Crowd Funding in Perspective of Australia

Question: Discuss about the Crowd Funding in Perspective of Australia. Answer: Introduction: Crowd funding is a popular mode of funding through investors for a specific purpose. It has got its presence since long. The purpose of this mode of funding is to ensure a quantity of funding by the investors for certain purposes which may be of social, business or other purposes. It is mostly found that crowd finding is made to make some business effort or for some social purposes. It is observed that this instrument is used for different purposes. Crowd funding has crossed its different level transition through different efforts opted by the aspirants right from mailing to the latest mode of internet to raise funds for specific purpose(lipton-herzberg, 2016). Investment in any form has a direct relation between the fund raisers and the investors in the form of interest of both the parties. As this type of funding is made from the crowd or people with no specification of the investors, it is being observed that the people who invest in the crowd funding has some common interest in general for which they respond to the common purpose which may have social or other values for which they can feel the same platform to encourage any specific effort(Young, 2013). Description of crowd funding We will discuss different aspects of crowd funding in the form of definition and explanation of crowd funding, with some examples in the context of commercial as well as social activities and a detailed discussion of crowd funding in respect of the Australian scenario with the emphasis on control measure of the same through corporate law and its similarities with the international law of crowd funding opted by any country so far the legislative jurisdiction is concerned(Nesta, 2012). Definition: To define crowd funding, the basic concept of this investment is to be understood. It is mainly an effort through which small amount of investment from individual for fund raising purpose is being made through a big network which may consist of groups of same mentality, community or the nation as a whole. This concept of fund raising[4] may be initiated through different activities to make people aware of the purpose of this investment pull and when the investors feel that the same can have direct interest to fulfil their demands, they come voluntarily forward to invest in the same venture(Rider, 2015). The concept of crowd funding can be used for different purposes which may be beneficial for initiating any commercial or social purpose. Explanation: This concept is mainly to raise funds which are made for a specific reason with commercial or social value. The investors feel interested when they find the same has capacity to entertain their needs. The concept of crowd funding is not to raise fund from a set of people with the status of shareholders to entertain the needs of any organization, but it is being sued mainly for a purpose which is commonly acclaimed by mass and they are ready to invest for the purpose(Cunningham, 2012). The need of crowd funding is observed from long ago when the fund was required for some common purpose to satisfy the interest of the people of any community. The recent concept of crowd funding is getting well popular among the intended investment pullers when internet had come into existence with its broader reach to the people. Social media is playing a vital role in this aspect. Different platforms in the form of website or social media is being used by the intended investment seekers to reach the target audience to explain the project and the basic reason of raising funds for the purpose(Hanrahan, Ramsay, Stapledon, 2015). Examples of crowd funding: As we know, the purposes of c crowd funding are different- it may be for commercial purpose, or for social purpose with non-profit intention. While the commercial purpose of crowd funding has the direct impact of raising funds for the business purpose, it offers different types of promotional activities to be availed through this fundraising activities for the investors. Commercial example of crowd funding in Australia: Tatura Hotel: The effort of crowd funding by the Tatura Hotel is being launched in the website indegogo.com. This effort of crowd funding has substantial response by raising funds of even $11,000 a day so far the record shows. As this is a time bound campaign the proposer of this crowd funding, Bugs estimated a total pull of around $ 65K by the stipulated time period. The appeal of this crowd funding drive is backed by the offers which were including the tailor-made type of naming of the foods and the different parts of the Pub with the names of the investors. The investment parameter of this drive is fixed as per the offer to the investors. The uniqueness of this fund raising drive is featured by the success of this effort which is known as the quantity of funding derives the rewards, the more the investment is, the value of the rewards are more lucrative(Ryan, 2014). Red Robin Supper Truck: The stakeholders of Brisbane Bands, the grates, Patience Hodgson and John Patterson had raised a campaign for crowd funding of Red Robin Supper Truck which is food truck and stationed on permanent basis at the back of Death Valley, a bar next door to Southside Tea Room. This example of crowd funding is not only concentrated to high level of technological development but also concentrates on more offerings to the customers to ensure the future loyal customer base which can be instrumental for development of business. This drive of crowd funding had resulted to additional $1000 for further development and growth for the Red Robin Supper Truck. The campaign had been floated in Possible(Murton, 2015). . Social example of crowd funding in Australia: There are different efforts of helping the mankind through social activities by donation for which the help of crowd funding is sought for. One of such example was fund raising efforts in Australia which had been launched through the platform of gofundme.com. Oliver bike ride across Cambodia: This effort of crowd funding is mainly to facilitate the children of Cambodia by riding a bike to cover 850 Kilo mitres over eight days throughout Cambodia for raising money on the ground of charity to be extended to the children by the name of the mission Charity One Step One Life which is being supported by the childhood friend of Oliver, Jake[9]. The objective of this drive is the ensure fund for extending small scholarship for which they had taken so many initiatives in last two years like formation of a fully upgraded and equipped school for the children enabling them to access the benefits of high technology which they might not have earlier; extending sponsorship to facilitate the scholarship to the children: ensuring employment to fifteen local Cambodians to run the school by training them for teaching English and other subjects in the One Step One Life school: creation of purified water supply for the villages of Cambodia, etc. For this purpose there is a huge requirement of fund which can be generated through this drive of crowd funding which can raise fund of $1500 as start-up capital. Other relevant information is available in the organization(Kirby, 2016). Proposed legislative framework for regulation of crowd funding in Australia: The legislative department of Australia had initiated motion to amend the existing legislation of Corporation Act 2001 through Corporation Amendment Bill (Crowd Sourced Funding) 2015. The basic purpose of this bill is to make a framework to control the crowd sourced funding for the aspirant companies both public and small unlisted entities with the provision of introductory relief to them regarding compliance of statutory governance with enabling the ministry to allow the clearing and settlement facility operators exempting them from identified sections of the Australian Market License[10](Ashurst, 2015). The structure of the bill will consist of three schedules to provide the eligibility criteria for CSF offerings with obligations for the intended entities, the process of offerings, regulations regarding incomplete disclosure as the part of offer related to CSF with protection to the investors. Policy fixation and economic justification of Crowd Sourced Funding (CSF) is to ensure promotion and facilitation of innovative ideas in Australian economy in perspective of CSF for start-up companies which needs adequate finance for their business. It is found that inadequate finance is the biggest barrier for innovation as the result of the research and development cannot find its birth in the application stage for inadequacy of fund specifically for SME units. The extract of CAMAC report finds the resultant Capital Gap which is restricting the company for funding the necessary steps for further development which is barred from attracting fresh source of funds from traditional sources and the entity is not able to attract fund through public issue of securities(CAMAC, 2014). Economic justification of this bill is generated from the bottleneck of inappropriate information, externalities and the basic cumbersome compliance of the Corporations Act. The said bill had been referred by the Senate to the Senate Standing Committee on Economic legislation on 3rd December, 2015 for further analysis and enquiry about the said bill with the expected time of report on 29th February, 2016. The report had been published by the said Committee on 1st march 2016. The outcome of the report emphasized on the importance of the role of finance for start-up sector with the security to the investors, as well apart from other big agendas related to innovative measures and subsequent productivity. The two basic recommendation of the committee depicts that the senate should pass the bill with ensuring governance[11] to be carefully monitored for ensuring the careful implementation of the legislation with the review to be undertaken after 2 years of enactment with the specific emphasis given on the subjects in the report(Gupta, 2016). Comparison between Australian and US Crowd Sourced Funding in perspective of legislation: While the Australian legislative authorities had taken up necessary steps to ensure the need of CSF[12] and to secure the interest of the stakeholders, USA has evolved formidable developments in this field through the implementation of JOBS Act (Jumpstart Our Business Start-ups Act) 2012(Currell, 2016). This rule had erased the restriction to the companies to sell their securities to the people though the platforms which normally act as mediator of crowd funding. These platforms are treated as brokers of the US Securities and Exchange Commission with the status of funding portal as per the legislation of the US. In nutshell the legislation narrated in JOBS Act allows the licensed broker-dealer or funding portal registered with SEC. This Act encourages the concept of crowd funding and there are so many entities came forward to provide the crowd funding service to match the increasing demand of the concept, both for start-up entities and for the public interested in investments(Garrad, 2015). In comparison of both the countries related to this issue, it is found that both countries are aggressive with this concept but Australia is more conservative towards securing the interest of the investors. Conclusion: The concept of crowd funding is matching the emerging demand of investment in the modern world irrespective of its nature of operation. It is mostly found that the people would prefer to invest through the entities which are more conversantly run in the internet with its proper certification. When the question of crowd funding is there, the intended investments seekers would prefer a good platform which can ensure good projection of their dream project to the investors and the investors also like to find their name in the list of investors of those start-up projects which would have immense scope of development through innovation. It is the trend of the modern tech-savvy world to involve in every level of engagement through internet and the investors are no exception to this concept. It is easy to reach the target audience and they would like the concept as they can find the prospect of the project-both in long and short term period. Crowd funding from social media would be the future of the investment and that will be the ultimate in future commercial or social fund raising. References: Ashurst.. Crowd-sourced equity funding: what the Bill and the Innovation Statement mean for Australia. (Retrieved August 30, 2016, from ashurst) CAMAC. (2014). CAMAC Report. Cunningham, W. M. The JOBS Act: Crowd funding for Small Businesses and Startups (2012);. Currell, M. Crowd-sourced equity funding what should Australia do? Retrieved (August 30, 2016, from herbertsmithfreehills) Garrad, L.. Crowd funding and Singapore Startups. Retrieved August 30, 2016, from (guidemesingapore 2016): Gupta, N. Corporations Amendment (Crowd-sourced Funding) Bill 2015. Retrieved (August 30, 2016, from APH) Hanrahan, P., Ramsay, I., and Stapledon, G. Commercial Applications of Company Law (2015); Kirby, O. Olivers Bike Ride Across Cambodia. (gofundme August 30, 2016) lipton-herzberg. Business, Finance Life. (2016, June 18 lipton-herzberg) Murton, D. 5 outstanding Australian crowd funding campaigns. (August 30, 2016 marginmedia). Nesta. An Introduction to Crowd Funding. (2016, em-a.eu) Rider, B. International Financial Crime; (Research Handbook on International Financial Crime 2015). Ryan, B. The Tatura Hotel - The Internet's Pub. (2016, from indiegogo). Young, T. E. The Everything Guide to Crowd funding, ( Aadams media, 2013).