In the video below I detail the shift in funding from regions to one central point and back again.
Stock Exchanges used to be primarily funding matchmakers
The future of economies will be determined by the success of its new businesses developing from the nursery into fully-fledged functional businesses.
In the mid-1800’s there were six stock exchanges, one in each of Australia’s state capital cities, Melbourne, Sydney, Brisbane, Adelaide, Perth and Hobart in Tasmania.
There were also smaller exchanges born out of the gold rush days of the 1860’s such as the Bendigo and Ballarat exchanges in Victoria. Then there was the Newcastle Stock Exchange founded in 1937 that in the past had listed as many as 300 local and regional companies. A number of these went on to become significant businesses.
These regional stock exchanges were all serving their local communities and fulfilling their original purpose as an exchange. Not to trade shares, but rather to raise money for local businesses in the most cost-efficient and effective way.
Since then all these regional stock exchanges have disappeared, being merged into a single entity, the Australian Securities Exchange (ASX) affectively closed them as they didn’t have a huge volume of transactions, and trading is now centered on the ASX.
However, like the 1860’s the need for capital to grow new businesses and create jobs, particularly in rural and regional Australia is greater then ever. The mission of the Regional Funding Hubs is to assist local small and medium sized enterprises gain better access to growth capital.
It’s my opinion that, in the future, there are other avenues we can explore to raise capital for new businesses. Why not harness local funding from private investors who want to invest just a portion of their portfolio locally.
Establishing a network of Regional Funding Hubs
I believe this can be achieved by establishing a network of Regional Funding Hubs across Australia to list evaluated companies needing investment and link them with local investors willing to participate.
Local people are encouraged to invest in their own community because their mothers, fathers, sisters and brothers could work there.
So, for example, take a thousand investors in a region each with say $10,000, this would provide a pool of $10 million dollars for a region, without the need of a bank to support it and avoiding the high cost of floating and listing on a stock exchange.
Effectively then, we’re almost recreating these regional sources of investment without the need for volumes of trading.
Once established, Regional Funding Hubs, not only retain investment in an area, but also start attracting inward investment as well.
There are tens of thousands of unlisted “small” companies involved in industrial production on a local and regional scale throughout Australia. Through the establishment of Regional Funding Hubs we can enable direct investment into these to grow productivity and increase employment in Australia.
Without straining the public (tax payer’s) purse
Result? Well, small companies get access to local lower-cost funding from more reliable investors. Regions retain and attract investment capital, and investors gain access to local investment opportunities.
Governments also win, as Regional Funding Hubs nurture entrepreneurship, business building and local job creation without straining the public (tax payer’s) purse.
So what’s not to like?