Photo credit; David Pacey on Flickr

With Kickstarter set to launch in New Zealand this month, crowdfunding has taken off in the island nation. But a law change next year will allow for the start of a new type of crowdfunding, and New Zealand’s Snowball Effect aims to take advantage.

Unlike crowdfunding platforms like the aforementioned Kickstarter and New Zealand’s PledgeMe, which merely allow people to make a contribution to a project, Snowball Effect will actually allow contributors to gain a stake in a business they contribute to, much like owning stock.

Snowball Effect is set to launch in April of 2014, the same time the law change will come into effect. The law will make it legal to offer equity for capital through crowdfunding.

When the system is live, a company would be able to approach Snowball Effect and raise capital through the platform from members of the public, who in return take a stake in the business.

Led by directors Richard Allen and Simeon Burnett, Snowball Effect is touted as a system would reduce the cost and complexity of raising capital and would let New Zealanders easily invest in small businesses.

“What this is about is opening up and liberating and democratising the whole investment process,” Burnett says.

“One thing which has really come through strongly in the work that we’ve done is Kiwis love the idea of being able to back New Zealand businesses. They’re hugely passionate about that. So this is opening up an opportunity for New Zealanders to absolutely get in there and support businesses they like the look of.”

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