Profile: Putting her faith in equity crowdfunding

This article first appeared in Personal Wealth, The Edge Financial Daily, on January 15, 2018.

We are not fund managers or venture capitalists who have to ensure the investments give maximum returns. Instead, we are matchmakers. Therefore, our primary focus is coherence of information and full disclosure. > Elain

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Elain Lockman has worn many hats in her career, but none really fit her until she became an entrepreneur. 

She started out in the oil and gas industry at Petroliam Nasional Bhd (Petronas) before moving on to other government-linked companies such as Multimedia Development Corporation (now known as Malaysia Digital Economy Corporation) and Malaysia Debt Ventures Bhd. However, she soon learnt that working in big organisations can be frustrating — as the companies grew bigger, decision-making became more sluggish. And this prevented her from showing her full potential. 

Discontented with the situation, Elain decided to offer business development consultancy services to companies of all sizes, from start-ups to bigger players such as DiGi.Com Bhd and Packet One Networks (P1). That was when she realised she thrives best in the start-up ecosystem. 

Today, the co-founder of one of the six licensed equity crowdfunding (ECF) operators in the country — Ata Plus — works with start-ups daily to facilitate their fundraising activities and ensure that the platform provides the best experience for both investors and issuers. To demonstrate this, Elain and her fellow co-founders have personally invested in the start-ups on their platform, including those that eventually failed to meet the minimum funding amount. 

“Whatever disposable income I have left after my allocation to traditional investments, I allocate to ECF. That is because I see a lot of good companies and, in a way, I am one of those who have done the most due diligence on them because I interact with them directly,” says Elain. 

“I know how they operate. I believe in their technologies. I have faith in them. That is why they are on the platform in the first place. This is my way of vouching for them.” 

She invests between RM500 and RM20,000 in each of the issuing companies on the platform. 

Elain says the Ata Plus team tries very hard to make the investment process seamless, even if it means all work and no play for the team. “We work hard to make sure that the process is swift because that is our key role. We are not fund managers or venture capitalists who have to ensure the investments give maximum returns. 

“Instead, we are matchmakers. Therefore, our primary focus is coherence of information and full disclosure. We need to make sure that the investors get all the information they need to decide whether or not their investments will be worth it.”

Ata Plus has a proprietary investor relations management platform — the first of its kind in Malaysia. It allows issuers to efficiently connect with the shareholders. The platform also allows issuers to regularly report to their investors with the least amount of hassle, apart from providing necessary documents such as investment agreements and shareholder certificates. 

“We highly recommend that our issuers do regular reporting, whether it is quarterly, monthly or even more frequently than that because investors want to know what is going on with the business. You cannot be missing in action right after obtaining the funding as investors will not be happy,” says Elain.

“Therefore, we set up a reporting template for the issuers. It is more like a newsletter, where they can update investors with information such as their sales performance, how they have used the money, partners they are linked with and changes in senior management. Also, investors can immediately connect with the issuer on the platform if they have any queries.” 

Ata Plus currently stands out from its peers as it is the only blockchain-based ECF platform in Malaysia. Presently, the blockchain technology is only used for record-keeping purposes, but there are plans to make further use of the technology, says Elain. 

The company also accepts bitcoin as an investment instrument, treating it as an asset rather than a currency as the digital token is not recognised as legal tender in the country. “We always look for ways to provide a better experience for players in our ecosystem, without compromising on the Securities Commission Malaysia’s requirements and obligations with regard to compliance and disclosures. We understand the SC’s concerns about investor risk management and we are doing our best to ensure that we are able to protect investors,” says Elain. 

To demonstrate to the SC how the platform could accept the cryptocurrency, she bought her first bitcoin in early 2016. Back then, it only cost RM3,000 each, compared with about RM61,000 at press time. 

“Actually, I was offered a bitcoin for only RM10 many years ago. But I had no idea what it was. As interesting as the technology sounded, I thought it was shady. What made it worse was that they were selling it like a multi-level marketing product. I really regret not buying it then. Now, I am a serious cryptocurrency trader,” says Elain. 

Today, she owns a portfolio of cryptocurrencies, having diversified into other altcoins as well to mitigate her risk. She has allocated 30% of her portfolio to bitcoin, 30% to ethereum and the rest to other well-performing digital currencies. 

“I reap my returns from time to time, but I always make sure that my principal is there. At the same time, I look forward to investing more. Who knows, tomorrow bitcoin prices may suffer a sharp drop. If that happens, I will not hesitate to buy more, contrary to what others may say,” says Elain. 

Adding liquidity to the market 

Together with FundedByMe, Crowdonomic, Eureeca, pitchIN and Crowdplus, Ata Plus received approval from the SC to be a licensed ECF operator in June 2015. However, the platform — which has been operational for more than a year — is not Elain’s first venture on the crowdfunding scene. 

“About seven years ago, we applied to Cradle Fund Sdn Bhd to create Malaysia’s first shariah-based microfinance crowdfunding platform called i-Sharaka. People would be able to invest in micro-entrepreneurs for as low as RM10. We were inspired by Kiva — a US-based peer-to-peer (P2P) financing platform for underbanked enterprises,” she says.

“Cradle arranged for us to meet Bank Negara Malaysia to propose our idea. The central bank found i-Sharaka interesting and revolutionary as crowdfunding was not yet common back then. But at the same time, it was worried about compliance and legal matters, especially concerning anti-money laundering measures. Because of this, it was difficult for us to continue.” 

Finally, after encountering multiple hurdles in trying to introduce the platform, the team realised that it was far too early to introduce crowdfunding in the country. So, i-Sharaka never took off. 

The co-founders kept the idea on the back burner. The opportunity finally came in April 2015, when the SC announced applications for ECF operators. Elain and her business partners — Kyri Andreou and Aimi Aizal Nasharuddin — quickly went back to the drawing board to design the concept for Ata Plus. The team was ecstatic when it found out that it was one of the six applicants shortlisted, out of a total of 27. 

“Back then, if you looked at all the other licensed operators, we were the only ones who did not have an existing platform or investors yet. We funded the platform ourselves and then came the gruelling next few months that we took to build it,” says Elain.

“It was very challenging to do so. But having given it our all, we are very happy with the outcome.” 

Ata Plus is currently working on the possibility of a secondary market for its investors. To do this, Elain and her team have put together a limited liability partnership (LLP) structure, which the platform proposed would lead to the introduction of a secondary market, was recently approved by the SC. Under this structure, each investor becomes a limited liability partner of the company he or she invests in.

According to Elain, the LLP structure will not only help facilitate trading on the secondary market, it is also a cost-effective solution for issuers to manage the investors, compared with the current nominee structure, which is quite expensive to maintain. 

“The role of the LLP is to hold the shares that represent the investing companies in a partnership structure, and each share is unitised. That is the reason we like it. It will come in handy later when we want to trade the shares on the market because it is already based on ‘per unit’. And because it is on the blockchain platform, as it bypasses the need for any third-party entities such as brokers, we are looking at a new way of trading,” she says. 

Elain clarifies that only companies that have successfully raised funds via ECF can have their shares traded. For Ata Plus, these companies are scholarship platform Skola Fund, financial education platform Finspark and natural health and wellness platform PurelyB. 

The shareholders of ECF issuers can choose to exit their investment and put it up for sale, enabling new investors to buy in and the companies themselves to buy back shares. This effectively creates more liquidity in the market. 

Elain says Ata Plus already has a prototype of the secondary market for its platform, but is waiting for the SC to release a proper framework before it can be officially launched. 

Hungry for knowledge

As someone who is always hungry for knowledge, Elain says she enjoys being involved in multiple projects to learn and improve herself. Along the way, she admits, there have been mistakes and unforeseen circumstances that have made the journey challenging, both mentally and financially. Nevertheless, she is glad that they happened as they have made her stronger and allowed her to face even bigger challenges. 

“Once, I decided to dip my toe into the food and beverage industry. Together with my business partners, we started the first organic café in Langkawi. It was all fine and dandy — until the owner of the shoplot decided to evict us to demolish the building in our first year of operations. We lost a lot of money — not a single cent of compensation was given. Our investment and hard work went down the drain. It was very painful,” says Elain.

“But at the end of the day, we learnt an important lesson and that is something money cannot buy. As we have had this experience, we understand the issuers a lot better. We know the pain they have to go through. That is why we also try to make things easier for them and ensure that we give them the funds raised as quickly as we can.” 

Elain is currently involved in several projects outside of Ata Plus, including several blockchain projects. One of those that were recently launched is Actyvate.my — an online social innovation platform built for Malaysian Global Innovation & Creativity Centre (MaGIC) and 1Malaysia For Youth (iM4U). 

“It is a very interesting project for the Malaysian youth, with bright ideas for social enterprises. They can suggest their ideas on the platform and must get at least 50 votes from the user base before they are able to kick off their crowdfunding process. After they have done this, the government will match the overall amount raised, up to a maximum of RM50,000 each,” says Elain.  

“We built that platform for them, but we told MaGIC and iM4U that actually you can just take any white label crowdfunding product to build it. What we are proposing is to enhance the platform with blockchain, which will bring in token elements and commercial partners. But we think this will be an ongoing project.” 

She adds that social enterprises will be charged a different fee structure on the Ata Plus platform should they decide to become an issuer. As the company is the only shariah-based ECF platform in Malaysia, the companies can only be onboarded if more than two-thirds of their businesses are shariah-compliant. 

Elain is positive that ECF will continue to gain popularity among retail investors in the future, especially as more success stories emerge. “The pace of business growth has changed because of technologies. If you are investing in small businesses, you will realise that the turnaround time to create value is much faster than before. Big businesses cannot respond to the market as fast as smaller businesses can,” she points out.

“But then again, of course, there is a lot of risks in investing in start-ups. Companies fail — it happens. This is something investors should always bear in mind.”