Equity crowdfunding is a fundraising platform for companies to raise early-stage financing. We talked about the 5 things you need to know about equity crowdfunding in Malaysia in our previous article. In this article, we cover reasons why you should consider ECF to raise funds for your business.
Table of Contents
a) Access to alternative funding source
I. For Startups/Early-stage company
Traditionally startup entrepreneurs obtain initial funding from family and friends to kick start their ideas when these companies are not mature enough to secure bank financing.
In a fast-paced digital world, this hurdle of waiting for the company to be eligible for bank financing may mean loss of growth opportunities. Hence ECF can provide an alternative funding source as the entrepreneurs can pitch their ideas to the public and secure investments from early investors who have confidence in their business.
II. Established private company
Oftentimes, many Small Medium Size (SME) companies will have sufficient operating cash flow to grow organically but may not be able to expand exponentially due to funding constraints and there is a limit on how much bank financing an SME sized company can take on. With ECF, these companies will have access to alternative funding sources beyond traditional bank financing.
b) To raise brand awareness of your company
As ECF is a public event which have audiences potentially amounting to thousands of investors, the company can use the ECF campaign as a marketing event. Further, there is a possibility to convert your loyal customers to be your company investors and also your new investors to become your future loyal customers.
c) To ascertain the valuation of your company
Often, it is very difficult to ascertain the value of a private company. With ECF, it provides an avenue for private companies to determine the fair value of their company based on the response from potential investors.
d) Retaining management control
During ECF fundraising, the Issuer typically dilutes a small percentage of shareholding (e.g. 5% to 20%) to the new ECF investors. This allows the owners/founders to retain control over the company while obtaining funding to grow the company. Further, most of the ECF investors are financial investors in nature and would not have intention to be involved in the daily management of the company.
How can WeCorporate assist your ECF Fundraising journey?
We will be able to assist you on the following areas:
a) Financial forecast preparation
This is critical as investors would like to understand the financial plan for the company in the future and the likelihood of getting a high return on their investments in your company. In addition, the financial forecast will also form part of the company valuation analysis.
b) Pitch deck preparation
Pitch deck is an investment proposal to be shared with investors to attract their investment interest by describing the overall business of the company (which may include management team profile, business nature, key products, financials and future business plans).
c) Business valuation
WeCorporate can assist in conducting a valuation exercise of the company by examining the historical financial performance, forecast and competitors to ascertain a fair valuation based on comparable market data.
d) Term Sheet preparation
WeCorporate can advise you on the appropriate and strategic share structure and terms to be offered to the investors and also assist you on drafting the term sheet.
e) Outsourced CFO service
This is a comprehensive service which covers more than the 4 services mentioned earlier. We will assist you throughout the entire ECF journey from selecting the right ECF platform, assisting on the ECF documentation submission and due diligence process, assisting you to respond to questions from potential investors. In addition, as your outsourced CFO, we will be able to provide in-depth strategic advice post ECF campaign such as fund-raising journey beyond ECF and where practicable, making introduction to our network of potential investors and investment funds around the South East Asia region.
FAQs in Equity Crowdfunding in Malaysia
- Malaysia incorporated companies and limited liability partnerships are allowed to raise funds via equity crowdfunding.
- In the last 12 months, the team have assisted companies on their efforts in seeking fundraising, investment, divestment and/or financial due diligence with a total deal size of more than RM100 million.
- Yes. WeCorporate can assist you with the financial forecast preparation as well as pitchdeck preparation.
Niresh Kaur is a content development manager who writes for WeCorporate. She mainly writes legal articles, as well as analytical content that serves entrepreneurs with insights on the business scene in the APAC region.
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