Projects looking for crowdfunding investment can benefit from feedback at a very early stage of development.
If a proposal struggles to attract funding, it’s clear that the concept may need tweaking – or even abandoning. Crowdfunding provides a strong way of background check of ideas and capital before an investment takes place.
Compared to the United States and Europe, Southeast Asia was a little slow off the mark in adopting crowdfunding and other aspects of FinTech. This maybe due to the ripples of the 2008 financial crisis that drastically affected the region. Owing to this reason, the deterioration of the traditional financial system in the west left a space for disruptive technologies to fill.
However, FinTech in Southeast Asia is catching up quickly, with crowdfunding showing strong growth in recent years – reaching investment levels comparable to more mature markets.
Somewhat paradoxically, the relative lack of established financial institutions reduced the impetus of crowdfunding in the early days. This means that there is less of a barrier to growth, now that a foothold has been secured.
Additionally, SE Asia represents a flourishing market of around 655m people. It is a burgeoning startup scene and a magnet for investment, which is why it’s the potential for crowdfunding to take off in a big way.
Crowdfunding can often provide much faster financing compared to banks.
Investors, evidently, are able to invest smaller amounts in a business, and so are often more willing to risk it on an attractive concept, rather than relying on a fully detailed business plan.
And of course, some crowdfunding models rely on no guaranteed return on investment at all.
With online crowdfunding, entrepreneurs have the opportunity to connect with investors from different nationalities and backgrounds. Therefore, it is through this strong international aspect that you can benefit from a fostered crowdfunding model.
This means that you can establish a foothold in markets across the region from the moment of your project’s conception. This advantageous pinpoint is important in an area like SE Asia, that is composed of several independent; yet closely linked markets.
Entrepreneurs looking for investments can benefit from feedback at a very early stage of development. So if your proposal struggles to attract funding, it’s clear that the concept may need tweaking – or sometimes abandoning. Indeed, crowdfunding provides a strong way of background check of ideas and capital before an investment takes place.
Although the concept of crowdfunding is still somewhat novel, it provides an easy marketing hook for press, influencers, and tech-savvy customers.
Clearly, the FinTech nature of the model makes it particularly suitable for projects in areas such as the Internet of Things, where publicity can snowball even before you complete a funding campaign.
Brinc, for instance, is a hardware IoT accelerator based in Hong Kong and MENA (with demo days in Silicon Valley). Its strives to help the teams accepted to their program with market demand validation for sponsored projects on Indiegogo.
So the advantages for startups and SMEs are clear. Happily, the SE Asian authorities are aware of the situation and the opportunities it offers. Various countries have adapted their regulatory stances to make the crowdfunding model equally attractive to investors.
Some platforms available in the region over the past few years, both local and international, include:
Singapore-based SME crowdfunder Kapital Boost launched an Islamic crowdfunding service endorsed by the Financial Shariah Advisory Council. It is one of many examples of how the adaptability of the crowdfunding model can be channeled in innovative new ways.I
In Singapore, crowdfunding platforms are covered by securities regulation which provides protection for investors, requiring the platforms to keep a capital base to ensure liquidity.
Crucially, however, changes to the law in 2016 mean that these requirements are now more closely suited to crowdfunding, recognizing that the amounts invested by individual funders are smaller, and so this capital base need not be as large.
Also, much of the red tape applied to securities has been stripped away for crowdfunding campaigns of up to S$5m in Singapore, making the whole process more agile.
These changes have made it possible for crowdfunding platforms to provide a faster-moving service. As such, the interests of investors are fully protected, without stifling the innovative nature of startups by over-complicating the funding process.
The regional growth in FinTech in general, and crowdfunding in particular, shows no sign of slowing.
On the one hand, established western platforms are opening offices in Singapore, Malaysia, Hong Kong and elsewhere to better tap into the local markets. On the other hand, more and more well-backed native platforms (see bullets above) are springing up to recognize particular facets of local business.
But the future of general-purpose SE Asian crowdfunding in the medium term looks rosy indeed. Regional operations are now beginning to cut out the middle man, linking SE Asian initiators directly with their local investors.
With the resulting companies often exploiting western and Asian markets, as well as plowing profits back into the region, it’s not hard to see this as a virtuous cycle. Ultimately, that could end with SE Asia becoming the global hub for the new financial industry.