And how they can help you achieve your financial goals
In partnership with pitchIN
While most of us are probably familiar with reward crowdfunding platforms such as Kickstarter and Indiegogo, equity crowdfunding is perhaps something less known. However, it is fast gaining popularity. In a nutshell, equity crowdfunding involves people investing in an early-stage unlisted company in exchange for shares in said company.
Equity crowdfunding in Malaysia has been around since 2015 and to date, close to RM120 mil has been raised for 108 companies from more than 6,000 investors. And that number is constantly growing. Equity crowdfunding has opened up new opportunities, not only for companies but investors as well.
Sam Shafie, the CEO and co-founder of equity crowdfunding platform pitchIN, says, “While Malaysia has a funding ecosystem comparable to other countries, the Securities Commission of Malaysia is forward looking and it has been steadily introducing proven alternative investment tools and platforms into Malaysia. Adding equity crowdfunding in the mix gives founders fundraising alternatives and for the investment community, a chance to access deals that they may not have access to before.”
Companies that wish to raise their funding on the platform need to fulfil certain regulatory requirements before they are allowed to crowdfund from the general public. In exchange, investors get equity or shares in the company they invest in.
Sam tells Going Places more about pitchIN and how you, as consumers, stand to benefit.
What sets pitchIN apart from other crowdfunding platforms?
pitchIN was founded in 2012, and is a pioneer of crowdfunding in Malaysia. We started as a reward crowdfunding platform before getting approval from the SC to become a recognised market operator and start an equity crowdfunding platform.
Our founders are involved directly in the local startup ecosystem, investing in and mentoring startups. We’ve also developed strong ties with the entrepreneurial ecosystem – from government agencies to venture capitalists and angel investors. Because our team spends time working closely with both the companies and investment community, we can ensure the interests of both parties are taken care of.
Has Covid-19 changed the investment landscape? If so, how?
Prior to the MCO, pitchIN hosted numerous face-to-face events between companies and investors throughout the country. Because of the lockdown, we could no longer host events and faced a lot of uncertainty.
However, we quickly pivoted to online meetings and continued operations as usual. We have been pleasantly surprised by the results. In the three months that Malaysia was under the MCO, pitchIN had its best-ever quarterly performance – raising close to RM10 mil for four companies. In fact, things are still going really well. In the first half of 2020, we have already surpassed the total amount raised in the entire 2019.
Why should people consider getting into equity investing, particularly in relation to pitchIN?
Equity crowdfunding is a great place for investors to discover and invest in fast growing companies with high potential. Equity crowdfunding has democratised investing and fundraising. With equity crowdfunding, investors can diversify their investment portfolio by investing in smaller amounts in a number of companies, which helps manage their investment risks. We welcome investors from anywhere. Malaysia’s equity crowdfunding guidelines allow anyone in the world to invest in deals on platforms like pitchIN. As a matter of fact, to date, investors from 27 countries have made investments in deals on pitchIN.
At pitchIN, we are constantly looking for companies that will be able to reward their investors. Being investors ourselves, we not only look for markets that are growing but also companies that have figured out how to scale their companies while managing the challenges that come with growing a company. Sixty companies have been successfully funded to date, so you can imagine the variety of deals available for investors.
How do you make sure investors feel safe using an alternative, non-traditional investment platform such as yours?
Every investor needs to know that investing comes with a risk. There is no guarantee that the company will do well. Investing is also different from financing or a loan. Your returns from investment could be very high but you could potentially lose your investment too.
Platforms like pitchIN help mitigate that risk as we are regulated by the Securities Commission (SC), and are mandated to abide by various rules and processes set by the SC. All the deals that are on the platform undergo a due diligence process. There is also a high degree of transparency – companies are mandated to disclose their financial information and investors can easily access the Offer Documents, the amount of funding the companies are seeking and how each campaign is doing.
Investors are also safeguarded in terms of how much money they sink into each investment. Under Malaysian equity crowdfunding guidelines, there are three major categories of investors on the pitchIN platform. The smallest category of investor – retail investors – are advised not to invest more than RM5000 per company and RM50,000 per year. Investors can also withdraw their investment at any time before the closing of the campaign, with a further six-day cooling period at the end.
Investors can also expect quarterly, half-yearly and annual updates from the companies. This is to ensure that investors are keep abreast with information on how the companies are performing. Another point worth highlighting is that equity crowdfunding rides on the power of the crowd. Investors benefit from the feedback, questions and investing decisions made by their fellow investors. pitchIN’s largest backed deal, OXWHITE, drew 485 investors. Plenty of other deals ended up with more than 100 investors each.
Has pitchIN’s focus on discovering good companies been fruitful?
Yes, we are happy to report that the vast majority of companies on pitchIN are doing well. Last year, we saw the first exit for investors. MyCash Online investors were offered exits at 44.2% returns by a venture capitalist after just two years of holding the shares. In addition, we have companies that have issued dividends. A significant number of pitchIN-funded companies have also raised further rounds at higher valuations. pitchIN is very transparent about how the companies are doing. Our annual pitchIN Equity Crowdfunding Report, which can be downloaded from our platform, offers a breakdown of how the different companies are doing.
For more information about pitchIN, visit its website here.