The Australian startup ecosystem is in need of new sources of capital to unleash the innovation within. The current equity raising regulatory framework is simply not suited to most startups with its heavy focus on compliance and investor protections.
Crowd Sourced Equity Funding (“CSEF”) is seen as a way to free up vast sums of investment capital. With legislation likely to be introduced to parliament in the coming months, encouragingly it appears that the Opposition is willing to work in a bipartisan way with the Abbott Government to help fast track the introduction of CSEF reforms.
The allocation of $7.8 million in the budget for ASIC to implement and monitor a regulatory framework to facilitate the use of CSEF is another promising sign we are getting closer to implementation. We had hoped that the budget might give the government an opportunity to give more specific guidance around the CSEF legislation likely to be introduced to parliament but unfortunately we are still left to ponder which of the three broad alternatives will be adopted.
To recap, the three broad CSEF regulatory models being considered by the Treasury at present are:
which highly restricts the ability of startups to attract capital.
It is difficult to say whether the less regulated NZ model will be followed or whether the less regulated NZ model will be followed or whether investor protections will be given more emphasis. But we are sure there are a lot of startups in need of equity hoping for a lighter regulation touch as they stand by the mantra: "let the crowd decide".
It is hoped that the Government will introduce legislation by August 2015 an we hope that the bipartisan approach promised by the Opposition will mean our next report discusses the details of the new CSEF legislation, rather than talking about the alternatives.
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