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Crowd Source Funding Questions & Answers

CrowdSource Funding is now helping hundreds of Australian start-ups fund their businesses like never before and providing an opportunity for all people to participate in companies they understand or connect with.

To help founders and entrepreneurs to understand this new method of raising capital we thought we would try and answer some initial questions.

So What is CrowdSource Funding?

It is a comparatively new funding option now available for start-ups or smaller private companies. It allows investment offers to be made to retail investors via an accredited CSF platform such as Birchal.

Not without its risks, of course. However, ever since the Legislation was enacted in Australia in early 2017 (later amended in late 2018), which contains the rules governing who can access CSF, the amount raised has been growing strongly.

OK. But how does it work?

The CSF Legislation outlines a structure under which a start-up or small private company may source funds from the 'Crowd', with a cap of $5M per year.

The company produces an information memorandum called a CSF Offer Document with prescribed minimum information with easy to follow templates provided by ASIC and must be published and facilitated by an authorised CSF intermediary.

As an extra measure, this intermediary must check the eligibility Company, Directors and the Offer Document and potential investors.

What are the Benefits of Crowdfunding?

CSF affords companies wishing to raise capital with access to a broad fresh market of investors due to the ability to promote widely and much lower investment minimums reducing risks for investors whilst allowing more people to participate.

The CSF platforms have also made the process much more straightforward and efficient whilst ensuring that companies and their directors comply.

Can I raise funds using CSF?

Depends. ASIC specifies that CSF entities can include "unlisted public companies and proprietary limited companies (excluding investment companies or vehicles) with less than $25 million in consolidated assets and annual revenue that have their primary place of business and a majority of directors residing in Australia."

Is there a limit to how much I can raise?

Yes. Eligible companies can raise up to $5 million in any 12 months, which is known as an "Issuer Cap".

Is there a limit to how much I can invest?