ECF operators get frank

• Operators have prioritised quality over quantity
• More needs to be done to boost Malaysian ecosystem

[Caption corrected: An earlier version incorrectly stated that BabyDash was looking to raise RM500,000.]

IN 2015, six equity crowdfunding (ECF) platform operators were awarded licences by the Securities Commission of Malaysia to operate in this country. They are FundedByMe, Eureeca, Crowdo, Ata Plus, CrowdPlus.asia and Equity.pitchIN.

Now, more than a year later, Digital News Asia caught up with the six operators to see how far they have progressed and where they see the local startup scene headed. First, let us take a look at their progress to date in relation to the number of Malaysian companies that have been successfully crowdfunded, as seen in the table below:

Quality, not quantity

Based on the table above, it would seem that the local and Asean operators such as CrowdPlus.asia and Equity.pitchIN have facilitated ECF for as many as 12 Malaysian companies, while Crowdo, FundedByMe, Eureecca and Ata Plus have the least number of Malaysian companies in their stables.

However, Crowdo chief executive officer and co-founder Leo Shimada (pic, right) believes that this is really not a numbers game. “Specific to Malaysia equity crowdfunding, we have prioritised ‘quality’ over ‘quantity’ and successfully facilitated two record breaking offers shortly after our public launch,” he told Digital News Asia via e-mail.

The two ventures are The Parenthood, which Leo said is the record holder in terms of the highest amount raised in Southeast Asia at RM2.64 million, and Nuren Group, which was the first ECF Offer led by a venture capital fund, Gobi Partners. The combined Gobi investment and ECF raised funds was over RM9 million, Leo added.

Sam Shafie, CEO of Equity.pitchIN also expressed his satisfaction with the quality of the companies they’ve facilitated ECF for. “We are happy with the results so far. Kakitangan for example is currently the fastest company to raise funding - RM1.5 million within 24 hours and also holds the record for having the largest number of investors - 63 in total,” he told Digital News Asia.

Their plans for Malaysia

According to FundedByMe Malaysia’s Goettfert, their key goals for 2017 are to operationalise the P2P financing business and bring on board more potential companies for ECF funding campaigns.

Eureeca co-founder and co-CEO Sam Quawasmi (pic, right) said that the operator’s aim is to use Malaysia as a platform to launch and expand its presence into other Southeast Asian markets. “We are on track to list in two more SEA countries by the end of 2017 and are currently undertaking our market research and due diligence on which ones they will be.”

CrowdPlus.asia chief operating officer Bryan Chung said they will continue reaching out to cities other than the Klang Valley starting with Penang and Johor Bahru and focusing on SMEs. “Through the formation of an ECF association, we will join forces and resources to bring education to these markets. We are also looking to bring some companies from other Asean countries to raise funds here and we have started discussions and are working with government agencies and incubators in those countries.”

“Crowdo is convinced with the potential of Malaysia, and while 2016 was an exemplary exploration year, 2017 is all about scaling up. With that motivation, we are ramping up our team, seeking to take on more Issuers, and grow our global Investor community so they can connect with the Malaysia market,” said Crowdo’s Leo.

Equity.pitchIN’s Sam also expressed optimism concerning the operator’s 2017 goals. He said they want to at least double the successful fund raising from what they had done in 2016. “This would mean at least fund raising RM4 million for companies that were to list on pitchIN. To do this, we will focus more in curating investable deals. Plus also fundraising for smaller startups but with a working model that has seen traction in a large addressable market and backed by a good team.”

The ECF operator also plans to grow its database of investors locally and also regionally. “A lot of resources will be spent on meeting with investors outside of Malaysia and also working on some form of partnerships,” Sam said.

More needs to be done

From speaking to the different ECF operators, it was clear to Digital News Asia that more needs to be done to improve the ecosystem in Malaysia, to produce more quality companies. When asked for his thoughts on the startup scene in Malaysia, FundedByMe Malaysia CEO Daniel Goettfert said: “My personal view is that the startup scene in Malaysia has to from the get-go have a Go-Asean market goal or it will find it hard to achieve scalability with reliance only from the Malaysian population to fuel its growth trajectory.”

Goettfert also believes that there must be a streamlining of initiatives from the various segments by the Malaysian government and accelerators/incubators for startups. “Basically, a set of guidelines have to be developed/adopted to clearly assist promising startups and not falsely lead those who are clearly not ready yet,” he said, adding that all the ECF operators have to conduct more market education events for investors and issuers.

Crowdo’s Leo observed that across the region, they have seen a significant uptick in genuine interest and passion around startups backed by each country government’s push to foster entrepreneurship and revitalise the SME sector.

“However, there is clearly a financing issue. In some markets like Malaysia there is a financing gap, where in other more advanced venture financing markets there is a distribution challenge or sustainability issue with over dependence on government funding,” he opined. Leo also said he believes that online marketplace financing such as ECF and P2P (peer-to-peer financing) will play a pivotal role to help Malaysia and broader Asian startups unlock their full potential.

When asked what more can be done to improve the Malaysian ecosystem, Eureeca’s Sam noted that to enable a thriving startup ecosystem, there needs to be education programmes which target tech-savvy youth to cultivate a deeper understanding of entrepreneurship and investing, regulation of the equity crowdfunding industry and tax relief schemes that promote investor participation.

Notably, Ata Plus co-founder and director Kyri Andreou (pic, above) said that companies need to have less reliance on grants (other than early stage grants), less reliance on project based work, and leverage on the alternative financing models as an option rather than a last resort. He also cited support from the government, corporates and government-linked corporations and advocated the need for a start-up “adoption” programme for proof-of-concept, commercialisation, market access and access to ecosystem/value chain partners.

Chung (pic, above) believes a change of mindset is in order. “We need a more integrated and collaborative ecosystem as the players tend to operate in silos. The mindset needs to change and accept that we are in a sharing economy and that no one is a competitor. As an example, an ECF platform can work with venture capitalists, incubators and government agencies in supporting and providing funding to companies. With the collective contribution, the chance of a company succeeding is far greater.”

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