Mystartr, now a licensed equity crowdfunding platform, is one of the three companies that received such approval from Datuk Syed Zaid Albar, Chairman of SC and was witnessed by the Minister of Finance, YB Tuan Lim Guan Eng at the event held at the SC yesterday. The other 2 companies are 1337 Ventures and Ethis Ventures.
Prior to this, the SC had awarded ECF registration to 7 companies since June 2015 (Alix Global (FundedbyMe), Ata Plus, Crowdo, Eureeca, pitchIN, CrowdPlus Asia and Fundnel).
With the addition of 3 companies that received approval yesterday, the Malaysian market will now see 10 active ECF players and this move will, in the words of the SC Chairman:
“facilitate the development of innovative digital solutions which democratise access to investments while broadening financing options available for all Malaysians. The introduction of ECF and P2P financing provides an alternative source of capital for micro-small-and-medium enterprises (“MSMEs”) to fund business expansion, finance working capital and meet other financial requirements”.
The team was led by our corporate and technology partner Edwin Lee and supported by associate Kelvin Wong and legal executive Martin Liau. They provided advice on the registration process, regulatory compliance and assisted on the drafting and designing of various key operational documents.
Mystartr has been running a highly successful reward-based crowdfunding platform since its inception, having helped more than 800 projects to secure more than RM1 million in funding. Mystartr plans to combine its existing reward-based crowdfunding platform with the new equity-based crowdfunding platform into a single platform with the hope that such an innovative platform will offer a more rewarding and fulfilling experience to its users and investors. It plans to operationalise the new platform within the next 3-6 months.
The funds originate from a crowd of individuals, who invest in a cause/business/project that they believe in. It is a new form of fundraising platform that allows startups or other MSMEs to obtain funding through small equity investments from a relatively large number of investors, using online portals to publicise and facilitate such offers to investors.
Through ECF, investors will receive shares in return for their investments and can expect a return in the form of dividends if the company performs well. It allows even individual investors opportunities to invest and own certain shares in a company, which were previously only available to institutional investors such as private equity or venture capital firms. Such investment, however, also comes at a higher risk, as investors may receive nothing if the business they invest in fails.
Property crowdfunding offers the same potential as that of ECF and P2P financing platforms in providing an alternative source of financing but is specifically tailored for first-time homebuyers. At the same time, it will provide investors access to a new investment option.
At the Fintech Roundtable yesterday, the SC confirmed that it is currently working on that scheme and will formally announce it to the public by Q3 or Q4 of 2019.
The announcement of more ECF and P2P operators marks a progressive milestone by the Government in bridging the gap between investors who want to invest in MSMEs who have great projects or business plans but lack of funding. This will certainly help Malaysia to create a thriving entrepreneurial ecosystem.
Disruptive technologies have changed the way we live and do business. The emergence of ECF and P2P is yet another innovative example of how technologies are disrupting the traditional means of funding, democratizing access to capital as well as offering up more investment opportunities to everyone.