Crowd-Sourced Funding Shows Sustained Stability and Growth in Platform Activity
Latest CSF Industry Report ‘Funded’ Highlights Ongoing Resilience
Birchal announces the launch of the Crowd-Sourced Funding (CSF) FY24 Industry Report ‘Funded’ demonstrating stable funding volumes, resilience and a 16% growth in the number of companies using equity crowdfunding in Australia compared to FY23, signalling growing confidence in the CSF funding model amid tough economic conditions.
Despite the challenges and broader market downturns, equity crowdfunding demonstrated remarkable resilience with Australian CSF funding volumes remaining consistent with FY23, delivering $64.5 million from 35,000 investments. Birchal continues to play a significant role, and as the market leader was responsible for hosting 66 of the 99 campaigns and raising $46.5 million from 27,000 investors, with the next closest competitor raising $8.2 million.
The Funded report reveals that whilst there were more offers on the platforms this financial year, the raise sizes were smaller ($661k average deal size) reflecting a conservative investor market most likely underpinned by rate rises and general economic uncertainty. This is somewhat contrary to the broader VC/angel funding channels where there seems to be fewer more targeted ‘mega rounds’ bringing the funding volume up.
Interestingly, successful CSF offers have outpaced new listings on the ASX for the second year running, with just 56 ASX IPOs completed in FY24 (one fewer than FY23).
“The last financial year demonstrated remarkable resilience with equity crowdfunding levels remaining consistent with 2023, contributing $64.5 million to the startup ecosystem," says Matt Vitale, Co-Founder and CEO of Birchal. "Despite the challenging funding environment, a 16% increase in the number of companies using CSF compared to FY23 highlights the growing recognition of CSF as an efficient way to raise capital."
Vitale says, “It’s evident from the Funded Report that startups and SMEs play an essential role in driving economic growth, they are the lifeblood of Australia’s economic future. Proposed changes to the wholesale and sophisticated investor tests may narrow the pool of investors able to invest in startups, impacting both investors and the availability of capital for startups and SMEs. Persistently high inflation, interest rates, and cost-of-living pressures complicate the economic landscape.”
“The CSF regime appears to be a critical part of the answer. It is the only way early stage businesses can make a regulated public offer of securities, and gain unparalleled access to a potential investor pool of over 10 million Australians.“
“Australia's CSF industry has rapidly penetrated the market, with approximately 130,000 Australians already participating in CSF offers. As other capital pools narrow, the opportunity to aggregate them into a proven, regulated, scalable mechanism like CSF is compelling.”
“We believe equity crowdfunding is an incredibly powerful piece of regulatory infrastructure with robust investor protections. Enhancing incentives for retail investors by expanding ESIC incentives to all CSF companies is essential for the future of CSF. It unlocks a national pool of capital.”
Dom Pym, Co-Founder of Up, Pin Payments and his family office Euphemia says, “As an early investor in Birchal, I’m thrilled about the future of equity crowdfunding in Australia. With over $211M raised, Birchal stands as a cornerstone of financial infrastructure for our startup ecosystem. I champion and invest in businesses like Birchal that elevate the startup ecosystem, positioning us as global leaders. The data from Birchal’s latest industry report underscores the power of CSF in providing vital capital to innovative startups that might otherwise be inaccessible to investors.”
“The returns I’ve seen in European markets, where platforms like Seedrs and Crowdcube have been active for over a decade, highlight the effectiveness of CSF as a funding model. I’m excited to see what Birchal will deliver for the Australian economy as our funding market matures in the coming years.”
There are signs of growing maturity in the CSF industry, in FY23 46% of all successful CSF offers were made by companies that had greater than $1M in reported revenue, an increase of 8%. Interestingly, 28% of CSF deals were follow on raises in FY24.
A look at quarterly performance saw Q1 and Q2 were strong compared to FY23 with a greater than 20% increase in funding volume for the first half, however, those gains have been eroded by a softer finish in Q3 and Q4.
The industry as a whole delivered $315 million to the ecosystem across 427 CSF offers through the CSF regime since it commenced in 2018. Birchal alone facilitated over $211 million of investment into the ecosystem for startups and SMEs across 279 successful offers from over 127k investments.
Popular Industries
Food and Beverage was the top performing category for the third consecutive year with $19.7 million raised across 29 deals, representing 30% of the funding volume, down on FY23 when it made up 37%. This is followed by Healthcare at $14.2 million (again predominantly medicinal cannabis-related business) and then the sustainability surge is continuing as a trend in CSF with $8.1 million raised across 14 offers (12%), with Manufacturing making it to the top 4 categories for the first time. Another interesting trend was the significant growth in App-related campaigns (a total of 7) in FY24.
Top Raises
1. Hellyer's Road - $4.4m from 1,338 investors (OnMarket)
2. Medigrowth - $3.5m from 2,047 investors (Birchal)
3. Naked Life Spirits - $3m from 935 investors (Birchal)
4. Hydrowood Holdings - $2.4m from 668 investors (OnMarket)
5. Birchal - $2.4m from over 1,149 investors in December 2023 (Birchal)
Having previously raised $3million in 2022 via its own crowd-sourced Funding (CSF) platform, Birchal with approximately $5.39 million raised across two offers, is now among one of the biggest achievers through the CSF regime.
CSF Activity by State
Activity in NSW surged with a 14% increase in funding volume ($18 million raised) and a 32% increase in the number of campaigns (34) compared to FY23. Victoria also saw growth, with a 19% rise in funding volume ($21 million raised across 31 deals) and a 32% increase in campaigns. Tasmania made a strong entry into the market with contributions totalling $8 million from three campaigns, following just a single raise in FY21. This notable addition to the CSF landscape included the largest deal of FY24.
International Lens
For the first time, the report includes voices from around the globe on the future of CSF. Commentary from key CSF intermediaries including CrowdCube, Seedrs, DealMaker and FrontFundr are featured as we look beyond Australia to the trends sweeping the globe.
Funded FY24 provides an analysis of the current state of the CSF sector, revealing trends, areas of growth, and the shifts that are starting to shape the investment landscape. Review or download the full Report here.
