Many startups and small and medium enterprises (SMEs) in Malaysia are eager to use crowdfunding as an alternative way to raise funds. This follows from the formation of several Malaysian-based crowdfunding platforms, which have already been approved by the Securities Commission (SC). For many years, investors and entrepreneurs in Malaysia have been connected through the assistance of the government agency, The Secretariat for the Advancement of Malaysia Entrepreneurs (SAME). This is expected to change since SAME is now turning to connect the investors and entrepreneurs through equity crowdfunding portals.
Equity crowdfunding is a new form of fundraising that is gradually replacing conventional methods such as accessing loans from banks.
Equity crowdfunding is a new form of fundraising that is gradually replacing conventional methods such as accessing loans from banks, which require borrowers to provide annual financial statements for three years, guarantors and collateral. The crowdfunding portals, such as Propellar CrowdPlus Sdn Bhd, have the responsibility of ensuring that due diligence is exercised on potential startups, SMEs and investors. This involves scrutinizing the company’s details including information about incorporation, directors and shareholders.
Retail investors are allowed to invest between RM 500 to RM 5,000 in each company, but there is no limit to the amount that can be invested by sophisticated investors, such as high net worth individuals. Companies can raise up to RM 3 million within a year and then raise another RM 2 million afterwards.
In addition to being able to raise capital for their businesses, startups and SMEs will also get connected with different investors including successful entrepreneurs and senior business executives. They can then learn from them by sharing their journey and experience in an investment industry, which would help them grow faster.
It is also important for companies to establish reliable channels of communication with their investors so as to keep them informed on the progress of the investments and address any concerns as they arise. The companies are also required to have clear objectives and purposes for the money they are planning to raise. This is one of the best ways to attract and maintain investors’ confidence and solicit more for future investments.
The approval of crowdfunding portals by the SC has shown that Malaysia is optimistic about the success of crowdfunding. If given the commitment it requires, then this may officially become a new alternative for startups and SMEs in Malaysia to raise funds. Various sectors of the economy such as real estate, film, and technology are expected to attract many participants.
Featured Image: Petronas Tower, Malaysia