22 Feb Crowdfunding for film?
Crowdfunding has become an effective and viable project development tool for startup projects globally. While these avenues of equity raising are available to Australian entrepreneurs, the restrictive nature of the Corporations Act 2001 (Cth) (the Act) imposes a far too heavy disclosure and regulatory burden. For independent filmmakers, this burden is a serious limitation to the access of funds from potential interested investors. The use of crowd sourced equity funding (CSEF) is a great innovation to the way that money is exchanged and increases the opportunity for new projects to be successful.
In what many believe to be an overdue response, the Federal Government today announced that there will be new legislation around crowdfunding by the end of the 2015.
The Government insists that changes to the current regulatory system are an urgent priority in order to support investors and entrepreneurs alike and provide greater opportunities to explore new ventures.
The onerous regulations currently imposed by the Act were designed with the intention to protect “mum and dad” investors for enticing and risky online investment opportunities. The Act limits the opportunity for small proprietary limited companies from engaging in such capital raising activities from the general public.
However, since the global success of Australian projects such as Flow Hive, the Government was forced to react with today’s announcement.
Not only should the Government feel that this is an important time to review and make changes to the current regulatory scheme, but opening up avenues of crowdfunding will encourage the most talented entrepreneurs with the most exciting ideas to stay in Australia, instead of fleeing to a country with less restrictive equity raising regulations.
The concept of crowd funding is exciting in that it provides a greater opportunity for the public to engage with product developers. With the networking capabilities of social media, the public now has a much louder voice than at any stage of history. Projects which receive overwhelming support are clearly meeting a desire of the public. A project which receives very little support will not go much further than early development, which will save the time and resources of everyone involved. Crowdfunding provides exposure, customers and financial backing.
It follows that the coming changes announced today may provide an exciting opportunity for the Australian film industry. With an unprecedented engaged audience, the opportunity for some filmmakers to respond to feedback and develop a successful project is ripe. The global reach of the internet provides an exciting medium to reach markets internationally. Through engaging donors/investors at every stage of development, the donors/investors are emotionally connected to the project. This connection could go a long way to financing some Australian films.
The Government is encouraging greater input in the development of the law, in the form of an “Innovation Collaboration Committee”. Furthermore, the Government is considering providing access to the vast sources of data to entrepreneurs.
The model put forward by the Corporations and Markets Advisory Committee (CAMAC), as well as the model used in New Zealand is being considered.
CAMAC’s model included caps on the amounts retail investors could invest in a CSEF of $2,500 per issuer a year, and $10,000 aggregate investment over a year, allowing small investments into 4 ventures annually. The approach in New Zealand includes voluntary investor caps, with the level of disclosure to investors dependent upon the level of any voluntary caps and the amount of funds the CSEF issuer is seeking to raise.
The deregulations which are currently being considered will offer independent producers the flexibility to pursue investment for a project without the red tape. Deregulations which move away from stagnant law will encourage our best film makers to remain in Australia, further developing our society’s culture by providing an opportunity to for Australian artists to tell their story.