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Crowdfunding crucial to Tech Valley growth, researcher says

13 Jun 16

A researcher from The Open Polytechnic has released a statement saying that NZ's Technology Valley will need to depend on crowdfunding for future growth and innovation.

The Hutt Valley tech hub, known as 'Technology Valley', was recently relaunched on June 9. According to Professor Gary Mersham, a digital business technology research at the Open Polytechnic, believes that crowdfunding is one of the ways the initiative can receive large amounts of new investment.

“There is a growing confluence of crowdfunding, angel investing and IPOs," Mersham says.

Mersham believes that crowdfunding, crowd lending, angel investment, business accelerators and startups are part of a fundamental business emergence ecosystem as the industry relies less on traditional banks to grow their operations.

Crowdfunding

Crowdfunding is not limited to product launches any more, as Mersham says indebted governments are using crowdfunding. The World Bank says crowdfunding is a low-cost option to reach ex-pat donors, in an era when development financing needs to increase from billions to trillions of dollars. The crowdfunding phenomena is also effective on a local scale, Mersham believes.

“The recent successful crowd-funding campaign to return Awaroa beach to the Abel Tasman National Park is an example of this potential in the New Zealand context. The investment industry is being disrupted and redefined as are other industries. It’s healthy, undeniable and irreversible” Mersham says.

Equity crowdfunding

Equity crowdfunding uses a number of successful tactics to widely share an investment campaign, benefiting from product feedback, product pre-testing, more exposure and advocacy from shareholders in anticipation of a public offering. Mersham believes equity crowdfunding campaigns reach more people that would otherwise never hear about them.

Minimum investment amounts can be as small as $500, which enables diversification of investment portfolios. That in combination with equal access to investment information gives new investors the same Q&A and commentary as experienced investors receive.

New investors can also see that more experienced investors have committed to the funding, which gives them more peace of mind about their own investments.

Crowd lending

Crowd lending allows capital loans to be raised without losing equity. This method is most effective for startups, and New Zealand companies such as Lightning Lab and CreativeHQ are becoming major players in the crowd lending market.

Mersham says crowd lending has become a more mature, business-focused version of crowdfunding, attributed in part to angel and crowd investors. He believes businesses at many stages of growth and development can use this method of product fine-tuning and fundraising, particularly before an IPO.

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