Getting capital through social network platforms

  • Business
  • Thursday, 27 Oct 2011

PETALING JAYA: The allocation of capital for new businesses may have just found another route into the eager hands of aspiring entrepreneurs through social networking platforms.

MyEG Services Bhd managing director TS Wong believes that social networks could allow the public, as opposed to financial institutions, to wield the deciding power on how and where capital is allocated for business start-ups.

He cited MyEG's reality show Make the Pitch as possibly the first avenue to shift the way capital was allocated locally.

The show features a competition for entrepreneurs to pitch their business ideas on a social network set up by MyEG where angel investors and entrepreneurs get together, exchange ideas, strike partnerships and co-invest.

The participants need to pitch an innovative business idea to win the votes of members from that investing and entreprenuership social network before the judges pick winners from ten finalists. The judges, who are also the panel of investors, will weigh various factors including response from viewers and users of the social network to decide who to invest in.

“Sometimes, an investor may not know what would be the actual market response to a business idea. By looking at the responses and amount of direct pledges an idea generates, it gives investors a gauge of the market take up rate for a new product or service.

“Therefore, the investors on the panel will look at the response from the users of this site to gauge how well does a particular product or service meet market needs,” Wong explained.

He added: “We actually invest money, up to RM500,000, for an equity position in the selected companies and we expect the entrepreneurs to execute their business idea as promised.”

The judges are MyEG executive chairman Datuk Norraesah Mohamad, Multimedia Development Corporation (MDeC) chief executive Datuk Badlisham Ghazali, MDeC vice-president of digital enablement Saiful Bahari, Cradle Fund Sdn Bhd chief executive Nazrin Hassan and Wong himself.

Cradle Fund is the venture capital arm of the Finance Ministry.

Viewers of the show can also pledge support or funding for their favourite entrepreneur and get in touch with the entrepreneurs directly if they wish to invest directly in the business.

“(They) can directly fund the business by pledging RM20 each. The entrepreneur can decide what to give the pledgor in return, for example a voucher for the future product or service of the business being funded,” he said..

The public funding does not contravene Securities Commission regulations as the pledgors are not entitled any shares in the start-up company.

Wong also related the mechanics of the competition to the Occupy Wall Street movement in New York which has claimed to represent 99% of the American population.

“The 99% of the population is obviously disenchanted with how the present financial system is allocating capital. We think the future of capital allocation can be decided by the (public) and our social network may yet prove to be the first iteration of this shift,” he said.

Make the Pitch, which will be playing its third episode this week, airs on Wednesday nights on NTV7.

Submissions from entreprenuers to participate for the second season will be open on Nov 1.

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