Crowd Funding For Investment – Platforms And Examples

Introduction to Crowd Funding

Discuss about the Crowdfunding Analysis for The West Wind Gin.

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Crowd funding is a way of reaching many people to raise investment funds and usually takes place online, where people raise small amounts of money. Crowd funding is very important when the company (issuer) is looking to sell many shares to the public because it is time-saving and cheaper. This innovative investment procedure is easier and time-saving as every company is looking on how to minimize cost and maximize profit within a very short period (Song, 2018). Investors, on the other hand, are looking forward to investing in a high return company with lower risk although the risk-takers may decide otherwise. Therefore, the investment platforms like micro ventures and Equitise are creating a path through which an investor can meet the issuer. The platforms are available worldwide and every individual thinking to buy assets can just do it online (Manchanda, 2014).

Nevertheless, the are many companies that are campaigning on the internet by use of the above platforms and an investor can reach them by just clicking. Such companies are west wind jin and Hash Ching with their campaign on Equitise, and Primo Wind and Pixilate having their campaign on the micro venture platform. The investing companies and their campaigns vary in their operation and presentations

The west winds offer opened officially on the Equitise platform on first may 2018 but opened to the public on 13th may 2018 and it is expected to close on 17th July 2018 at 5 pm. It deals mainly with its unique beer products in Australia. In this company, shares are being sold on this platform at a price of 0.25 united states dollars or 0.27 Newzealand dollars.

Brand West Winds Gin has launched an equity crowd funding campaign to raise $3.5 million to accelerate its growth, and while this form of fundraising is new to the Australian market, it has been on the distiller’s radar for years (River, et al., 2018). “The company has been getting queries from people all the time, asking, ‘how do we invest?’”. This is a clear way of gathering the data concerning the customer perception about the product. “The appeal of [equity crowd funding] is that it is a great way to broaden the base of people on the journey with us.” (White, et al., 2018)

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The entrepreneur started in the year 2016 when his “fascination with making things” led the engineer to investigate how to build a gin distillery, including traveling to the US to learn how to make spirits. West Winds has been largely bootstrapped since launching in 2010, over the past eight years, the company raised more than two million dollars from friends, families, and well-wishers.

Investment Platforms for Crowd Funding

However, with fans of the gin brand regularly asking how they could buy a piece, (White, et al., 2018) it is important to be considering an equity crowdfunding tilt for a longer period before making any decision,  and before all, the company had to meet the co-founder of Equitise Chris Gilbert in 2015 the west wind gin had been in discussion for a quite long period trying to understand the Equitise mode of operation and its cultures.

The West Winds Gin offer was open to a select few investors last week and went live to the public on the Equitise platform this week. According to the funding page, the business has so far raised $473,000 of a minimum required $500,000, with 64 days left to invest in the company. Punters can buy a piece of the business for a minimum investment of $500.

The company will use the funds “primarily for working capital and for inventory as we grow,” (White, et al.,2018). In its first year, West Winds Gin sold around 5000 bottles of gin. The companies target is to sell 10000 bottles in 2018 which is double in 2017. These are sold throughout Australia as well as in Canada, the UK, France, Singapore, the United Arab Emirates, Japan, China, and Malaysia.

” Capital raised in this crowdfunding campaign will go towards bridging the gap between the company’s payment of excise tax and its payment for products, as well as increased marketing exposure, given West Winds has been concentrating much on the US market. The focus at this point is South East Asia and the UK and Europe, but we’re looking closely at North America, looking very closely at the US,” (White, et al., 2018). 

Mortgage marketplace startup HashChing, a fintech startup disrupting the monopoly of the big banks, has also launched an equity crowdfunding campaign. It’s currently live on the Equitise platform, which has one of the seven crowdfunding licenses issued for the first time this year. HashChing, which is seeking between $1 million and $5 million, has so far raised $286,500, at a minimum $250 investment, with another eight days to go.

A slight difference in interest rates can cost homeowner thousands of dollar each year, (Sodhi, 2018). This is why one out of two Australians like to deal with a mortgage broker instead of going directly to the bank.HashChing, which launched in August 2015, provides a channel for potential borrowers to access home loan deals that have been pre-negotiated by brokers. The current pool now represents 60 banks and non-bank lenders.

Examples of Companies Using Equity Crowd Funding

This means interest rates offered through the app are often far lower than the big four banks’ standard offerings, which are currently around 4.5%.In 2017, Hashching wrote $540 million worth of home loans. Equitise was the platform behind Australia’s first equity crowdfunding for digital bank startup Xinja which raised $2.4 million (Pelzal et.al., 2018).

 Co-founder Chris Gilbert (2018), currently only 1% to 2% of startups  seems to have a go through to become a crowdfunding project.“As our investor audience grows we will probably widen that and include some earlier stage businesses,” he told Business Insider.

“It has a specific mandate at the moment for businesses that have traction, they have revenues, and  technology platform launched … it is really looking for tangible growth businesses.”Seven companies were issued Australian Financial Services authorizations to provide crowd-sourced funding. (Zhang, 2018) Equity crowdfunding enables Australian retail investors to invest as little as $50 or as much as $10,000 in a business. New legislation enabled by the Crowd-sourced Funding Act 2017, allows companies with less than $25 million in gross assets to raise up to $5 million a year. Retail investors are able to invest up to $10,000 per company a year 

Pixilated is a company that is an open-air photo booth rental including the set-up and delivery of your booth, on-site instant printing, high-resolution digital photos, a friendly Pixilated attendant, props, and more! as displayed on its website. (Manchanda. et al., 2015) This is a company that was founded in 2012 and built in Baltimore Maryland. Its product being a photo booth and marketing strategies being built,  it still becomes riskier than west wind gins because its future returns are not certain. It is clear that the data presented by primo wind shows a positive progress  as shown below 

According to the figure above, it is riskier to invest in this company because, the income generation may become zero and therefore, no credible returns at all. Comparing the two, the primo wind and west wind gin company, it shows, west wind has good returns which cannot easily become zero. 

Conclusion

From the deep analysis of all the companies discussed above, you can see that the west wind gin is more suitable for investment. It mainly deals with the gin which its sales are predictable and less risky. This company sells its shares at an affordable price that many people can afford investing here (Zhang, 2018). There is no season that their graph would touch zero like other companies such as Primo wind as shown in the graph above. This means that the investor is assured of good returns. Moreso, on their website, the investor can judge whether to invest or not, because, they have all the data on their front page.

The Benefits of Equity Crowd Funding for Investors and Issuers

People lack education and trust about the internet money or have financial deals on the internet. (Ordanini, 2011) It is not easy to address this issuer as it is hard to have a teacher in every location of the world to educate the investors. In countries like Africa, many investors do not have any confidence or knowledge to use this sites. (Khavul, 2018)I see it important for the owners of equitise to advertise in in social media, and carry out interviews using online questionnaires to help them market their company, otherwise, it can take very long to reach the required target of the funds. More so, the company should think of decentralizing its organization to reach many people. 

References

Agrawal, A., Catalini, C., & Goldfarb, A. (2010). Entrepreneurial finance and the flat-world hypothesis: Evidence from crowd-funding entrepreneurs in the arts (No. 10-08).

Herzog, S.M. and Hertwig, River., 2013. The crowd within and the benefits of dialectical bootstrapping: A reply to White and Antonakis (2013).

Psychological science, 24(1), pp.117-119.Estrin, S., Gozman, D., & Khavul, S. (2018). The evolution and adoption of equity crowdfunding: entrepreneur and investor entry into a new market. Small Business Economics, 1-15.

Dalsgaard, C. and Sterrett, River., 2014. White paper on smart textile garments and devices: a market overview of smart textile wearable technologies. Market Opportunities for Smart Textiles, Ohmatex, Denmark.

Ordanini, A., Miceli, L., Pizzetti, M. and Parasuraman, A., 2011. Crowd-funding: transforming customers into investors through innovative service platforms. Journal of service management, 22(4), pp.443-470.

Kim, K., & Viswanathan, S, White. (2018). The’Experts’ in the Crowd: The Role of Experienced Investors in a Crowdfunding Market.

Kuti, M., & Madarász, River G. (2014). Crowdfunding. Public Finance Quarterly, 59(3), 355.

Li, Y. Z., He, T. L., Song, Y. R., Yang, Z., & Zhou, R. T. (2018). Factors impacting donors’ intention to donate to charitable crowd-funding projects in China: a UTAUT-based model. Information, Communication & Society, 21(3), 404-415.

Manchanda, K., & Muralidharan, P. (2014, January). Crowdfunding: a new paradigm in start-up financing. In Global Conference on Business & Finance Proceedings (Vol. 9, No. 1, p. 369). Institute for Business & Finance Research.

Polzin, F., Toxopeus, H., & Stam, E. (2018). The wisdom of the crowd in funding: information heterogeneity and social networks of crowdfunders. Small Business Economics, 50(2), 251-273.

Xiao, B. S., Lim, E., & Tan, C. W. (2018, January). Introduction to the Minitrack on The Sharing Economy. In Proceedings of the 51st Hawaii International Conference on System Sciences.

Kraus, Sascha, Chris Richter, Alexander Brem, Cheng-Feng Cheng, and Man-Ling Chang. “Strategies for reward-based crowdfunding campaigns.” Journal of Innovation & Knowledge 1, no. 1 (2016): 13-23.