Six equity crowdfunding platforms in Malaysia have concluded over 30 deals since authorities there gave it the green light just over two year ago.
This comes after equity crowdfunding platform pitchIN revealed earlier this month that SalesCandy, a sales performance and lead management customer relationship management provider, raised 1.50 million ringgits ($350,000) from 54 investors this month.
The deal is the 10th this year for the platform, which has raised more than 12m ($2.8m) ringgits for companies so far.
In June 2015 six platforms were approved by Malaysia’s security commission chairman Ranjit Ajit Singh (pictured above) to carry out equity crowdfunding in the country.
In all 31 deals in 2016, 2017
To-date, the local equity crowdfunding industry has concluded 17 deals this year, according to Malaysian newspaper The Star. It’s not clear how much funding these raised. A total of 14 deals were concluded last year, raising 10m ringgits ($2.4m).
Other deals concluded so far include a health and wellness online community portal that raised over 1.8m ringgits from 117 investors, a houseware chain store which raised almost 3m ringgits from 89 investors and a halal speed dating service which raised 90,000 euros from 44 investors.
Malaysia was one of the first emerging economies to regulate equity crowdfunding. Crowdfunding rules allow private companies with paid-up capital of not more than 5m ringgits ($120,000) to raise no more than 5m ringgits or no more than 3m ringgits ($71,000) a year for small firms.
Retail investors are allowed to invest up to 5,000 ringgits ($1,200) per company and 50,000 ringgits ($12,000) a year. Investors are eligible for Malaysia’s angel tax incentive.
Anyone found guilty of fraud under Section 179 of the Capital Markets and Services Act can go to jail for up to 10 years.
To ensure quality deal flow, at least one platform – Crowdplus Asia - uses qualifying merchant investors to identify deals and help and mentor investee firms. The platform claims it has 100 such lead investors.
The platform is also backed by a ventures group, Netrove which offers mentoring to companies investors invest in.
If a UK report is anything to go by things look good for those countries that allow equity crowdfunding (Brazil in July became one of the latest to do so - see this post).
In the UK equity crowdfunding now makes up 15% of all early-stage entrepreneurial finance there. In the seven years since its inception, the sector had by June 2017 provided equity funds of almost £500 million ($660m) for 1,538 entrepreneurial pitches.
Using interviews with investors and investees in the UK, the report by the London School of Economics in September revealed that in the UK equity crowdfunding provides real additionality to the sources of entrepreneurial finance while not bringing major new risks for investors.
Equity crowdfunding therefore has the potential to become an alternative vehicle to unlock millions of dollars of funding for fast growing small businesses.
More emerging markets should step up and craft rules that permit investors to take part in equity crowdfunding.
Timm is a South African who writes on small business. Click here to sign up for the monthly Small Business Insight newsletter.
Stephen Timm is a