There are three reasons why this new wave of entrepreneurship is set to happen.
- Increased avenues for investment
Startups are no longer solely seeking funding from large firms, and new avenues of capital – such as equity crowdfunding – have grown in popularity. This form of fundraising is allowing people previously excluded from investment the opportunity to support different industries and back products they are passionate about. One notable example of an effective crowdfunding campaign has been sugar free soft drink company Nexba. After crowdfunding $6 million in capital last year, the business is now planning to raise $50 million to support its European expansion plans.
Crowdfunding is significant because it proves there is a market for a product or support for an idea. Investment committee members who were too nervous to back a particular business can clearly see that consumers are prepared to bite. There are countless examples of crowdfunding that have seen millions of dollars raised to support new products. With Australian regulation now allowing retail investors to take part in equity crowdfunding, the general public can now have actual ownership in businesses whose vision they believe in.
- Archaic systems need to be overhauled
When the COVID-19 crisis hit, it revealed that the old ways of doing things were in dire need of change. Technology is needed to revolutionise workplaces and industries alike, with medicine, education and real estate just three industries that have been revealed as needing to be overhauled during the pandemic
Forced isolation has already required people to live and work in new ways, and for businesses to adopt new technologies and operating behaviours. When we completely emerge from lockdown, many of these technologies will be here to stay and even be expanded because of the recognised impact that they’ve had. It may even be enhanced when people aren’t spending around twenty hours a week commuting, or catching a plane for ten hours to take part in a ten-minute face-to-face meeting.
- Ethical investment for a purpose
Even before the pandemic changed our everyday lives, companies contributing to climate change were being called to account as Australia experienced its worst bushfire season on record. Investors alarmed at the impact of companies damaging the environment have begun to look at their own investments, and whether these are aligned with their values.
KPMG has highlighted a mindset shift – both among consumers and investors – when it comes to “ESG” – ethical, social and government issues. Climate change and sustainability have become much bigger concerns since COVID-19. The drop in emissions as cities locked down highlighted the damage being done by our pre-pandemic way of life and business. It predicts that ESG investments “will offer differentiation and resilience”, noting that so far, ESG investments appear to be at least, if not more, resilient to the economic consequences of COVID-19 than mainstream investments. Governments may in future demand social dividends from the bailout that many businesses have been given, with greater environmental regulations. This will drive investment opportunities in new technology to enable better sustainability.
While the economic and social pain of COVID-19 is far from over, “green shoots” are already emerging. Square Peg Capital, Australia’s largest venture capital fund, is readying for a “burst of innovation” on the back of the pandemic. It predicts that 2021, 2022 and 2023 will be the best period to invest since the 1995-99 period, with the world “going to need re-imagining on an unprecedented scale over the next few years… much of which will be done by the next generation of creative and resilient founders”.
Many of those founders will be supported by individual investors through crowdfunding. And not just as a way to invest – but also to more actively participate in recovery and building our future economy and society.
Steven Maarbani is CEO of VentureCrowd – an Australian crowdfunding platform for alternative assets. A Partner and member of the Innovation Advisory Council of the Real Tech Ventures Fund, Steven also sits on the Advisory Board for a number of high-growth companies, and was formerly a PwC partner specialising in Venture Capital & Private Equity.