Crowd-source funding a consistent $70m market, Birchal yearbook shows

Australia had access to an investment category that poured a consistent $70m into growing businesses for the past two years but not enough start-ups are taking a run at the money.

The Birchal board.

Australia had access to an investment category that poured a consistent $70m into growing businesses for the past two years but not enough start-ups are taking a run at the money.

That is the view of Matt Vitale, a co-founder of crowd-sourced funding company Birchal, a platform that had orchestrated raises as large as $5m over the past 12 months.

The nation’s CSF regime saw a total investment of $71m last year, and Mr Vitale says there is more where that came from, and that the regime needs to be associated with more than just food and ­beverage.

“This is a movement that is gathering pace and it’s supporting entrepreneurialism in Australia. It has all the benefits but with consumer protections, and it’s a rules-based regime at the same time,” he said. “I think it is the way of the future.”

CSF was becoming a popular way for novice investors to back early-stage business, he said.

“I think there is a growing number of people that are interested in early-stage businesses as an asset class and they are able to find success and enjoyment in supporting founders in their journey,” he said.

Cannaponics, a cannabis start-up that aims to produce cannabis at scale, held the title of Australia’s largest CSF raise last year, raising $5m in May from 2771 investors – $5m is the maximum amount a company can raise through CSF in a single funding round. The business operates a 4000sq m greenhouse on a 67ha site in Western Australia.

Birchal co-founder Matt Vitale.

Companies such as Cannaponics were quickly finding a home on CSF platforms, Mr Vitale said, as they often attracted passionate hobbyists along with sophisticated investors.

Across all CSF platforms in 2023, food and beverage was the most popular sector, seeing a ­collective $21.6m invested across 24 raises.

The reason the category had been so popular was because some brands were able to build a community that they could then leverage for financial support to grow, Mr Vitale said.

“They’re also products that people can understand and that they’re already consuming,” he said. “It’s hard to differentiate in that market and CSF is a really good way of telling your story and establishing your connection with customers.”

Australia’s CSF regime had been partial to food and beverage for quite some time, with the sector taking out the most investment of all sectors for the last three years, according to the CSF Yearbook 2023, Birchal’s annual report analysing investments over the past 12 months.

Healthcare followed, with nine successful campaigns that saw $13.3m raised from 7521 investors, then sustainability, with 12 campaigns with a collective $7.6m and 5494 investors, and lastly consumer goods, with eight successful campaigns that brought in $4.7m from 2632 investors.

Total investment for 2023 was $71m across 82 campaigns – that is down slightly from the $72m invested in 91 campaigns in 2022.

The second-largest raise last year belonged to Medigrowth, which picked up $3.5m from 2047 investors in August. The start-up, founded in 2017, distributes medical cannabis oil and dried cannabis flowers.

Cannaponics and Medigrowth were closely followed by Naked Life Spirits, which raised $3m from 935 investors in July, and Old Young’s, which raised $2.7m from 855 investors in March. Both raises were conducted on the Birchal platform.

Across CSF broadly, there are three major players in Australia: Birchal, Equitise and OnMarket. Birchal is the largest, with its 57 successful deals seeing $53m invested in 2023. OnMarket saw $7.1m raised across five deals, while Equitise saw $6.5m across nine deals. Other players in the space were responsible for $4.4m across 11 other deals.