WITH ongoing market education, equity crowdfunding (ECF) has been gaining traction as an alternative platform for small businesses to raise funds.
However, there is still a lack of public awareness around ECF and this could pose a challenge for SMEs looking to raise capital through the channel.
“Acceptance among SMEs is growing and noticeably for the right reasons, and it is becoming a funding method of choice. But the public still suffers from a general lack of awareness and cultural bias against longer-term investment and they will need incentivising to participate further, ” says Elain Lockman, co-founder and director of Ata Plus.
“There have been some improvements in terms of awareness through new campaigns with the MyCIF Fund.
“However, we anticipate that without greater incentives and awareness building, finding local investors will continue to be challenging. And greater focus will need to be put on targeting and growing the foreign investor pool, ” she adds.
MyCIF – the Malaysia Co-Investment Fund – is administered by the Securities Commission (SC). The fund co-invests with the crowd in either an ECF or peer-to-peer (P2P) campaign to attract interest.
Last October, the government announced that another RM50mil will be allocated to the fund under Budget 2020.
Despite growing recognition for ECF, 2019 saw an unexpected slowdown in terms of overall funds raised and new campaigns launched. Elain attributes this to the overall confidence level in the general economy and the ongoing political situation.
However, the market also saw some positive movements with the three successful exits that took place last year. Elain notes that the willingness of some investors to stay on for the long-term for these exits was also heartening.
“There is a healthy pipeline of new listing for Ata Plus from a diverse sector of industries. What has been noticeable is the average funding requirement is always near the maximum currently allowed which would suggest that a review of the limits set by the SC is in order if ECF is to show a healthy growth.
“Our focus this year will be on the investor with the launch of our secondary market and investor app.
“We feel the roll out of our secondary market this year will be a timely boost to incentivise greater investor participation. The only indicated concern by SC with regards to the secondary market is the level of liquidity permitted given the goal of encouraging a ‘patient’ investment but as we have witnessed in two of the exits in 2019, a majority of investors who participate in this asset class do so with a long term view in mind, ” she says.