This is what you should know about Crowdfunding in Singapore for 2019
Crowdfunding has become a popular way of raising funds in Singapore but it is also a phenomenon that is taking place globally especially due to advancements in technology. Popular crowdfunding platforms globally include Indiegogo, Kickstarter and GoFundMe.
Singaporeans have become more inclined towards crowdfunding to raise funds for things such as medical bills among other things. However, it is mostly used to acquire funding for businesses or developing various products. More than 600 crowdfunding platforms currently exist in the world. Some of them happen to be located in Singapore. Below is a list of the startups available in the country.
This is one of the most globally known crowdfunding platforms and it also has its operations in Singapore. Users on the platform can either choose between the keep-what-you-earn and the all-or-nothing option. The keep-what-you-earn option just like the name suggests allows you to keep any extra cash from the funding round. However, the downside is that you will have work with whatever amount is raised even if the amount is not enough.
The all-or-nothing option allows you to raise the targeted amount for a project. However, if a project fails to raise the targeted amount then it has to refund the raised money.
This is the most popular crowdfunding website in the world. However, its popularity attracts many projects which either end up failing or making it big-time. Kickstarter projects, therefore, need to be well-researched, and well-planned in order to increase the chances of success.
FundedHere – for start-ups
This is yet another Singapore-based crowdfunding platform whose aim is to help startups achieve success. The platform requires startups to be in operations for at least three months before they can qualify for crowdfunding. It also boasts of a $50,000 minimum paid capital for at least one of the startup’s founders.
FundedHere allows startups to either choose a loan option or an equity option. This allows them to decide the amount of control that they wish to cede so that they can access funding. The platform happens to be MAS approved and is also one of the largest Singapore-based crowdfunding platforms.
This is perhaps the most popular crowdfunding platform in Singapore. It is particularly attractive to investors because it facilitates peer-to-peer or P2P lending and crowdfunding investing. The platform prioritizes the interests of the investors. It has a free tool called “Auto-Invest” which investors can take advantage of to automatically distribute funds to investment opportunities. It takes into account various factors such as the industry, interest rates and tenure preferences.
Funding Societies offers the best asset quality compared to the other crowdfunding platforms that operate in Singapore. The platform’s P2P lending uses big data and technology to connect investors to small and medium enterprises seeking funding. Meanwhile, CB Insights highlighted Funding Societies as one of the top 250 fintech companies in 2018, The company also announced that it hired World Bank advisory council member Dr. Muhamad Chatib Basri as its advisor.
Crowdfunding regulations in Singapore
Crowdfunding platforms that have their operations in Singapore are regulated by the Monetary Authority of Singapore (MAS). However, not all of them are regulated since it is not a requirement. However, there is a significant difference between the regulated ones and those that are not regulated.
Regulation determines the type of funding offered and there are two kinds, namely “equity-based crowdfunding” and “crowdlending”. For example, startups that are funded through FundedHere can pay back in the form of equity or repay the loan later on.
MAS categorizes crowdlending as a type of lending and this means it should be regulated through the Securities and Futures Act. Those seeking to use this type of crowdfunding in Singapore, therefore, need to determine whether their preferred crowdfunding platform has an MAS license to operate in Singapore. If an operator does not have a license, then they are considered to be running illegal operations in Singapore and can even disappear without legal ramifications.
Crowdfunding categories in Singapore
Singapore’s crowdfunding market exists under four categories.
- Lending –based
Donation-based funding refers to the type of crowdfunding where individuals contribute their resources to support a charitable cause. Reward-based crowdfunding is where investors give money to a startup in exchange for a reward. Equity-based crowdfunding is where individuals invest in a company in exchange for shares from which they can then earn dividends. Lending-based crowdfunding is where individuals lend money to a company or startup and the borrowed money is repaid in the future with some interest.
As noted earlier, securities-based crowdfunding platforms operating in Singapore have to be registered under the country’s securities regulations.
Equity-based crowdfunding has been growing more popular in Singapore especially because it presents a win-win situation for both investors and the company. It also allows companies to raise capital without losing control to venture capitalists.
How should Singapore startups decide which option to go for?
Startups looking to go through the crowdfunding way in can choose from any of the four available options. However, are a few things that they have to consider before they choose which option to pursue. Choosing which option to go with is actually not as tricky as it might seem. Startups that want to go the regulated should consider going with crowdfunding platforms that are MAS-regulated.
As far as the other options are concerned, it all comes down to the startup’s preferred option and the path which a startup believes is the best way forward. For example, a startup may decide to equity-based crowdfunding option where investors will benefit from the company’s success. A reward-based option will likely attract more investors as opposed to the other available options.