By Paul R S Hocking

The securities regime ushered in by the Financial Markets Conduct Act bought 2 very important tools to the SMEs of New Zealand.  The ‘small offers exemption’ and more particularly ‘Equity Crowdfunding’ (ECF) market services has meant that the small end of town now have better and more cost effective access to external capital.

This is important as SMEs can’t survive on cashflow, bank debt and family and friends providing the funding necessary to grow into new markets or new products/services.

It is pleasing to see that this expansion of the capital market continuuuansion of the capital market continuium d mm is now getting further regulatory support with the, hopefully, upcoming alteration to the Takeovers Code which will see the concept of ‘small’ extended into the application of the Code.

However a more conducive legislative and regulatory environment doesn’t of itself deliver a vibrant ECF market.  Indeed the market seems to have slowed from its initial 18 month surge in issuers.  But this can’t mean the need of either issuers or investors can have been met.

There are myriads of private companies that have a need for capital, a desire to grow and a good story to tell.  One good thing about the ECF market is that it has matured in terms of what is being bought to market (its now not all about pizzazz and glitz but more about good prospects backed by skilled and experienced business owners/managers with a well judged business plan) and the way issues are structured.  We are now seeing hybrid deals combining both a retail component (up to the max of $2m) and a wholesale component of far greater amounts.  The ECF platform managers and, more importantly, the investment bankers/corporate financiers are seeing ECF as a useful tool rather than an end in itself.

What we now need is for the advisers (lawyers and accountants) to upskill themselves and bring ECF to SME owners as a real means of funding.  The ECF platform operators can’t and shouldn’t be the only ones promoting the benefits of ECF; its now a public good that needs to be in the toolkit of all business advisers and on the radar of all economic development agencies.