Equity crowdfunding and the need to play it cool
By Karamjit Singh September 24, 2014
- Equity crowdfunding can succeed if expectations don’t run ahead
- Entrepreneurs need to learn to sell the love about their companies
I REALLY enjoyed the two-day Securities Commission Malaysia-organised Synergy and Crowdfunding Forum (SCxSC) from Sept 19-20.
The few sessions that I attended and the networking around them were enriching and fun, to say the least.
Fun. Now that is not a word one would associate with an SC event, and yet there were enough people who brought up the fact that the energy and buzz from SCxSC was not unlike any forum the Commission had organised before.
In fact, I skipped a family function as I found the second day sessions so interesting. It was no surprise then that I came away with a greater awareness of and appreciation for the merits of the equity crowdfunding (ECF) platform that will be launched in Malaysia next year.
I have to say that I used the opportunity as a moderator for one of the sessions to play devil’s advocate, contending that entrepreneurs caught up in the sexiness of ECF could end up being caught by the demands of managing a large pool of investors, all of whom feel they can have a say in the business.
Anyone who has managed investors before will know how time-consuming and energy-draining this can be, especially if the relationship sours.
For my efforts, I got admonished by a member of the audience, an entrepreneur, who urged me and the panel to “be more positive” about the impact of ECF. That comment certainly changed the mood of the session, and it was great!
It was also amazing that the second day of the forum drew almost 300 attendees on a Saturday! There were two tracks, one on various aspects of ECF and the other on angel investing – the latter because the Malaysian Business Angels Network was a co-organiser of SCxSC.
I wrote an article yesterday about one of the sessions I attended and it was during the Q&A from this panel that I caught a question that probably is in the minds of all the almost 600 people who attended the two-day forum: Can ECF succeed in Malaysia?
And while we heard some standard answers, including the need for an early success to set the tone and strong investor education, I prefer a more prosaic approach.
I think it can succeed – as long as we don’t expect it to be an immediate success and get carried away with expectations.
For instance, Jason Best (pic), the keynote speaker and cofounder and principal of Crowdfund Capital Advisors, declared, “It was very exciting for the SC to plant the flag and take a first-mover advantage in the region.”
I would cool such cheering rhetoric. Partly because I don’t want us to start jumping on it if there are no standout success stories either. With this, I hope the companies chosen to run the ECF platform will have the stamina to last the pace.
Probably the first two years will be a learning process for both the investing public and the entrepreneurs themselves, but we will get to a place where both sides get more comfortable with their respective responsibilities and the opportunities that ECF offers.
For SC chairman Ranjit Ajit Singh, the opportunity is clear. He describes ECF as “the democratisation of wealth and strengthening the inclusiveness of finance.” That is a lofty description for what ECF can potentially stand for, but it also reveals the excitement the regulator has over this new form of funding for Malaysia.
Let’s hope investors like the benefits that ECF bring, especially the greater transparency the platform offers.
This does not mean they can punt more, however. On the contrary, crowdfunding experts advise that investors really love the company they wish to invest in and think about how they can help the company.
And entrepreneurs, be ready to sell the love of your company. Who knows, I may just explore this option for DNA as well!
Equity crowdfunding: The good, and not so good
Investor confidence critical for equity crowdfunding: SC chairman
Crowdfunding the beginning of a long-term relationship
SC seeks feedback on equity crowdfunding regulations
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