(Oct 23): After three years of serving Devil Curry to patrons in Kuala Lumpur, eatery co-owner Cheryl Victor plans to raise as much as 1 million ringgit ($307,000) via equity crowdfunding to spread her mother’s specialty overseas.
The 37-year-old may offer as much as 49 percent of her company in exchange for funds once Malaysia’s legislation allows small businesses to tap a large number of individual contributors over the Internet. Victor says banks “generally” are reluctant to extend a loan that size to small businesses such as Simply Mel’s, which specializes in Eurasian cuisine.
“This would help bypass the conventional ways to get funding, like from a bank which is hard to get an unsecured loan, while also getting genuine investors that believe in our story,” Victor said.
As Southeast Asian governments boost the role of small and medium-sized companies in their economies, such businesses are seeking new ways of obtaining money to grow as banks tighten lending. Malaysia is paving the way for crowdfunding platforms to start by proposing regulations this year, while Singapore is studying the potential for such methods of fundraising.
The market potential for crowdfunding in the developing world is estimated to be as much as $96 billion a year by 2025, according to a World Bank report published last year. That would represent about 1.8 times the total global venture capital investments in 2012.
Italy, Japan
Italy and New Zealand are among countries that have allowed companies to raise capital online, while Japan’s parliament passed a bill in May that may see equity crowdfunding implemented over the next year. The U.S. still hasn’t finalized its proposal, which falls under the Jumpstart Our Business Startups Act that went into effect in 2012.
Malaysia “is acting really fast on the needs of the market and the changes happening in society,” said Daniel Daboczy, head of Swedish platform FundedByMe, who plans to start equity crowdfunding in the country and neighboring Singapore as soon as legislation is in place.
While it may lag behind on measures to allow capital financing via the Internet, Singapore leads in fundraising by venture capital companies. The percentage of funds raised in the city state compared with the Southeast Asia region was 85 percent or more every year since 2012, according to research firm Preqin.
Angel Investors
Crowdfunding platforms raised an estimated $5.1 billion in 2013, compared with $2.7 billion in 2012, according to Crowdsourcing LLC’s research website Massolution.
Malaysia’s planned framework will allow companies to raise as much as 3 million ringgit over 12 months and a maximum of 5 million ringgit, the Security Commission said Sept. 25. The plan is scheduled to be tabled in parliament this year.
Money can be raised by small enterprises and venture capital firms, while those contributing funds can be individuals or wealthy people known as angel investors. After joining a campaign, there is a cooling-off period of six days during which they can withdraw their funds.
The proposed framework is “very inclusive,” based on the kind of investors who are allowed to participate and types of companies that can raise money, said Leo Shimada, chief executive officer of Singapore-based crowdfunding platform Crowdonomic.
The Monetary Authority of Singapore said it is monitoring “developments in other jurisdictions” on crowdfunding financing and is looking at an appropriate framework. Indonesia doesn’t have any such regulation or platform yet, according to Lolly Amalia Abdullah, an official at the Ministry of Tourism and Creative Economy.
For Victor, who plans to set up a production center to make sauces and curry pastes for local and export markets such as Australia and the U.S., the framework in Malaysia can’t come soon enough.
“I have big ideas that require a hefty initial investment,” she said of her plans to also venture into food trucks that will bring Simply Mel’s fare around the streets of Kuala Lumpur. “I am quite enthusiastic.”