In recent years, blooming businesses have been in talks about the relatively new financial technology (FinTech) space that is currently revolutionising the way businesses raise finance. Crowdfunding, essentially, is the practice of funding a new business venture by raising small amounts of money from a large number of people, typically via the Internet.
Crowdfunding was perceived as unchartered waters until the amendment of Capital Markets and Services Act in July 2015 legalised equity crowdfunding (ECF) in Malaysia. There are currently ten ECF companies registered under the Securities Commission Malaysia (SC), which is a regulatory body that governs the Malaysian capital market.
We are very honoured and grateful to have spent some time with Mr. Max, who is the founder of one of the leading and recognised ECF platforms, CrowdPlus.asia. He graduated from the UK with extensive knowledge in Law and Finance and has over 30 years of work experience in the field.
ASEAN’s First ECF Platform
CrowdPlus.asia was first founded by Max in 2015. It has then paved the way for ECF players in Malaysia. Max saw exponential growth potential in crowdfunding, especially ECF, in Malaysia and decided to tap into this new market. His vision was to transform Malaysia into an ECF hub.
He shared with us the steps involved to become one of the first licensed ECF platforms, including having consultations with the Government and rigorous screening by the SC. Competing for the license among over a hundred applicants was not an easy task, Max stated. Fortunately, CrowdPlus.asia was triumphant in obtaining the license and became the first out of five other companies to launch their platform. It is supported by the parent company, Netrove Ventures Group, which is an established tech-based venture capital firm.
Crowdfunding Jargons Explained
Did you know there are various types of crowdfunding that one could easily venture into? Reward crowdfunding is for those who wish to contribute to a social cause such as not-for-profit projects. Arguably however, P2P (peer to peer) lending, which is a form of debt, and ECF have become popular options for those who are seeking to make a return on investment.
According to Max, P2P lending appears to be more popular among Malaysians due to varying perceptions. In simple terms, it is a loan given by individuals to businesses and interest is received in return. It is deemed more flexible as it is short-term in nature, for example 6 months.
On the other side of the spectrum, investors will acquire shares of the company via ECF and will be rewarded with dividends or interest. It is for a relatively longer tenure at a minimum of one year. Investors are encouraged to re-evaluate their investment goals and portfolio before deciding on a method of investing.
The Differentiating Factor
In this ever growing market, CrowdPlus.asia has adopted a unique methodology from its parent company in order to gain a competitive edge. Qualifying Matching Investors (QMIs) is a feature that strives to help small and medium enterprises (SMEs) by providing mentorship, management advice and relevant connections in addition to the funds raised. It comprises 60 experienced entrepreneurs from a plethora of industries aiming to add value to businesses. In doing so, SMEs will be able to grow their businesses in the current competitive economy.
To protect investors, a tried-and-true system is adopted from its parent company that will filter companies based on credibility and longevity. The acceptance rate is currently 7% which is extremely low as competitors have an acceptance rate of 30% to 50%. This would ensure that only the best companies are offered to investors as CrowdPlus.asia intends to become a sustainable ECF platform.
Power of the Crowd
Before ECF was introduced in Malaysia, many SMEs struggled to raise capital and subsequent finance. Generally, they would seek help from the 3Fs – family, friends and foes, often limited in nature. Venture capital was inaccessible to most businesses as extremely high expectations and due diligence would be enforced. The last resort would be to “put your life at risk” by going to the bank as it would require securities, collaterals and personal guarantees.
ECF strives to capture the power of the collective 15 million workforce in Malaysia. Max further illustrated, “Imagine the entire workforce investing RM1,000 annually into ECF, it would be a RM15 billion industry. It will completely change the funding ecosystem in Malaysia.”
Tips for Investors
Max encouraged all investors, seasoned and fresh, to try out this new asset class. As the minimum investment is RM100, it will be accessible to most Malaysians. As the investing mantra “high risk, high reward” goes, investors will be able to enjoy lucrative returns with a reduced risk as all the companies on the platform are strictly filtered by CrowdPlus.asia. Max stressed the importance of choosing the right ECF platform in order to gain access to the right mix of companies. Max concluded, “Do not be afraid!”
Journalists: Amanda and Areeshya
Download Article: Harnessing-the-Power-of-the-Crowd.pdf