.svg)
Retail investors in private companies have become desperate to get their money back but most never understood the risks of equity crowdfunding, Anna Ross, the founder of beauty empire Kester Black warns.
Ms Ross has turned to a new platform for trading private companies launched this week, but a financial expert warns the growing market in alternative investments presents new risks. The Albanese government is considering shutting more investors out of these growing markets.
Ms Ross started her beauty empire in 2014 as a cash-strapped fashion graduate but is now on track to make $10 million a year. Her start-up was valued at over $22 million in 2022.
She ran a virtual crowdfunding capital raise in 2020 in which 1700 people – mostly customers – invested $2.3 million, many of them the minimum of $250. Others invested thousands of dollars. Four years on, she faced a dilemma as some investors became desperate to cash out, whether to pay school fees or meet their mortgage payments.
“A lot of the investors were first time investors,” she told The Australian Financial Review. “I would get emails every year asking how much their shares were worth.
“I ended up with about six people who were desperate to sell because their personal circumstances had changed. I had other people who wanted to buy in. My lawyer said ‘don’t get involved, it’s too complex and onerous’.”
Ross is the first private company to complete more than $70,000 of share trades on a new market for trading private companies, launched by the founder of ASX-listed share trading platform Selfwealth and former CBA executive Andrew Ward.
The new marketplace called Liquidise is backed by wealthy family offices and venture capital funds including Peter Devine at Beachhead, Sapien Ventures and Ron Lesh, with a $100 million pipeline of private companies set to trade including Holon Investments, Hellyer Metals, New Quantum, and LOVE TO.
Ward says the platform could also help workers who have equity trapped in the growing pool of employee share schemes.
