Is it possible to finance your startup through crowdfunding in Singapore?

startup crowdfunding financing singapore

While the concept of crowdfunding in Singapore is still a fairly new one, it seems to have taken off like a rocket ship. Crowdfunding platforms such as Capital Match, Moolah Sense, Funding Societies and Funded Here seem to be growing from strength to strength, and the companies seeking funding on these platforms usually find their requests fulfilled in short periods of time, sometimes in even less than a day.

What is crowdfunding?

Just in case you’ve been living under a rock for the past couple of years, the concept behind crowdfunding is to obtain something, be it money, content or services, from a large group of people. In the context of raising funding, crowdfunding simply means looking towards the masses (or in certain cases, a particular segment of investors) to finance a company.

 

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Debt-based crowdfunding

Commonly referred to in Singapore as peer-to-peer lenders, platforms such as Capital Match, Moolah Sense and Funding Societies focus on companies seeking to fund their companies through debt. Here, the crowd loans money directly to the company and expects repayment over time with a certain rate of interest.

Anyone in Singapore can invest in the companies on these platforms, as long as they invest a minimum sum (from as low as S$1000), making this an attractive proposition for retail investors to invest in slightly riskier companies. Unfortunately, it seems that the peer-to-peer lenders in Singapore only cater to small to medium sized enterprises with a documented history of being in business. However, it might still be possible to finance your startup through…

Equity-based crowdfunding

Previously, most of the platforms dedicated to helping startups in Singapore crowdfund financing were rewards-based, helping the startups raise money by offering their supporters in ways that didn’t include the issuance of shares in the business. For example, a startup raising funds to finance the development of the next big mobile Massively Multiplayer Online (MMO) game could offer early access to beta versions of the game, t-shirts or exclusive invitations to launch events.

Back then, this appeared to be only avenue available to startups that wanted to try and get funding through a crowdfunding platform but unfortunately this method of trying to raise money didn’t seem to take off and a number of the startups offering this service have closed shop.

In equity-based crowdfunding, founders basically sell their investments through a crowdfunding platform in exchange for equity. In other words, the investor gets a small stake of the business in return for his investment, the value of which rises or falls depending on how well the company does.

In 2016, Singapore finally saw its first fully licensed equity and debt crowdfunding platform, FundedHere go live after its Capital Markets Services (CMS) licence was approved by the Monetary Authority of Singapore (MAS). As the platform just went live on 01 April 2016, it remains to be seen how successful it will be. Hopefully, this form of crowdfunding will thrive and prosper in Singapore, providing yet an alternative avenue for startups in Singapore to raise funding.


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