What You Need to Know about Crowdfunding in Singapore
Crowdfunding is one of the best ways to raise funds for your business. Crowdfunding is defined as the activity of raising funds from a large number of individuals through an online platform. Some of the most popular crowdfunding platforms include Kickstarter, Indiegogo, and GoFundMe.
Kickstarted has more than 15 million supporters, and it has raised approximately US$4 billion in total. As far as GoFundMe goes, it has more than 50 million supporters, and it has raised over US$5 billion in total. And last but not least, Indiegogo has more than 9 million supporters, and it has raised approximately US$1 billion in total. Today, there are more than 600 crowdfunding platforms available in the market. Most of these platforms’ fund-raising activities are reaching billions of dollars every year.
Crowdfunding is not the only way to raise funds for your business.
Types of Crowdfunding
There are 3 main types of crowdfunding. They are:
- donation-based crowdfunding,
- reward-based crowdfunding,
- and securities-based crowdfunding.
Let’s talk more on each of them.
When people choose to pool their resources to support a charitable cause, it is called donation-based crowdfunding.
Every single time a person choose to give some of their money to a company in return for a reward, it is called reward-based crowdfunding. A good example is video gaming companies awarding some of their most loyal customers with copies of their newest games in return for their funds.
The securities-based crowdfunding can be divided into 2 different categories:
- equity-based crowdfunding; and
- lending-based crowdfunding.
When people choose to convert some of their money into company shares and receive a share of the profits in the form of distribution (or a dividend), it is called equity-based crowdfunding. Lending-based crowdfunding is when people choose to lend some of their money to a company and the company commits to repaying the loan at a particular rate and time frame.
It is important to note that both forms of crowdfunding are subject to securities relations prevalent in the jurisdiction where the online platforms are based. Over the past few years, equity-based crowdfunding has gained high popularity in the start-up scene. Not only does the equity-based crowdfunding allow start-ups to raise funds without having to give up control to venture capitalists, but it also provides a way for small investors to earn an equity position in the venture.
The Regulation of Crowdfunding in Singapore
Donation and Reward-Based Crowdfunding
The Monetary Authority of Singapore’s (MAS) regulations do not apply for both donation-based and reward-based crowdfunding.
Here is where Singapore’s Commissioner of Charities comes in. In January 2018, Singapore’s Commissioner of Charities came up with a voluntary code of practice. According to the code, all donation and reward-based crowdfunding platforms are required to verify the legitimacy of their fund-raising appeal.
In Singapore, all securities-based crowdfunding platforms are both licensed and moderated by the MAS. These crowdfunding platforms are granted a Capital Markets Services License under the Securities and Futures Act. Fund-raising companies that are listed on securities-based crowdfunding platforms have the right to make small offers without having to issue a prospectus, which is an investment-offering document. However, these fund-raising companies must disclose the key risks of such investments to all investors.
In order to make it easier for companies to raise funds, the MAS has reduced the base capital requirement significantly, from $250,000 to $50,000. Also, the $100,000 security deposit clause has been completely removed. However, this only applies to platforms that are catered to accredited investors.
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Popular Securities-Based Crowdfunding Platforms in Singapore
There are many securities-based crowdfunding platforms to choose from in Singapore. These include:
- Capital Match: raised approximately $110 million
- Capital Springboard: a peer-to-peer invoice finance platform and has over $192 million worth of invoices transacted
- MoolahSense: provides its registered investors with a peer-to-peer lending platform and has raised over $64 million through more than 670 campaigns
- Funding Societies: raised approximately $319.4 million through its total amount of loans
- FundedHere: a fund-raising platform that aims to connect tech start-ups in both China and Southeast Asia to professional accredited investors. It has helped several different companies raise approximately $6.7 million in total.
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