OnMarket CEO, Ben Bucknell, has a chat with Sky News Business host, Ticky Fullerton about all things Equity Crowdfunding, including the upcoming launch of OnMarket Crowd in Australia.
Ben gives an overview of Equity Crowdfunding globally, in particular the UK; the new legislation recently introduced in Australia and the benefits for business in Australia, and the associated risks for investors.
Ben also reminisces on his pearl diving days, as well as answering some of the bigger questions around the auditor General's comments regarding the $1.1 billion spend on innovation...Ben pulls no punches!
Ticky:Two years ago, a small company called OnMarket came into the media spotlight with the enthusiastic Prime Minister for innovation, Malcolm Turnbull, launching a brand new product. It promised to democratise investing in IPOs by enabling retail investors through their mobile to bid into new floats. Since then, on market crowd has taken around 70 IPOs to market like this, but until now investors had to stump up a minimum $2,000. Well as of last week, the government is issuing licences to allow Equity Crowdfunding in Australia from the public for as little as a $50 investment. The idea being to bring together SMEs, entrepreneurs, and startups with retail investors, and you can bet that OnMarket crowd is one of the first players to apply for the licence. The CEO, Ben Bucknell joined me in the studio a little earlier on. Ben Bucknell, it's great to have you around today. It's been 2 years since you kicked off democratising it all.
Ben Bucknell: It seems to have gone by very quickly Ticky.
Ticky:I bet it has. You've been working very hard now. This most recent news, you're going to take democracy even further, so we're actually going to be able for 50 bucks to get involved in equity raising, are we?
Ben Bucknell:Well, it's an interesting thing that's happened, so all around the world we've seen Equity Crowdfunding bring an enormous amount of capital to growth businesses.
Ticky:When you say enormous amount, what are we talking?
Ben Bucknell:Around about 2.5 billion globally when we talk about it, only being introduced in the UK in 2013.
Ticky:Yeah. This is just from many, many, many, many people.
Ben Bucknell:Lots of little people ... not little people, but people investing little amounts.
Ticky:Little amounts. Yeah. That's quite a sizable amount if you think. It's sort of 50, 100 bucks, maybe 400 bucks but small amount.
Ben Bucknell:Well, I think what's really interesting is that this fills a gap effectively. You've got around about 200,000 Australian businesses that Deloitte came out and said were seeking potentially up to 60 billion for growth expansion. These are companies that are not able to get further financing from the banks, what they really need is an equity slice, and so they can go out, they can appeal to ordinary Australians who believe that this is a business that will bring something new and exciting, and make an impact on Australian society.
Ticky:Okay. Why should the punter, or indeed the self-managed super fund investor, invest in these startups when clearly other people in the private market are not?
Ben Bucknell:That's a good question, and I think if you think about it, and the way I thought about it initially was along those lines. If I go and invest in an IPO, and that's what we've been doing over the last two years is we've basically done 70 IPOs and offering them to the public. If you invest in an IPO you're investing purely for a financial return, but if you're investing in equity crowdfunding, people's drivers are different, so they're actually thinking, "How is this business going to contribute some way to society?" Now sure, some of them will fail, in fact this is designed to get capital into riskier businesses that can't otherwise get funding, but some of them could be the next Facebook, if we're using a well-worn example.
Ticky:So you are a platform through which people can do this once you get your ... have you got your licence yet?
Ben Bucknell:No. Licence applications first were open on Tuesday this week. We put ours in on Wednesday, so we're hoping that we'll be first cab off the rank there.
Ticky:Okay. Once you've got your licence, how do people get involved in this? You presumably throw up startups that are looking for money. How do people get to know about this thing here?
Ben Bucknell:So, people join the OnMarket platform just by onmarket.com.au, they sign in with their details, we go through a process, we have extensive due diligence on companies that are coming to us. There's no shortage of companies seeking capital, and we pick out the best of those, offer them up on the platform. It's a very transparent process, people can see how far funded each business is, so if it's raising $5 million dollars and it's 60% funded, they've got 3 million already bid for.
Ticky:Yeah. In your original business model where you were looking at IPOs, those companies would have been small but of a reasonable size.
Ticky:These are much smaller companies potentially you're talking about?
Ben Bucknell:Not necessarily. So under the legislation, companies can raise up to 5 million per year through equity crowdfunding. So I think we're potentially seeing a lot of companies that traditionally might have gone down the IPO path, offering on the Crowdfunding route because they don't necessarily have the overheads that are associated with a listing.
Ticky:Well, one of the things that you were offering in the 70 IPOs that you've helped get to market is research, and free research, which you contracted out, didn't you effectively? You had researchers. Now can they ... they won't be able to get across all these, will they?
Ben Bucknell:Well, it's an interesting one actually. We've got plans in the making for how we expand that research offering. It's not ready yet but it's one of the developments that we're making for the platform. We're constantly looking around the world at what we consider to be the best practises. Some of it we're taking what's being done before somewhere else in the world, and some of it is their own innovation that we're adding to the platform.
Ticky:Now, this is not listed, is it?
Ben Bucknell:This is unlisted stocks. Predominantly, investors and retail investors are limited to $10,000 per company. Obviously high-net-worth investors can invest as much as they want, but they're not listed. They're going to be high risk, they're going to be high growth, high potential.
Ticky:Yeah. Because the government had to get its head around this, didn't it? Offering to retailers, which are on the market generally we don't like. Mums and dads getting involved in things that they may or may not understand, so the government had to get its head around this, didn't it?
Ben Bucknell:So take everything you know about securities, law, and prospectus disclosure, and protecting retail by throwing more and more disclosure, and just throw that off the room. And say, "Okay. People can be responsible for their own decisions." There's actually a lot of very intelligent so-called retail investors out there. They might be retail as far as the law is concerned, this doesn't mean they're not savvy investors, and they're perfectly capable of making their own investment decisions. On the other side of protection, what the government's done is said, "We'll limit people to $10,000 per company." Now, that's still a lot of money in my mind, so people need to be careful.
Ticky:But it has its own built in. Then as you say because your start-up, you should understand risk, you used to be a pearl diver for Paspaley I read.
Ben Bucknell:I was hoping you weren't going to bring that up.
Ticky:Yap. I'm just shocked by that, but anyway you moved on. But presumably...
Ben Bucknell:Maybe I should have stuck with that.
Ticky:People really need to understand that when you're investing in a start-up, there's all this upside but there is obviously downside as well.
Ben Bucknell:The way the licencing structure works is that companies can only raise through ASIC registered equity crowdfunding platforms, and it effectively takes a lot of the obligations that you might typically see in the market operator licence with ISX or [tri-X 00:07:10], and the obligations that you have in a retail AFSL and it brings the two of those together and forms in your licence. One of the key pieces of protection are these risk warnings that we keep sticking up in front of people saying, "Beware. Beware. Beware," because these are high octane investments and a lot of them are going to fail.
Ticky:How long do you think it's going to ... I mean looking forward OnMarket crowd you're going to get how many companies by the end of the year do you think? Is it as much as you can handle?
Ben Bucknell:Where's the crystal ball? Where's the crystal ball? I think it's going to be enormously exciting place for people to engage with ... by people I mean for companies to engage with the community.
Ticky:And your world positions, as you say you hope you're the first cab off the rank, do you think there'll be a lot of competitors in this space?
Ben Bucknell:I think there will. We've got some really good competitors, so if we look out we've got VentureCrowd that's Viv Stewart, he's doing a good job there. They are a VC lead model. You've got the guys at Equita, they've done a lot to get the legislation ready, and then there's probably a host of other people that are putting in for licences.
Ticky:Of course, I interviewed you just after you were standing there shoulder-to-shoulder with the prime minister, all part of the great big innovation statement. Now since then literally at the end of last month, the Auditor General's come out and really sort of smashed the $1.1 billion innovation agenda saying it was really are very hard to tell whether it's making any difference. How do you react to that?
Ben Bucknell:Well, it's interesting. I wonder if the author of that has really thought about the fact that here in Australia we've got 1.2 million entrepreneurs that employs 60% of our 12 million workers, and contribute 343 billion nationally to the economy each year. Now, small business has been the powerhouse of the Australian economy ever since Federation and probably before, and I think the government has recognised that. So, I wonder whether the author of the report is looking perhaps through a different lens.
Ben Bucknell:This has bipartisan support, this equity crowdfunding regime. So what this does is potentially bring an enormous amount of capital from people who are perfectly capable of making their own investment decisions, and will be driven both for social reasons that they want to see this business get up, and they want a piece of the action if the thing is very successful. We are seeing some incredibly exciting innovations come through.
Ticky:What you're saying is the way that that's being measured on the accountability front is perhaps not consistent with your views?
Ben Bucknell:You know, there will always be naysayers, won't there? There will always be visionaries, and there will be naysayers for divisions.
Ticky:Okay. Last quick question. You floated at the time two years ago the Bitcoin in Australia IPO, how do you think it's gone since then?
Ben Bucknell:Well, we attempted to float the Bitcoin IPO. They ran into regulatory hurdles in between ASIC and ISX, so unfortunately for investors, and we've seen what Bitcoin prices have done since then, investors missed out on the opportunity.
Ticky:So they directly missed out on it altogether you think?
Ben Bucknell:So they missed out on the opportunity. It didn't go through for a listing.
Ticky:Right. But plenty of other opportunities in the pipeline.
Ben Bucknell:Plenty of opportunities in the pipeline. We've had 70 IPOs, and I think there's going to be many more in the Equity Crowdfunding space.
Ticky:Ben Bucknell, great to have you in. Thank you very much.