward the documents to you.
Would you like to view the recent video on “Crowd Sourced Funding Equity Raising” that we produced as part of this promotion?
If so great! Please click here to view.
Details of our upcoming webinar presentations are available on For Accountants’ website.
You can access our podcasts:
- ESS BIZTOOLS Business Advisory Services Podcast – click here
- ESS BIZTOOLS Accountants Minute Podcast – click here
If you have any additional questions please don’t hesitate to visit our website www.essbiztools.com.au or to send an email to: peter@essbiztools.com.au or Telephone Peter Towers on 1800 232 088
Have a great day!
Peter Towers | ESS BIZTOOLS | peter@essbiztools.com.au
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