FinTech Talk

Snowball Effect: A virtuous circle of investment

Snowball Effect’s CEO Simeon Burnett is on a mission to simplify the process of investing in New Zealand businesses. Launched in 2014, Snowball Effect is New Zealand's leading private equity investment marketplace. Since then, they’ve managed to hustle more investment in New Zealand than any of the other equity crowdfunding marketplaces here. Driven by the goal of building a thriving marketplace to connect companies with the capital they need to grow, Simeon says the idea of Snowball Effect came to him when he realised that the process of raising capital was an inefficient process. 

“We thought there would be better ways to use tech to improve the way capital was raised.” 

Together with Josh Daniell, they really just want to make the idea of investing in young New Zealand companies attractive, appealing, and most importantly, easy as. 

The abcs of innovative investing

The beauty of Snowball Effect lies within how simple it is for people to start investing, and how this efficiency translates into big wins for Kiwi companies looking to grow quickly. With Snowball Effect, people can invest instantly though the digital platform. 

“They sign everything online - they don’t need to print anything off,” 

Simeon says. Companies who need funding can get access to the raised funds within just a couple of weeks. “The fastest we’ve done it is three days.” Which is pretty amazing considering that traditionally this process can take months to access to that kind of capital. 

While efficiency is pretty integral to their innovation, Snowball Effect is banking on their “bank” of  valuable investor profiles - that Kiwis can easily fill out online. During the process, you’re able to choose the kinds of industries you want to invest in, as well as build a case for your own skill sets that might make you appealing as a company director further down the track. “We want to build a network of 1000s of people in New Zealand so that when a company comes to us looking to raise $2 million we can go to the database and use it to find people who might be interested, essentially connecting the right people with the right companies.” Sounds a lot like curation, which is not something the traditional investment markets have ever seen before. 

Building a better future for NZ

Through Snowball Effect, Simeon hopes to get New Zealanders interested in investing in young, growing companies. “Putting a small bit of their disposable income into startups will only serve to increase their own wealth in the long run,” he says. Interestingly, he plans on piquing this interest through in an old-fashioned way: storytelling.

Simeon believes that Snowball Effect’s biggest asset is that they’re able “to distill down a company’s capital raised to it’s core story.”  He adds, “we don’t need the legal mumbo jumbo  to be able to see and understand what a company is up to. That kind of language takes away from the company’s story.” For him, distilling the heart of a company down to a simple story is how they can make it look more appealing to invest in. This paired with how easy it is to sign up, and well you can see how Snowball Effect is playing a big part in democratising investing in New Zealand. Gone are the days of having to engage a broker. Gone are the days of piles and piles of paperwork that might deter your average Kiwi family. “Snowball Effect makes investing far more user friendly and more in touch with a 2017 world by simplifying it and opening up access to all New Zealanders.”

Over the next 5-10 years, Simeon sees Snowball Effect raising larger funds for New Zealand companies. “Up to $10 million. The largest we’ve done to date is $3.5 million and currently we’re working with a company trying to raise $5 million.” Making it easier for Kiwis to invest in young companies hasn’t always been smooth sailing. Despite the fact that New Zealand is a small enough country where it’s easy to create networks, these networks can take a lot of time to build. Luckily for Simeon, his patience is a virtue. 

“It takes time to grow and build confidence. We want to be a critical cornerstone to capital markets here. Ideally we’ll play a significant role in liberating capital markets in this country, making it easier and better than it is now.” To do this, he and his team work hard to build up relationships and credibility. He adds, 

“The good thing about New Zealand is that you can get an introduction to anyone here. People are keen to help and have a conversation.”  

Honesty is the best policy

Snowball Effect have always been careful about how they talk about investing so that the potential risks are always clearly communicated. “At the end of the day we’re dealing with high risk financial products so you have to be careful how you pedal them, or market them.” 

They’ve raised capital funds for over 27 New Zealand companies - averaging about one a month. And they’ve got plans, of course, to increase this over the next few years. Having worked for Fonterra in countries like India and Brazil, Simeon knows that Kiwis have a different attitude towards entrepreneurship. “Perhaps it’s a huge generalisation,” he says, “but it’s not bad, it’s just different.” Some Kiwis may be pulling back on the throttle just as things are going well, happy to coast and get the “BMW, bach and the boat”, but he doesn’t appear to be one of them. “As a team we work pretty hard. Yeah, it’s easy to be busy working on the wrong stuff, but we’re focussed and have a good sense of what we want to achieve. We’re getting things done, we know where we want to be in the future.”

Kiwibank are proud sponsors of the Innovative Hi-Tech Service category of the NZ Hi-Tech Awards. Backing innovative Kiwi businesses is what we’re all about.

Interested in discovering some other amazing New Zealand businesses? Check out our Business Time section.