What is equity crowdfunding?

Equity-based crowdfunding allows an investor to buy shares in the project itself. The Securities Commission had been testing the waters on whether Malaysia was ready for equity crowdfunding since August 2014, and rolled out a set of initial guidelines in February 2015. The Securities Commission has approved six platform operators to date.

How is it different from other forms of crowdfunding?

The most common form of crowdfunding which generally makes waves is rewards-based or donation-based crowdfunding. This form of crowdfunding usually offers a tangible reward that increases in value with the size of the contribution. Equity crowdfunding is buying a stake in a company.

Why do companies go for equity crowdfunding?

It offers an alternate avenue for companies to gather funds without having to go through the lengthy and expensive process of getting listed through an initial public offering. The Securities Commission sees crowdfunding as something that can fill the “capital gap”, for start-ups and other small enterprises with creative ideas which need funds to bring those ideas to fruition.

What can equity crowdfunding offer investors?

Equity crowdfunding allows an investor to invest in smaller companies that have a potential to grow faster. While the risk is greater, it also gives possibilities of much higher returns. Investors have a wider pool to choose from in terms of investment, which in turn allows for the option of a more diversified portfolio.

How does one participate in equity crowdfunding?

Anyone can participate. Procedures will be revealed at the time of issue. The sophisticated investor, defined as those whose nett worth is over RM3 million by self-declaration, has no limits on the amount to invest in a crowdfunding project. The retail investor can only pledge a maximum of RM5,000 per fund-seeker for a total amount of not more than RM50,000 within a 12-month period, to prevent overexposure of retail investors to a particular fund-seeker, and also to encourage a diversification of portfolio.

Angel investors, those who help entrepreneurs and start-ups, and have to be recognised by the Malaysian Business Angels Network as well, have a limit of RM500,000 within a 12-month period.

KINIBIZ to go for equity crowdfunding

- KINIBIZ