Are you a new startup or an SME (Small and Medium Enterprises) business and you are looking for additional funds either to expand your business or as initial capital? One of the recent disruptive fintech (financial technology) platforms that you can consider is through what is known as ECF or Equity Crowdfunding.
How does this work?
Basically, it is a platform to raise funds and this is intended to help SMEs or businesses. The funds are generated from the general public. In most cases, they are retail investors who are on the lookout for businesses to invest their money in. ECF platforms are the best place for them to do this where they have a lot of options to choose from. If you are a startup or a small business looking to start your business, ECF would be your best funding option if:
- You are ready to be transparent with your business. In fact, you need to show your business numbers on the ECF platform because people will want to evaluate your performance. It is, after all, the only place for them to make the decision on whether they want to invest in your business. If your performance is poor, you will surely raise eyebrows
- You are ready to let your company have new shareholders. In some cases, you have no control over who they are
- You are ready to pay a certain commission for the amount raised. In fact, the Malaysian Securities Commission allow for the charging of a percentage from the amount raised through ECF platforms.
- You have a media strategy that includes telling the public about it. In fact, publicity will help your cause in raising funds for your business and the right media strategy will surely give you the boost that you need
Why should you use ECF?
ECF, like any other forms of investment, has its risks and other factors. This is one alternative option where you can get funding for your business because:
- Helps your business to gain media traction. When you use ECF, your business goes public and that will be a great exposure engine
- Customers become more involved. In fact, some of your customers (loyal ones) can be part of your business and be part of making it grow
- Your business gets better governance. You start being transparent and in the long run, your business comply with public expectations and any other regulations
- You are actually bridged to a wider reach of retail investors totaling to hundreds who could be part of your business
- You can get expert advice and any other recommendations from who possibly have been in the market for a long time
On the flip-side, you might not want to venture into ECF for several reasons. The biggest one is that your business might not be suitable. Take note that not all businesses can use ECF for funding. If you are a business which is not ready to show your numbers to the general public, then this platform will surely not work for you. Another factor that you need to be aware of is that your business will start having a large group of shareholders. While not all of them will have a say, some businesses might not be ready for this type of setup.
ECF Platforms in Malaysia
The ECF industry in Malaysia is one of the most vibrant markets in the last few years. These platforms have been operating and helping businesses start, raising millions of ringgit. Among those that have been making a lot of headlines include:
- Eureeca – has reportedly funding businesses in the UK and the Middle East
- PitchIN – One of the very exciting platforms to have achieved a lot of success with startups
- Crowdo – Popular as a P2P lending platform
- Funded By Me – A popular platform for local Malaysian companies
- Ata Plus – Social enterprises like to use this platform
- Propeller Crowd Plus – One of the popular platforms that resonated well among companies in the SME sector