Equity Crowdfunding report card for Malaysia in 2018

FOLLOWING the Securities Commission Malaysia‘s (SC) issuance of equity crowdfunding (ECF) framework and six platform licenses in 2015, ECF has transformed fundraising and provided entrepreneurs a fresh alternative avenue to attract investments. To date, there are seven ECF platforms in Malaysia.

At the just concluded SCxSC Fintech Conference 2018, the SC’s annual fintech event, the co-founder and director of Ata Plus, Elain Lockman (pic) presented the audience with a report card of ECF operator performance, specifically on how ECF has impacted the entrepreneurship ecosystem and a demographic picture of investors that have been actively involved.

Before delving deep into the topic, Elain declared that 2018 has been a challenging year for ECF operators due to the general elections and change in government. “Everyone’s focus was on politics so there was a three-month low, but despite that, we actually did pretty well in spite of that.”

Fundraising via ECF to date

Based on the numbers shared, the fund size raised has progressively grown since ECF inception in 2015. While the largest fund issue in 2016 was US$620,000 (RM2.6 million), the amount increased to US$716,000 (RM3 million) in 2017 marking a 15% increase. The largest fund issue in 2018 meanwhile is US$716,000 (RM3 million).

[RM1 = US$0.24]

“RM3 million is the maximum amount that any one company can raise via ECF at any one time. In total, they can raise RM5 million by going through a second funding round,” Elain explained.

Meanwhile the smallest fund size was at RM175,000 in 2016 but has today reached RM300,000 which is a promising 71% growth. Overall, total funds raised in 2018 reached RM21.6 million, a steady increase from RM8 million in 2016 and RM17.1 million in the previous year.

While there have only been 19 fund-raising campaigns published in 2018, the operators have received 210 applications throughout. Elain believes this is an indication of the robust screening process, “We are pretty diligent and mindful of regulatory compliance requirements. We ensure proper documentation and that information is completely transparent and available to the public.”

Investor demographic

With RM10 being the smallest investment size via ECF, Elain said this shows a push towards democratising investments. “You don’t need to have a lot of money in a campaign. It just depends on the offering of the particular issuer,” she said, adding that one particular company issued per unit share investments of RM10.

The largest individual investment stands at RM500,000, while RM1 million is the largest corporate investment to date. “We do accept foreign investors. With ECF, the investor can be from anywhere in the world,” Elain shared.

Thus far, 5% of ECF investors are foreign investors while the larger 95% proportion are local investors. Overall, the campaigns have attracted 2000 investors from 25 different countries.

Interestingly, the age breakdown shows that the younger Generation Y and X are more involved with 56% and 33% respectively investing in ECF campaigns. While Elain hopes for more participation from the Baby Boomers, she draws attention to one fact: “The investment sizes among the younger segment is smaller than the older investors.”

In terms of gender, the number of investments made by females in the recent year stands at 29%. “The number of females investing has increased because of the growth in female-led businesses listed on the platforms,” Elain said, highlighting possibility of interest in business segments such as fashion, wellness and baby products.

Future outlook

Based on 2017/2018 statistics, Elain shared: “We are seeing more issuers hit their RM3 million target and there are more small-sized deals.”

However, Elain said the operators were aiming for a doubling of growth this year targeting RM34 million. “Unfortunately, we only reached RM21.6 million. Hopefully we can catch up for 2018/2019.”

All ECF operators in the country have banded together to form an association named Registered Digital Markets Association to work together on six main objectives which include working with regulators and educating the market of ECF investment opportunities.

“We want to work with the regulators to come up with more incentives to motivate to market, from the business side as well as the investors perspective,” Elain shared.