WHAT WILL EQUITY CROWDFUNDING IN MALAYSIA LOOK LIKE IN 2018? WE ASK 3 EXPERTS
2018 is set to be a big year for equity crowdfunding (ECF) in 2018, as more and more success stories emerge.
This is a huge development.
Just two years ago, people used to think that you only got on ECF if you couldn’t get funding anywhere else.
Nowadays, startups are actually considering ECF as their first choice. Meanwhile, consumers are excited about getting a stake in a company that they believe in.
In 2017 alone, equity crowdfunding and peer-to-peer financing platforms funded 450 campaigns, raising a reported amount of RM50 million.
Since the ECF scene has grown tremendously over 2017, we wanted to get the platforms’ take on ECF in 2018.
We got in touch with the Sam Shafie from pitchIN, Elain Lockman from Ata Plus and Leo Shimada from Crowdo to see what their oracle eyes have seen.
We also asked them about what makes a successful ECF campaign, because we know some of you could use that info. You’re welcome.
1. What are the key points that make a successful ECF campaign?
When asked, Elain of Ata Plus had some concise answers to give.
One of the factors is the issuer already having a strong and loyal fanbase or members that can bring onset momentum to the campaign.
Other than that, it’s all about strategy.
A proper strategy, planning, campaign, execution, and engagement is key to a successful ECF campaign. To this end, campaigners are expected to develop high quality and effective content—everything from copy, design, images, and videos has to be on point.
Once you have all of that information, startups will need an “effective integrated marketing strategy—public relations, digital media, social media, events and etc”.
This was what Ata Plus saw in the success of Lewré.
Lewré already had a sizable and strong fanbase, but also had proper strategy and planning, a high-quality and effective copy, and an effective integrated marketing strategy (PR, digital media, social media, events, etc.)
She also noted that they had “well-planned nationwide roadshows in selected cities”, on top of their reputation.
Sam of pitchIN echoed her thoughts.
“I think investors gravitate to good founders—and you can see that in the offer document. Once you read it, even if you haven’t spoken to or met them, you can probably make up your mind about how thoughtful and how careful the founders are in putting out the whole plan for the company.”
Sam’s also noted that the campaigns that do well are the consumer-centric ones, simply because customers can engage in the product day in and day out.
That being said, something like Kakitangan, a B2B platform, did well on their site too because they created a product that their customers loved, and chose to invest in.
Leo of Crowdo speaks of similar virtues, but breaks it down as such:
• Marketing: The ability to articulate an exciting vision and growth and why this startup is the one to emerge as a winner and the need to capture this opportunity.
• Community engagement: Proactive engagement with your internal community as well as prospective investors to help spread the word and participate in the investment.
• A clear exit strategy: Investors need to know the proverbial “what’s in it for me”.
• Management team credentials: The competencies, relevancy, and cohesiveness of the management team.
• Good standing: Financial and business fundamentals are integral to building a growth business.
Leo points out startups with good ideas as Crowdo’s success stories.
Goody25 raised RM300k within 2 weeks, because of one key aspect. The platform asks freelance editors to submit their articles on the platform to be published through it. Not bad so far, but what sets Goody25 apart though is the quality checks.
On top of that, he also noted the young founders’ passion and energy which hooked investors.
Leo also highlighted The Parenthood, an indoor playground for parents to drop their kids at while they shop. Parenthood was one of the highest grossing ECF deals in Malaysia, while also being a brick-and-mortar business. This was a big development for the ECF scene.
2. What would make you hesitant to accept a company on your platform?
For Sam, pitchIN would hesitate “if it’s a pre-revenue company”. Doesn’t matter how long they’ve been around as long as they are able to validate their preposition “by virtue of having revenue already”.
Sam listed SalesCandy as an example.
A two-month-old company when they came to pitchIN, Sam’s team liked the idea, but challenged SalesCandy to actually go up and sell it before going live on ECF. The product was bought by two publicly listed companies before the platform was even built.
Ata Plus’ Elain agreed.
“If the business proposition by a potential issuer is still at ideation stage and not yet refined into functioning products and services/no or minimal traction”, that’s when Ata Plus is hesitant to list them, according to Elain.
Ata Plus is also wary of incomplete or incoherent information provided by the potential issuer.
3. What can we look forward to in ECF 2018?
Leo Shimada is optimistic, pointing out that the ECF industry raised a total of RM26 million in 2017 alone.
He thinks that “Crowdo’s strength is in its ‘win-win’ partnerships with investor groups, startup communities and other stakeholders in the ecosystem”.
Crowdo looks to bring in more potential partners, as well as hearing back from anyone looking for a chance at the ECF game in the region.
Elain also spoke about looking towards “more incentives from government, and support from agencies, government-linked companies and the private sector”.
She wants “successful total ECF fundraising amount to double from 2017”.
She also hopes for more participation from retail investors. In fact, Ata Plus will actively be courting investors (from both retail and sophisticated) to invest in ECF, because she wants “for entrepreneurs to opt for ECF as a feasible and strategic fundraising channel”.
Sam of pitchIN wants the same, but wants to take an active role in shaping ECF starting with 2018.
You know how Sam spoke of hesitating to list pre-revenue companies?
“What we want to do in 2018 is debunk that theory: investors do not need to invest in pre-revenue companies.”
In 2018, pitchIN will be “bold enough” to list companies still in its ideation stage.
“I think the excitement of investing is investing in founders with great ideas, who have not really done revenue yet.
“We hope by doing that, investors will be more educated in terms of picking the right founders and the right companies, at the same time help these companies to grow.”
Besides just cash, he hopes investors can actually use the product itself—and actually give feedback to companies on how else they can make the product more mainstream.
In the interest of curating quality companies though, pitchIN will be working with accelerator programmes like their own WTF Accelerator, 1337 Ventures, Pikom, and others. This way, investors can feel assured by that touch of credibility and sign on, even if the startup is still in ideation stage.
PitchIN is also looking at creating a Young Financial Education and Investment club for students, based on their investment ability.
As far as existing investors, pitchIN also looks to create a portal that could educate investors about existing trends that they can jump on.
Overall, the three are hoping to bring their own spin of credibility and trustworthiness to the ECF enterprise. As Sam pointed out, ECF isn’t just a last-resort choice for funding anymore and the pressure is on for these platforms to prove that ECF is a credible source of funding.
What we can say though is if you’re a company looking at potential funding on an ECF platform, 2018 is one of the best years to do it in Malaysia. Just keep all the above in mind.
• According to Ata Plus, pitchIN and Crowdo, what makes a successful ECF campaign are planning, campaign execution, and effective content to hook investors. Campaigns with good founders and a pre-existing loyal following also tend to do well.
• The three platforms are strengthening their education efforts for investors, while tightening relationships between them and players in the scene.
• They’re also looking to bring in more investors. PitchIN’s attempt will actually try to sell ideation-stage startups by partnering with accelerators, and creating a club to make investing more accessible to the student demographic.