VentureCrowd: The startup for startups

Crowdsourced equity funding has the potential to play a vital role in the success of a startup, according to VentureCrowd CEO Rob Nankivell.

VentureCrowd, an Australian online crowdfunding platform, enables investors to access a diverse set of asset classes. The recently appointed CEO told ZDNet he believes access to a deeper pool of potential funds would reduce a startup's business risk as they build over time.

"We've conducted equity crowd funding for a few startups in the past, and raised in the ballpark of AU$10 million," Nankivell said.

In March, VentureCrowd partnered with angel investor group Sydney Angels in a bid to connect more local startups with early stage venture capital.

"We believe more heads are better than one in early stage investing, so by pooling our expertise and networks and sharing the work, we can come to a consensus view on the merits of a deal and investment terms," Sydney Angels management committee member David Jackson said at the time.

"Equity-based crowdfunding is a great way to access a different group of investors and to top up an investment round led by more experienced professional investors."

As a partner of VentureCrowd, Nankivell said Sydney Angels generally sponsors one of the startups, to get them onto the platform.

"The due diligence is done by the smart guys -- on the angel side -- and then they look to the crowd to source a little bit more," he said.

One of VentureCrowd's startup success stories has been the taxi-booking app and mobile payments platform, Ingogo. In May, Ingogo closed a AU$12 million funding round, which boosted its total funding to almost AU$28 million.

Of the AU$12 million raised, AU$4.2 million was sourced via VentureCrowd, in exchange for 4.9 percent equity.

Nankivell said that the company has a steady stream of startups on the horizon, which are currently being introduced through VentureCrowd's partners. He highlighted the University of Wollongong transaction, CriticalArc, is a startup to look out for, having just closed its funding round at AU$962,000.

VentureCrowd currently has two properties on its books at present as well, with the sold out Moreton apartment development in Bondi, Sydney.

"Property funding is pretty big globally," Nankivell said. "All we are trying to illustrate is that our platform is versatile, and could be used for startups, property, and for credit -- which is actually our next asset class."

The CEO said that instead of going to the bank for a loan, VentureCrowd will raise funds to cover the level of debt.

"The best way to think about VentureCrowd is that it is a multi-asset class opportunity; but startups are our first love."

Nankivell revealed that VentureCrowd is planning to use the platform to fund something very close to their hearts.

"We'll be using the platform in the near future to raise capital for ourselves.

"[VentureCrowd] will be using the same model as for external entrepreneurs, with a combination of institutional shareholders, and a crowd interest as well."

In August, the Australian Federal Government issued a consultation paper that outlined its draft crowdsourced equity funding (CSEF) legislative framework for public companies.

The consultation paper [PDF] discussed particular issues that would arise in any crowdfunding model for proprietary companies, and the potential democratisation of the venture capital model, a concept Nankivell agreed with.

"Crowd sourced equity funding could play a vital role in their [startups] success if the pool of eligible investors was to grow either through legislation or a broadening of the existing qualifying investors via evidence of successful investor experiences."

The CEO said the environment has changed and that an individual should not have to prove a six-figure salary, or a AU$2 million pool of money before they can invest.

"It used to be a whole lot of rich guys dealing with a whole lot of rich guys, a very 'clubby' sort of atmosphere, building their own little syndicates. Equity crowd funding is a way to broaden that to people who don't have the contacts, but are still interested in getting exposure to a number of different startup companies.

"On the entrepreneur, or startup side of things, we would like to see all startups have access to potential funding; big or small, it shouldn't matter about the classification of the company.

"If you just got out of a cab, and Ingogo was the payment method used, and you had a great experience, and thought, 'Oh jeez, I wish I could buy some of that', well they potentially could in the future -- that would be the way it could work."

Nankivell said that what is anticipated to become legislation would make the investor pool a lot more diversified.

"Diversification is pretty much a central theme of portfolio management -- for fund managers -- you don't want to have all of your eggs in one basket, and that idea is encouraged through what we think will be the legislation," he said.

"We are all quite excited on where this can take us, but we are hopeful the legislation will be delivered earlier, rather than later, to give everyone a clean line of sight."