The document summarizes the findings of a survey on crowd funding in Australia. 80% of respondents were receptive to allowing securities crowd funding as an alternative for startups to raise capital, as long as proper regulatory measures are in place. The majority believed the ideal maximum amount raised through a crowd funding platform is $1,000,000, to keep costs low while maintaining integrity. Most survey participants were entrepreneurs or business owners. The conclusion reflects on additional points to consider regarding crowd funding regulations.

1. Crowd Funding
survey findings
December 2011
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2. Context
• The United States has recently introduced • In an Australian context, crowd funding in
proposed legislature – ‘The Entrepreneur exchange for securities is not permitted
Access to Capital Act’ (“the Bill”) to allow due to legislature restrictions.
startups to use crowd funding to raise
capital in exchange for securities. Whilst • Startups in Australia have a concession,
the Bill has been passed by the US House commonly referred to as the 20/12/2 rule,
of Representatives, it is yet to be where they are allowed to raise a
approved by the US Senate at the time maximum of AUD 2,000,000 from a
this survey was initiated. maximum of 20 ‘retail’ investors in a
rolling 12 month period without the need
• In a nutshell, the Bill will allow startups to to meet the arguably burdensome
raise: disclosure regime. However, a strict no
– Annual maximum capital of USD 1,000,000 general solicitation rule still applies.
or USD 2,000,000 (if audited annual
financials are provided);
• This survey has been carried out to
– Annual investment by an investor is
limited to the lower of USD 10,000 or 10% determine whether it is beneficial for
of their annual income; and Australia to replicate the US and have a
– General solicitation will be permitted with crowd funding regime (in addition to the
a consequential amendment being made. 20/12/2 rule).

3. Findings
1. Would it be beneficial to allow securities crowd funding in Australia as an
alternative avenue to seek seed/early stage capital (i.e. should Australia follow in the
footsteps of the US and bring in reforms to allow securities crowd funding)?
Response
10%
10%
Yes
No
80% Maybe
Note: Comments were made by some respondents that the appropriate regulatory measures
should be put in place to protect investors and prevent promoters from abusing this concession.

4. Findings
2. What would be the ideal maximum amount that can be raised through a crowd
funding platform to ensure the process is still effective, compliance costs are kept at
a minimum whilst maintaining integrity in the process?
Response
10% $100,000
30% 10%
$200,000
20% $500,000
$1,000,000
30%
0% $2,000,000
Other
Note: No survey respondent chose the $2,000,000 option. Some respondents prefer the ideal
maximum amount to be between $4,000,000 - $5,000,000 whilst others believe it is subjective and
depends on the underlying venture.

5. Findings
3. Profile of survey participant
Response
0% Entrepreneur/
business owner
40%
50% Financial backer
10% Advisor/service
provider
Other

6. Conclusion
Summary of findings Points to ponder
• 80% of respondents are receptive to the idea • Should crowd funding be undertaken
of having a securities crowd funding regime through an ASIC regulated intermediary, by
any third party or by the investee company
in Australia, this conclusion has to be viewed (say via their twitter or facebook a/c)?
in the light of:
– The sampling pool was made of 40 • What would be an ideal annual investment
respondents; and ceiling cap for a crowd funder to limit loss
– Only 10% of the respondents were exposure and protect the crowd funder?
investors.
• What would be the minimum (financial and
non-financial) information required to be
• The majority of the respondents believe that disclosed to allow the crowd funder to make
at least $1,000,000 in capital can be raised an informed decision?
from a capital raising platform whilst still
maintaining the integrity and effectiveness of • What can be done to minimise company
secretarial costs given the comparatively
the process and keeping compliance costs larger shareholder base if the crowd funding
down. avenue is being used?