Interview with Paul Niederer, CEO of ASSOB

On the Crowdfund it! blog we delve into the situation with equity based crowdfunding by talking to one of the world’s leading experts.

Paul Niederer is CEO of The Australian Small Scale Offerings Board (ASSOB), a company which supports high growth companies in obtaining investors through Peer to Peer investing. ASSOB is a unique Capital Raising and Listing Platform for Unlisted Companies. As CEO Paul leads a team that shepherds businesses through an ordinarily complex and frustrating Capital Raising Process with efficiency and effectiveness.

Paul Niederer is one of world’s leading authorities on peer to peer investing and equity based crowdfund investment.  With the intense interest in the Crowdfunding provisions of the U.S. Jobs Act Paul is intimately involved in advising a number of parties in how to structure their funding portals and processes, and how ASSOB has had a fraud free existence through hundreds of equity based raises.

The ASSOB Platform raises around $20m million per annum and performs at least 8 times better than any similar platform worldwide.  Over the past seven years $129 million has been raised.

Crowdfund it: Thank you Paul for answering some questions today. First up, can you explain what equity-based crowdfunding is?

Niederer: Equity-based crowdfunding is where a company seeking to raise funds from “the crowd” offers shares in the company in exchange for cash. The people supplying the cash become investors and part owners of the business as opposed to pledge crowdfunding where they end up with a product, service or experience.

Crowdfund it: In the US they are looking at regulations to be announced in early 2013* about equity-based crowdfunding. What is the current situation in Australia?

* In April 2012 US President Barack Obama signed the Jumpstart Our Business Startups Act (known as the JOBS Act) into law. The JOBS Act aims to encourage and enable small business or startup investment in the United States. Part of the JOBS Act will allow small businesses to raise capital of up to US$1 million annually through online crowdfunding platforms by offering many small investors equity in a business. Rules and regulations governing this part of the JOBS Act will be introduced in early 2013.

Niederer: We have not heard of any moves to amend or introduce “crowdfunding” legislation into Australia.

Edit 19/06/13: Please ee the attached link: “The Government will undertake consultation on Australian crowd-sourced equity funding (CSEF), which will consider whether Australia’s corporations law properly regulates and facilitates CSEF.”

Crowdfund it: Do you think or hope that Australia may consider changing legislation to allow more openness to this in the future?

“The benefits are that hundreds of businesses that wouldn’t normally get funded through traditional channels can get funded by those near and dear to the company raising capital.”

Paul Niederer, CEO, ASSOB

Crowdfund it: What are the concerns and what are the benefits of equity-based crowdfunding?

Niederer: The main concern is fraud and scams. The benefits are that hundreds of businesses that wouldn’t normally get funded through traditional channels can get funded by those near and dear to the company raising capital.

Crowdfund it: With your knowledge of what is happening around the world in this area, is there one country or model that you think has the correct approach that you’d like to see Australia emulate?

Niederer: A model supported by legislation has yet to emerge. In Holland a hybrid model is used based on Cooperative legislation. In England investors dont invest directly in the fund raising entity but in another that invests as one shareholder. The U.S. is fashioning legislation and procedures to suit it’s market but it is early days.

Crowdfund it: Can you tell us about The Australian Small Scale Offerings Board and how it operates?

Niederer: ASSOB operates a business introduction and matching service for companies seeking equity capital through the ASSOB Platform. Over the past seven years this has developed in to a sophisticated and proven capital raising platform.

• ‘Personal’ investors make up 63% of ASSOB’s investors in raisings or as the legislation calls them, small scale offerings. These investors are known to the company and through that association are likely to have some knowledge about what they are investing into;
• ‘Sophisticated and professional’ – these investors have monetary limits as qualifiers and are deemed really to be financially astute to handle the risk of losing their investment;
• ‘Overseas’ – these investors do not live in Australia and ultimately the risk is their own;
• ‘Associates’ – these investors work for the company in a senior manager position or are related to a senior manager and therefore should have knowledge about the investment entity due to their position; and
• ‘Nil consideration’ – these investors have not paid any money or given any value for their shares as they were gifted and as such, are not losing anything by being offered shares.

ASSOB has developed its own set of Rules to afford investors a measure of protection which our internal legal department has strengthened over a period of time through experience, however as we are a business only, our procedures relate more to providing documentary evidence of director statements to assist aggrieved shareholders in pursuing claims and the Australian Securities and Investment Commission (ASIC) with enquiries.  We have done this to build the credibility and reputation of ASSOB and also because we do not want to be associated with a business that facilitates fraud.