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Equitise co-founder and managing director Jonny Wilkinson.
Image Credit: Equitise

$20 million and counting — Crowd fundraising by fintech startups surges in 2021

Crowdfunding for fintech startups has already hit the $20 million mark this year. According to data from the recently released “2021 crowdfunding industry report” from equity crowdfunding platform (ECF) Equitise, startups in the nascent industry raised a record $19.5 million. 

The crowdfunding sector has risen by 60% in the last two years, according to the report with total funds raised increasing from $28.3 million to $46 million in 2021. The entire volume of equity crowdfunding in FY19 was $28.3 million, according to the Equitise Industry Analysis. It dipped to $20.4 million in the fiscal year 2020 before touching $46.0 million in the fiscal year 2021.

The Equitise study outlines the industries that have had the most success with equity crowdfunding, as well as what the future holds, based on emerging business models that factor in the COVID-19 epidemic. 

The equity crowdfunding study also determines which industries have performed the best since the regulatory reform in 2017, with Fintech, alcohol, and food topping the list.

Jonny Wilkinson, co-founder and managing director of Equitise, says the pandemic has changed many parts of daily living, including how we buy, access food, and conduct business.

“We have highlighted the four biggest industries to watch in this space in the last few months of 2021 are direct-to-consumer and online shopping, sustainable food alternatives, telehealth and craft breweries or low to no alcohol alternatives,” Mr Wilkinson said. 

“E-commerce is on a growth trajectory, as the pandemic changes how we shop. D2C contributes about 10% of retail in Australia, compared to the 20-30% of the overall retail level seen overseas – set to reach $4.5T by the end of this year globally.

“Activity in this space is rapidly growing, with companies like adult acne disrupter tbh skincare currently running equity crowdfunding campaigns.

“Both digitally native companies are seeing exponential growth during the pandemic. Tbh skincare has turned over $798K in the last 18 months and baresop has sold over 3000 units since launching in November last year,” he said.

Fintech funding frenzy

With improved technology, shifting customer expectations, and the government’s focus on the financial services industry, it’s unsurprising that the number of fintech startups is growing (from 629 in 2019 to 733 in 2020) and turning to crowdfund.

“With increased technology and consumer expectations plus the Royal Commission’s spotlight on the financial services industry, fintech startups are increasingly turning to the crowd as a means of raising capital,” Mr Wilkinson said. 

“Two standout sectors in the broad fintech industry have been neobanks, such as Parpera and Thrive, as well as cryptocurrency apps such as Qubix and Coinstash. 

“In 2020 alone there were 49 (up 153.1%) new blockchain-related startups. With a mission to democratise currency, it also works well with equity crowdfund’s mission to democratise investing,” Mr Wilkinson concluded. 

There has been an increase in blockchain-related startups in the fintech sector over the previous two years. This may not come as a surprise given that there were 49 new blockchain-related firms in 2020 alone (an increase of 153.1 percent). 

Its objective to democratise currency complements the mission of equity crowdfunds to democratise investing. There have been 24 fintech ECF fundraisers in total, the most of any industry, totaling $19.5 million. Among the noteworthy offers were:

  • Lumiant (Equitise) – $1.16 million raised in 2020

A values-based advice service delivered via an innovative SaaS solution that helps financial advisers identify what really matters to their clients

  •  Thrive (Birchal) – $3 million in 2021

An AI-powered platform that automates banking, accounting, tax, and lending for SMEs

  • Coinstash (Birchal) – $2.8 million in 2021

Registered Australian crypto exchange offering new solutions that allow users to trade, earn, borrow and spend crypto

The fintech industry is amongst the top-performing industries in the Australian ECF, according to Will Yu, Investment Analyst. 

“The equity crowdfunding trend has proven to be one of the most effective ways for startups to raise funds while increasing brand recognition,” Mr Yu said. 

“It allows founders to raise funds from individuals who share their vision and are literally invested in their success. 

“It’s a simple and exciting method for individuals to invest in companies they believe in for just a few hundred dollars. If the company does well, the potential for profit is high because they will be able to get in on the ground floor,” he said.

Australian fintech landscape

A Fintech Landscape 2020 study conducted by KPMG Australia showed a total of 733 active fintech companies in Australia, up from 629 when the landscape was last released in September 2019.

The Australian big banks’ financial performance for the full financial year 2020 declined, with combined cash profit after tax (PAT) from continuing operations down 36.6 % from FY2019, as per the report.

The study showed that:

  • There was an increase in the number of fintech firms within the lending category supported by new players in both consumer and SME lending sub-sectors, as well as an increase in Buy-Now-Pay-Later (BNPL) providers
  • Growth in blockchain and cryptocurrency-associated fintech matched the general support and interest in the technology asset class across the past year.
  •  There has been a surge in the number of startups operating in the neobank sector, such as Volt.

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