With equity crowdfunding (ECF) creating a buzz across South East Asia over the last 12 months, Crowdo which has seen early traction in this space, is now targeting Indonesia, even as the Singapore-based firm is readying to launch operations in Malaysia.
For Malaysia, Crowdo will be targeting deals with pre-Series A ticket sizes. Its plans include extending operations to Indonesia by the year-end.
Co-founder and chief executive officer Leo Shimada said that having done extensive work, feasibility tests and having already built networks in various parts of Asean before, Crowdo held a head start in its expansion across the region.
Formerly incorporated as Crowdonomic, the crowdfunding company had rebranded itself as Crowdo a few months back.
“We have many things in the pipeline, and that puts us one to two years ahead of the (other) players who are just beginning to look into new markets,” he told DEALSTREETASIA at the sidelines of the recent World Capital Markets Symposium 2015.
Shimada explained that Asean, a fragmented region, needs to be understood market-to-market, to see in what form can ECF or peer-to-peer (P2P) lending services can succeed.
On its Malaysia plans, he said: “I think there’s a good opportunity for pre-Series A deals, in the range of S$50,000 to S$1 million ($35,720 to $710,000). The business needs to be more than just a business plan, but it’s not at the Series A stage where it already has recurring metrics.”
He noted that many venture capital (VC) funds were already looking at Series A and above while government grants and family and friends funding was usually for seed stage financing.
“It’s this stage in between that companies, which have built a product and have a solid business plan for another eight to 12 months, fall off the radar. And this is where we can create value by adding liquidity into this stage,” Shimada said.
The Securities Commission Malaysia (SC) had announced six ECF platforms in June this year, marking Malaysia as the first market in Asia Pacific to legislate ECF.
The plans of the six platform operators approved by the SC was to launch their respective platforms by the end of the year. As each operator races towards the launch, Crowdo remained optimistic of how the market will receive ECF, when it is available in Malaysia.
Shimada said the market anticipation has been encouraging: “We have lots of optimism because there is a lot of pent-up demand on both investor and business side. With startups and SMEs, they want to focus on the business and although fundraising is an important component of a business, it is not necessarily the core competence of the business owners. More than that, they are also beginning to realise that crowdfunding is not only about raising funds but also about raising awareness for their businesses and products and services.”
Shimada noted that investors were also welcoming the “democratic access to investment opportunities” through crowdfunding platforms.
“You will see venture capitalist participating in these deals but I think the whole point is to unlock liquidity by allowing angel investors – your white collar professionals, high income earners and retail investors – to participate,” he added.
He commended the SC for the legislation of ECF framework in Malaysia, changing the landscape of fundraising and investing.
“I think what’s really driven ECF more than the others is that the SC has introduced a progressive and competitive framework. Investors, they are no longer limited to accredited investment firms. (With ECF), not only private limited companies, but also micro VC firms can raise money as well. That’s among the current trends you see in ECF across the world,” he said.
More than a platform
On its website, Crowdo lists four platforms it operates – ECF, P2P lending, white label crowdfunding and rewards crowdfunding.
However, the founding team does not label itself so much of a platform operator but more of a modern financial services provider.
“We think of ourselves as a financial services firm. If financial institutions and banks were born today, how would it look like? Instead of physical branches, we would use mobile device outreach.”
He added that under its different platforms, the targeted businesses and investors would have difference profiles.
“The ECF is great for businesses that are doing growth financing; P2P could be more for businesses looking for working capital,” he said.
Using a portfolio approach across its platforms, Crowdo aims to address its clients’ needs better, by placing them on platforms most suitable for their funding targets.
“What clients want from us is a more efficient way for financing, so it’s incumbent for us to listen to what they want and make needs-based decisions,” Shimada said.
Although ECF and P2P models of financing are conspicuously different from the VC or angel investment models, Shimada and his team believes in working with these other players within the startup ecosystem. A fragmented marketplace would only make the market inefficient for all parties, Shimada noted.
“We want to create Tier 1 players across the ecosystem, and for that, we want to line ourselves with VC funds which may be lead investors in deals off our platform, or funds that may co-investors and angel investor groups which want to have a more value-creating role,” he said, adding startup hubs and communities were potential partners as well.
To date, Crowdo has partnered with the Multimedia Development Corporation (MDeC) and International Enterprise Singapore, both government agencies in Malaysia and Singapore, respectively.
Shimada said few more partnerships with incubators and investment funds would be announced soon.
“We want to become a connecting point for players in the startup investment scene. Investors can see the deals and act as lead investors, and that helps reassure retail investors that professional funds are participating,” he said.
On industries preferred, Shimada named consumer-facing industries in all the markets Crowdo currently operated in, and would be launching operations.
“This means technologies to the broadest sense possible, retail, consumer, real estate, and for Malaysia we are allowed to do fundraising for small VC funds as well,” he noted.
Shimada cited the reasons for focusing on these sectors being Crowdo team’s experience and understanding of these verticals, as well as investors knowing that these verticals have worked well on ECF platforms in more advanced markets.
“Also these are the businesses contributing to the gross domestic product, so that’s how you have impact, by serving underserved verticals that contribute to the real economy,” he said.