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Crowdfunding for SMEs in Asia

Cube Letters show crowdfunding in front of unsharp ludo figures. Background is light gray

All SMEs need money. Whether it’s seed funding for investment or cash to cover fixed costs, getting your hands on credit is a top priority for many SMEs. In recent times, compliance has risen as a priority for most organisations and securing loans, or even opening corporate bank accounts, from financial institutions has become more challenging. Crowdfunding is the practice of funding a project or venture by raising small amounts of money from a large number of people, often via the Internet. In 2016, it was estimated that worldwide over US$50 billion was raised this way.

 

Three’s a crowd
The modern crowdfunding model is generally based on three types of players: the project initiator who proposes the idea or project to be funded, individuals or groups who support the idea, and a moderating organization that brings the parties together to launch it.

Crowdfunding allows creators to attain capital at low cost by finding funders from around the world, to sell both their product and equity, and reap benefits from increased information flows to get early feedback on their projects. Other benefits include backing from potential customers, word of mouth marketing, and the propensity of groups to produce an accurate aggregate prediction about market outcomes. There are also non- financial benefits of crowdfunding; raising a producer’s profile and boosting their reputation, creating a forum where project initiators can engage with their audiences in the production process by following progress through updates and sharing feedback via comment features on the project’s crowdfunding page.

 

Risky business
Crowdfunding also comes with a number of potential risks and barriers. Failure to meet campaign goals or to generate interest results in a public failure and loss of reputation, many Interactive Digital Media developers are reluctant to publicly announce the details of a project before production due to concerns about IP theft and plagiarism, there is also the risk that if the same network of supporters is reached out to multiple times, the network will eventually cease to supply necessary support.

Crowdfunding is open to the problem of information asymmetry is exacerbated due to the reduced ability of the investor to conduct due diligence. Early stage investing is typically localized as the costs of conducting due diligence before making investment decisions and the costs of monitoring after investing both rise with distance. This trend is not observed on crowdfunding platforms as these platforms are not geographically constrained and bring in investors from around the world.

 

ROI
There are several ways in which a well-regulated crowdfunding platform can provide attractive returns for investors. They reduce search and transaction costs which allows higher participation in the market, crowdfunding opens up some of these neglected markets to individual investors, it is also attractive for investors add value to companies as brand ambassadors as it allows individual investors to be a valuable part of the company they invest in.

 

Crowdfunding in Asia

With sites from Indiegogo to GoFundMe offering easy access to applicants, anyone with a wonderful idea now has a better chance of securing sponsors. Here are two success stories of crowd funding from Hong Kong:

100 Self-Portraits
Visual artist Rachel Ip Hiu-yin drew inspiration from the ‘selfie craze’ to create a non-profit photobook titled 100 Self-Portraits of Hongkongese. With participants from ordinary folks to professional photographers, the aim was to encourage the public to re-evaluate the purpose and importance of selfies in people’s lives. Besides serving as a social critique, the selfies also provide a unique lens into the personalities of people in Hong Kong. In partnership with Brownie Publishing, Ip raised more HK$ 25,000 through FringeBacker within a month.

Dark Age Z
Local game designer and distributor Smoothie Games used Kickstarter to launch a strategic board game pitting armies of a medieval kingdom against marauding zombies. The game is played from the perspective of the King and  its goal is to protect the frontier from attacks by the walking dead. The player who secures the most points by defeating zombies wins. Smoothie opted for crowdfunding as a way to gauge public reaction to its inaugural project, and raised more than US$24,000 from 419 people within a month. The game is now in its final stages of production.

Indeigogo
One of the top crowdfunding platforms in Thailand is called Indiegogo. They are the largest crowdfunding platform in the world, and they are also working in Thailand with their slogan of “Dream it. Fund it. Make it. Ship it.” They offer flexible crowdfunding schemes, Marketing and Promotion, Integrated Analytics, Support and Mobile management supported by PayPal and credit cards.

Dreamaker Equity
Another popular crowdfunding website in Thailand is called Dreamaker Equity, launched by four co-founders in August 2015 this site is aimed specifically at Thai entrepreneurs. They only accept projects registered by Thai nationals or Thai registered companies. They recommend a two month lead up before the project is launched, intended to get the word out in advance and give the campaign a better chance. With Dreamaker Equity, instead of gifts and rewards, the project owners offer equity in exchange for the funds.

Chinese Whispers in Singapore
Titan Lee is a digital marketer running his own consultancy. Titan uses a mix of conventional and unconventional methods to achieve whatever the goal is: getting press coverage, growing social media reach acting as a crowdfunding whisperer. To date he has successfully run two crowdfunding campaigns. The first is of 3D-printing startup Pirate3D, which still holds the record for Singapore’s most successful crowdfunding campaign with US$1.43 million raised. This mindset led to Pirate3D’s record-breaking outing on Kickstarter. Meticulous preparation which began months before the launch of the campaign and a sizable US$37,000 budget also helped. Titan came up with the product’s sales pitch “the world’s cheapest 3D printer.” He studied past successes on Kickstarter via Kicktraq, and saw a trend, “the best campaigns see a huge spike in pledges in the first five days, which then tapers off,” he explained adding, “The most important objective for any campaign, therefore, is to create momentum at the beginning, which increases your chances of getting highlighted on Kickstarter’s homepage. This leads to more visibility and more pledges.”

Crowdfunding is an exciting alternative for SMEs hungry to raise capital quickly. There are numerous websites already established so if you are an SME owner with a great new concept that you want to turn in to a serious business your Christmas break may be the perfect opportunity to research crowdfunding options. Merry Christmas!

https://www.crowdfunding.com/

 

 

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Paul Conway
Paul Conway
My role as CEO is to take the business to the next stage of growth. I already have a fantastic and growing team. There are opportunities with payments, banking channels, additional software, cloud deployment and with over 300,000 customers in South East Asia and a publicly listed majority shareholder in Censof holdings, the opportunity and tools for growth are very real.

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