Ata Plus: Now anyone can be an angel investor with equity crowdfunding
By Chong Jinn Xiung December 24, 2018
- ECF investments not limited to high net-worth individuals
- Have a sound investment strategy, knowledge of the entrepreneur and look at trends
ONLINE Equity Crowdfunding platform Ata Plus recently hosted its latest Discourse Series session at its office in Kuala Lumpur in an effort to raise awareness of Equity Crowdfunding (ECF) among the local investment community.
A panel discussion took place during the session titled “Now Everyone Can Be An Angel”, a nod to the democratisation effect ECF has given to individuals to invest in early stage companies that have potential to grow.
Moderated by Ata Plus co-founder and director Kyri Andreou, the panel comprised of Spix Technologies executive director Joey Azman, Pikom chairman Ganesh Kumar Bangah, Al Bukhary Group business development and corporate strategist Farah Wahidah Rafik, PLT chief compliance officer Richard Azlan Abas and Helmigreen director Adam Helmi.
Indeed, Andreou started by saying that there was a need to correct the perception that one needs to be a high net-worth individual to be an angel investor irrespective of the investment amount.
“ECF has in essence extended angel investing to retail investors. It has democratised the way people can invest and matches capital with exciting new early-stage businesses that have the potential to grow,” he said.
To Ganesh, the appeal of ECF comes from the ability to hit high growth with the right bet netting up to 10 times the initial investment.
“When it comes to ECF investments, look at the areas of the economy that the government is pushing such as insurance tech or e-commerce,” he advised. The logic is that if a particular market is poised to grow then this opens opportunities within ECF to allow small investors to invest in high-growth investments at an early stage.
Just like any other form of investment, having a solid investment strategy is essential in developing a good portfolio stressed Ganesh, who is also the founder and chairman of Commerce.Asia. He said that his strategy was to invest in several companies within a particular ecosystem, specifically those that compliment each other.
He claimed that the strategy he employed had a 80% success rate. Even with the 20% of investments that did not succeed, he still managed to recoup the money he invested. He very much believes that synergies created within the portfolio reduced the risk of investments.
Other members of the panel shared their own takes on how they choose their investments. Farah believed in investing in companies that one has good knowledge about while Joey advised to only play with money that you can afford to lose.
So what are the major hurdles that ECF faces in trying to become a mainstream asset class for investors? Ganesh pointed out that the biggest challenge it faces is that the ecosystem is very young and as such there haven’t been any big success stories of investors that have made early exits while netting high valuations.
Speaking from Ata Plus’ perspective Andreou finds that there is a general lack of awareness of ECF, with less than 10% knowing what it is as opposed to overseas markets like the United Kingdom where ECF is taking off.
The second challenge is directly related to the first as there is a lack of a secondary market for trading ECF shares. Most retail investors don’t have a seven to eight year horizon and a secondary market will do well to encourage more active trading and allowing for early exits.
What needs to be done before ECF can go mainstream? The panel gave their opinions on the matter with Ganesh stating that a big win by an investor will spark interest in the platform as well as the setting up of a secondary market to facilitate better liquidity.
Farah adds that a tax incentive, similar to that afforded by the Angel Tax Incentive, may encourage more participation.
Adam, who is also a Malaysia Business Angel Network (MBAN) Accredited Angel Investor, made the case that more education is needed to spur younger and sophisticated investors to get involved in ECF in the future.