Almost everyone loves to read successful business stories such as case studies on millionaires and billionaires, unicorns, or maybe series funding. After all, success stories come with their fair share of key takeaways and inspirational messages. However, I think it’s just as important to acknowledge the failure stories and understand as well as overcome the root cause of those failures.
No matter how great a business idea is, funding is key to being able to kickstart that grand plan. Depending on the business model and industry, however, financing an entire company from the ground up can be quite expensive. Most founders have to rely on their own capital or borrow money from family and friends. Some try to gain funds through angel investors, venture capitalists or bank loans. But not every small company has the revenue stream or growth trajectory needed to secure major financing from them. This is where crowdfunding comes in, filling the funding gap outside the traditional route and solving the financial dilemma among early-stage businesses. While a few different types of crowdfunding currently exist in the market — rewards, donations, debt — the one I most highly recommend is equity crowdfunding.
What on earth is equity crowdfunding?
Equity crowdfunding (often abbreviated as ECF) is a fundraising activity that gives the opportunity to a large group of individuals, the ‘crowd’, to invest in businesses in return for small chunks of the business, the ‘equity’. Since the Securities Commission Malaysia (SC) initiated the industry in 2015, the ECF scene in Malaysia has received a positive response from the public and key investor segments — with around half the investors being under the age of 35 and hailing from retail,
signalling a tech-savvy and highly agile demographic. Its prominence continues to show positive growth in Malaysia, particularly in response to government initiatives to make financial services more accessible and digitised. As of December 2021, local ECF platforms have assisted 248 Malaysian businesses and raised RM420.9 million.
The beauty of equity crowdfunding
Believe it or not, the world – or in this case – the Internet is full of people eager to support new ideas and products, and get involved in the growth of businesses. This was what drove me to build MyStartr as an ECF platform: connecting fellow startups and small businesses to people who believe in bringing their business visions to life. With ECF, businesses are gaining more than just funds; they are also directly garnering the interest of various public stakeholders looking to diversify their investments. ECF also opens the door for more opportunities for businesses in terms of marketing opportunities, brand advocacy, community insights, and partnership prospects, among many others. Another perk that businesses can look forward to when considering ECF is the Malaysia Co- Investment Fund (MyCIF), a government initiative that gives issuers the access and experience to gain additional funds. MyCIF’s pact promises to invest a 1:4 ratio or RM 1 million in every successful ECF campaign that successfully raised RM4 Million and above from ECF investors. As with all things business, the key to ECF success is very often less in puzzling out a eureka moment or a short burst of outreach efforts — instead, it is built from a solid foundation of steps that add up on top of one another.
The ladder to gaining investor attention
Here are some criteria in creating the best strategy and pitch to attract investors’ attention.
Step 1: Choose an ECF platform wisely
There are several crowdfunding platforms out there that founders can utilise. The most important thing is to make sure the platform is registered with the Securities Commission of Malaysia (SC). Pay attention to the platform’s interface as well. Is it user-friendly and easy for you to understand? The interface should be designed in such a way that you can easily navigate through it — because then that means it’s easy to use for investors too. Besides that, a platform with good website support is also important. Since any business can only run one campaign at a time, figure out how long campaigns can be run at these platforms. Also, keep an eye out for any additional fees that may come your way, including set up fee, success fee, and processing fee.
Step 2: Create a portfolio that is extensive, catchy, and easy to understand
A proper business portfolio should not only serve as an introduction to a brand’s history, mission, and vision — it should also be one of the first tools to distinguish a brand from its competitors. Grip readers (and investors!) with a compelling brand story that addresses current marketplace gaps, as well as research data to underpin the statement. The more relatable the story is to investors, the higher the chance of turning their attention into interest. Be sure to also include eye-catching statistics if any, like unique skill sets or expertise, awards and accreditations, or even revenue numbers!
Step 3: Business plan with a solid strategy
After a brand portfolio, comes the business plan: an all-important document to convince investors that dipping into a business idea is worth their risk. It should clearly outline business objectives and goals, strategies to engage different target markets, and an exit plan — all of which are backed by industry statistics and forecasted growth. The plan should speak to investors and their monetary stakes, with data-driven financial estimates and potential returns. A good business plan should also address external factors, so talk about barriers to entry (if any) and address any strategies to keep competitors at bay.
Step 4: Participate in start-up fest / summit
This step is optional, but certainly worth trying for the young entrepreneur out there! Start-up festivals, such as our very own MyStartr Investors Summit, create an interconnected experience for every party in the start-up ecosystem. These events can be a great space to establish new networks, learn the ropes, connect with top industry leaders, and maybe even spark the beginnings of an industry collaboration! A new business idea can pique the interest of investors also in attendance, which can lead to making new partners that will offer capital to propel new business in reaching its full potential.
Article attributed to Goh Boon Peng, Founder & CEO of MyStartr
