Crowdfunding is one way to raise funds for your small business. If you are short of cash or want to build a financial cushion, crowdfunding is a solution you should explore. Crowdfunding is an increasingly popular way for SMEs to raise funds. One reason is that crowdfunding can deliver results quickly.
As an SME leader, before you decide to use crowdfunding as a financial solution, take a look at the risk and assess the advantages and disadvantages.
Crowdfunding platforms are internet websites that provide a way for a large number of people, the crowd, to provide money in small increments to support a person, a project or a legal entity. There are a lot of choices available. Here are two success stories.
Established in 2012, the MyStartr crowdfunding platform is for those who aspire to turn creative projects into reality, be it films, games, music, art, design or technology. The creators are wholly responsible for the projects. Since its inception, MyStartr has funded over RM1 million worth of projects but does not allow fundraising for personal gain.
Also founded in 2012, pitchIN is widely recognised as one of the most successful crowdfunding platforms in Southeast Asia. It has a track record of successfully executing projects like the first ever Indie festival in Penang, TAPAUfest.
pitchIN allows Reward Crowdfunding where ideas or projects pitched to the public and backers receive rewards from project owners. It also offers Equity Crowdfunding where private companies can utilise an online mechanism to raise money from investors in exchange for shares in the company.
If you decide to explore crowdfunding for your business, you then need to decide what kind of crowdfunding is best for your business. One way to do this is to compare and contrast crowdfunding with equity crowdfunding.
Crowdfunding means raising capital through the crowd through the (pre-)sale of a product, donations, or perks. Equity crowdfunding means raising capital through the crowd through the sale of securities. Here are some of the differences between the two approaches.
Crowdfunding is unregulated so you can use it to
Equity crowdfunding is regulated so you can use it to
The key difference is that it is easier to launch a crowdfunding campaign than an equity crowdfunding one. So before you decide, ask yourself: “Will an equity crowdfunding campaign bring me more benefits than a crowdfunding campaign?” Don’t be dazzled by the sound of securities. Make your business as simple as possible.
If you are a sole trader or in a business partnership, you may or may not need extra capital to grow your business. Evaluate all the options, their pros and cons before you start crowdfunding. Remember: one or two’s a company, three or more’s a crowd.