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Strength in numbers: Hong Kong's burgeoning crowdfunding industry
Crowdfunding is lowering the entry barriers for would-be venture capitalists worldwide. As one of Asia's bigggest financial centers, Hong Kong is quickly becoming a breeding ground for equity crowdfunding platform -- but regulators need to keep pace.
To date, the crowdfunding ecosystem has been populated by reward-based platforms -- think Kickstarter and Indigogo in the U.S. - this is because offering material rewards instead of equity allows crowdfunding to avoid regulatory headaches while accessing a wider of pool of unaccrediated investors. Hong Kong's latest addition to this ecosystem is rewards-based platform SparkRaise. Its founder Yeone Moser Fok tells NexChange:
“Crowdfunding platforms have the potential to turn traditional fundraising on its head. It is becoming easier to invest in startups and more people now have the chance to back the projects they love.”
She adds that these platforms offer startups two things: customer acquisition and product validation. Raising capital to complete the first run of a product is not only difficult, it's a big risk. Crowdfunding plaftorm help startups raise capital while ensuring there is demand for a product. However, Fok notes that future advances in regulation could see equity-based platforms being more widelyt adopted. She adds:
“The JOBS Act in the U.S. has been a big leap forward for equity crowdfunding but it’s still early days. In Asia, particularly in Hong Kong, there are still more regulatory hurdles to jump through before we see more equity-based platforms here.”
That is not to suggest equity-based platforms do not exist in Hong Kong. There already platforms like BigColors, Colony88, and Investable that offer some form of equity crowdfunding, though exisiting regulations mean that investments are restricted to professional investors, meaning the minimum ticket size excludes mom and pop backers. Investable founder Jennifer Carver explains:
"Right now the minumm investment is $10,000 on Investable and as an angel investor you always have to be prepared to just say goodbye to that money. That said, we have a broad range of services so that our startups stand a better chance of survival than most, but it's still a high risk investment that's not suitable for all types of investors"
Photo: James Cridland