Early days for alternative funding

PETALING JAYA: Two years ago, the Securities Commission gave out licences to operate equity crowdfunding platforms and last November, it gave out the licences for peer-to-peer lending.

pitchIN, one of the six operators of the equity crowdfunding platforms, has raised the most among the operators since end-2015, raising more than a third of the RM16mil raised by issuers up until this June.

However, funding and quality deals weigh on the industry. The Malaysian market remains small, both for funding and deals. The start-ups that did well, such as Grab, have gone on to raise funds at the regional level.

pitchIN chief operating officer Naysan Munusamy, while acknowledging the view that funding has become harder to get, also noted that later-stage start-ups with a track record still have an edge over the early-stage ones.
 
“ A lot of people are calling it a winter funding and I don’t agree. Yes, it is harder for start-ups at a very early-stage without any validation to raise funds. 
 
“But matured start-ups are finding it easier to raise funds on a much more bigger scale,” he said. 
 
Funding for early stage start-ups has become much harder due to grants becoming bleaker and investors looking for quality deals.
 
Cradle Fund Sdn Bhd chief operating officer Razif Abdul Aziz said early-stage start-ups need to think through their ideas.

Cradle Fund, an agency under the Finance Ministry, provides grants for early stage start-ups
 
Awareness remains an issue, with entrepreneurs who want to raise funds through either ECF or P2P lamenting the lack of awareness or understanding.

Baby Dash Sdn Bhd co-founder Tay Shan Li said it was an educational process for traditional investors to understand investing in a start-up compared to public-listed companies. 
 
“ Some of the older investors will ask  whether we have a dividend policy. They were trying to get accustomed to investing in a start-up,” Baby Dash’s co-founder Lavinie Thiruchelvam added. 
 
Funding Societies Malaysia chief executive officer Wong Kah Meng said awareness and returns were hurdles that the industry need to overcome.

Funding Societies, a regional P2P platform, has raised RM2.5mil for nine companies in less than four months after starting operations.

He said those who have less risk appetite could consider P2P investments, as it required less cash outlay, a minimum of RM100 investment.