Understanding the Meaning of Equity Crowdfunding (ECF) in Malaysia

ECF is the sale of securities (shares, convertible notes, debt, revenue share, and other types of securities) in a private firm to raise funds from the general public (that is not listed on stock exchanges). What distinguishes a crowdfunding platform from equity crowdfunding is what is sold. Entrepreneurs acquire funds through the presale of their goods, frequently at a discount, or through tiers of various benefits to attract followers and new customers using Kickstarter campaigns.

Subang Jaya โ€“ 11 February, 2022 โ€“ Startups and Small and Medium Enterprises (SMEs) or Businesses use equity crowdfunding to raise capital from the general public, sometimes known as retail investors. These companies are often a high-risk, high-return investment option to stocks, bonds, mutual funds, trust funds, and even fixed deposits.

Hereโ€™s what to expect if youโ€™re a startup looking to raise money through equity crowdfunding. Get ready to go public since outside investors will now be able to invest in your company. Also, be ready to present your figures on the platform. This is to assist members in making an investment decision. Malaysiaโ€™s Securities Commission has also permitted ECF operators to charge a portion of the funds generated. Itโ€™s critical to have a media plan in place to get the most out of ECF funding exposure. A fundraising video is essential for engaging and educating potential investors on why they should invest in your firm. It is critical to assist them in comprehending your organisation so that they are comfortable investing in it.

Some of the top crowdfunding platforms in Malaysia are Edugat Consultancy, Polyseed, GreenLagoon Technology, Time V and Nuren Group. In their first year of operation, the six ECF platforms raised Rm10 million, assisting the top 14 startups in obtaining investment. So how can we compare the platforms of equity crowdfunding in Malaysia? If you look at some of them, such as PitchIn and Funded by Me, youโ€™ll notice that they each have their own strengths and track records. It is up to startup founders to select how they want to gain from using an ECF platform to raise financing.ย 

There are some pros and cons to Equity Crowdfunding. One of the pros is ECF is a simple approach to getting media attention. Because there is someone to guide you through the process, ECF platforms also can operate as your Investment Advisor. Furthermore, ECF platforms have hundreds of investors, all of whom are prospective investors. However, Equity crowdfunding isnโ€™t right for every firm; For example, the benefits of equity crowdfunding may not apply to B2B companies. Startups must also be prepared to have a bigger number of investors or shareholders than typical. Having other partners in your organisation is something that every company should seriously consider. There will also be expenses associated with equity crowdfunding. Aside from the expenses, creating a crowdfunding campaign involves time and work.

To read more about these insights, visit us at Nexea Insightsย 

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About NEXEA

NEXEA is a Malaysian Venture Capital and Startup Accelerator firm that specializes in supporting and funding technology companies that have the potential to be the next technology giants. NEXEA also has services for investors and corporations that want to invest or work with future technology giants.ย 

NEXEA is known for its mentors who are successful ex-entrepreneurs, or C-levels who own or have sold (IPO, M&A) their businesses. The combination of experienced mentors, experts, and partners prove potent as the top companies out of 35+ startups invested by NEXEA have grown 3 to 16 times per year. NEXEA is based in Bandar Sunway, Selangor.

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