Crowdfunding: Next Generation Financing

CROWDFUNDING: Next Generation Financing

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www.crowdonomic.vc!

February 2015

Finance Industry Radar … Rapidly Shifting Competitive Landscape

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New Players Changing the Game… Innovativation, Advantaged Operating Model

Products!

Processes!

Infrastructure!

Economics!

IT!

Complex!

Manual!Repetitive!

Physical!Palatial!

Legacy!

Tool!

Traditional Finance!

Simplicity!Back to Basics!

Transparent!Digital / Data !

Mobile Lean !

Lean!

Core Enabler!

Crowdfunding!

Global Crowdfunding Titans…Rocket launch from Facebook App to Billion Dollar Company

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•  Debt Crowdfunging!•  Borrowers + Lenders !

•  Started 2007!•  Facebook App!

•  6.2bn USD in cumulative loans!•  Mid-single digit default rates!

Malaysia Bank #3!

Malaysia Bank #2!

Malaysia Bank #1!

25 billion MYR!

55%!

35%!

30%!

Market capitalization (As of Feb 4th, 2014)!

Crowdfunding… Online Crowdsourcing of your Venture Financing / Investment Needs

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What it is: Crowdsourcing for venture capital !

How it Works: Fundraising accelerated by social media and harnessing the wisdom of the crowds!

Fill standard offer templates!

Publish Online!

Advertise via social media!

Access virtual investor community!

Reach $ target!Grow your business!

Smaller amounts of money from many people to reach higher targets!

Efficient and Transparent Investment and Fundraising Process

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Standardized offer templates

‘1 click’ investment participation

All or nothing crowdfunding process

CF Engine… Ability to Harness the full power of web and social media

Publish Offer Page!

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Virtual Community! Distribution!

Social Proof! Validation!

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Technology! Consumer/Retail/F&B!

Real Estate! Fund!

Versatile Financing Option Effective across Industries

10+ mn MYR!

10+ mn MYR!

5 mn MYR!

265 mn MYR!

It is a Game Changer for both Start-ups and Investors

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Efficient outreach to multiple investors via internet!

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Startups & MSMEs!

Low – mid digit FRs!Record millions !

8 -12 weeks!Average online fundraise period!

Invest along-side seasoned pros!

Investors!

Crowdsourced due diligence community!

Bite-sized Investments / Diversified Portfolio!

For non-top 1% in wealth; The Need for Wealth Creation has Never Been Greater

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Quota: “Richest 1% will soon hold more net wealth than the other 99% put together”!

Quota: “48% of the world’s net HH wealth in the hands of the world’s richest 1%”!

Venture Investments available to a restricted few.. This will change with Crowdfunding

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Late 1800’s! 2004!

ROI:x 3000!

Investors: Navigate a New Asset Class through a Collaborative Approach

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CF Platform!

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Angel Investors!Lead syndicates!

Systematic Deal Flow!

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Investment Funds!Crowdsource LPs!

Top-up through Crowd!

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Retail Investors!Invest alongside

professionals!

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Corporates!Use CF as an early

prediction market!

Established Businesses: Building Advantaged Ecosystems through Win-Win Partnerships

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CF Platform!

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Financial Service Providers (1)!

Value-add licensed activities!

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Corporates!Sponsor and Mentor

upcoming Stars!

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Incubators!Provide foundation for

growth!

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Financial Service Providers (2)!

Ancillary Services!

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All Markets at Advanced Stages of Introducing Pro-Crowdfunding Reform… Malaysia at the Forefront

Countries in Asia debating Equity CF regulatory frameworks! New Zealand! Live Apr. 2014 – Equity / Debt CF !

Malaysia! Target Q2/Q3 2015 – Equity CF!

Japan! Target mid-2015 – Equity CF!

India! Proposal review – PCP* ended!

Australia! Proposal review – CAMAC!

Singapore! Under review - TBD!

China! Under review - TBD!

Hong Kong! N/A!

Thailand! SEC Public Consultation Paper released in December 2014!

Source: Crowdonomic Analysis; Competitive Intelligence; Literature search!* PCP: Public Consultation Process!

China

East Asia & Pacfic

S.Asia

Europe & Central Asia

Latin AM / CRBN

MENA

Africa

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Future Orientation: Crowdfunding in the developing world expected to reach $122bn. Asia will dominate.

Source: “Crowdfunding’s Potential for the Developing World” Report; InfoDev, Finance and Private Sector Development Department Washington – World Bank !

Low! High!

114!122!

58 (51%)!64 (52%)!

9 (8%)! 10 (8%)!6 (5%)! 6 (5%)!

17 (15%)! 17 (14%)!

14 (12%)! 14 (11%)!

7 (6%)! 7 (6%)!3 (2%)! 3 (3%)!

Crowdfunding annual transaction value – Intermediate term !Billion; Singapore Dollars! ~80 bn!

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ECF Regulatory Framework – Malaysia Highlights*

(*) Note: Contents in this page are based on SC ECF Public Response Paper and they are still pending parliament final approval. Source: http://www.sc.com.my/wp-content/uploads/eng/html/consultation/140925_PublicResponse_2.pdf!

Who: All Malaysia incorporated private companies + SC Registered Micro Funds!

How much: Private Companies (RM 3 mn / RM 5 mn) + VC Funds (uncapped)!

Share Types: Common Shares (preferred and ordinary); single type per Offering!

Fundraise Type: All-or-Nothing (Oversubscription is allowed)!

Offer Types: Primary (new share sale); Secondary (existing shares; 2 wks per 6 months)!

Advertisements: May advertise to the public but ONLY via the ECF platform!

Investors: Retail (RM 50k) + Angel (500k)+ Sophisticated Investors (Uncapped)!

Disclosures: <300k (not mandatory); 300 – 500k (case by case); >500k (Audited) !

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Strong Malaysia Market Fundamentals

* HNWI: High Net Worth Individuals!

68k HNWIs*! with! 1 trillion MYR in Net Wealth by 2015!

Significant size retail investor base highly optimistic about investing across asset classes!

Source: e27; World Startup Wiki !

3rd largest # of exits in SE. Asia!

Developing entrepreneurial ecosystem!

Growing # of local entrepreneur Heroes!

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Wrap-up

•  Niche>Alternative>Mainstream…. Preferred Venture Financing option!

•  Startups/SMEs: Efficient access to Smart Capital!

•  Investors: Economic Participation in Next Bn $ Company!

•  Businesses: Value Accretive Partnerships!

•  Crowdfunding: Online Crowdsourcing Venture Financing / Web + SM!