The 10 Commandments Of Equity Crowdfunding

Posted on July 27, 2020

Thou shall be Eligible
Companies seeking to raise funds via ECF must first fulfill the eligibility criteria under paragraphs 13.14 to 13.20 of the Securities Commission’s Guidelines for Recognized Markets. Only Malaysian incorporated private companies or limited liability partnerships (with a paid-up capital not exceeding RM10 million) and registered microfunds are allowed to raise funds through ECF. Further, Companies may only raise up to RM10 million in total through ECF, subject to appeal to the Securities Commission to increase their fundraising limits.
Tell a Good Story
In ECF, a good story goes a very long way towards determining the success of an ECF campaign. It is therefore vital for the Company’s business proposition to be presented in the most clear, convincing and impactful manner. In addition to just raising funds, ECF also gives Companies the opportunity to advertise and promote their business on a global scale. At Ata Plus, we believe that the essence of ECF is about giving entrepreneurs a chance to be heard, so take full advantage of it!
Commitment is Key
Fundraising is never an easy task and fundraising through ECF is no different. Often, the success or failure of an ECF campaign hinges on how much effort and commitment the Company puts towards their campaign. Although we will guide and assist them throughout this entire process, it is ultimately the Company who must be willing to put in the required effort in preparing the investment and marketing materials, promoting their ECF campaign, pitching at events and approaching investors. Afterall, if you’re willing to put in the work for one investor, why not a hundred?
Numbers, numbers, numbers
Companies undergoing an ECF campaign are required to display their financial information, accounts and projections on the ECF platform. Apart from ensuring that all such information / documents are complete, accurate and up-to-date, we also strongly recommend that Companies put in the effort to study and understand the numbers behind their accounts and projections in detail as they will often be required to justify the same when questioned by investors.
Know Your Value
Another important component of an ECF campaign is the valuation of the Company’s business. Although we understand that all entrepreneurs naturally feel optimistic about the success of their business, it is also important for Companies to be realistic about their financial projections and their valuation methodology. Over-the-top and exaggerated figures may often deter investors and take away from the credibility of the Company’s business proposition.
No Company is an Island
A successful business is rarely ever a one-man/woman-show. it is therefore important for Companies to emphasize the abilities and credentials of their key management and operational team members, advisors and any partnerships / affiliates they may have. Having a strong supporting team / network not only builds confidence amongst investors but also highlights the growth potential of a Company’s business moving forward.
Don’t be a Scrooge
Nobody likes a stingy miser. In ECF, it is the Company’s role when soliciting funds from the public to give them a compelling reason to invest in the Company’s business. As returns from capital appreciation are often long-term in nature, Companies can make their offering terms more attractive to investors by offering shorter term returns, rewards or even discounts on their valuation. However, Companies have to remember that committing to any offering terms in the term sheet will make them contractually binding and must be fulfilled.
Be Transparent & Accountable
Getting the public to invest in an ECF campaign is all about establishing trust in the Company’s business proposition. Companies have to be completely honest and transparent as to how they wish to utilise the funds raised from investors, as well as any facts / figures presented in their ECF campaign. After the ECF campaign closes, Companies will also be required to remain accountable and report periodically to their investors, just like any other stakeholder.
Understand your Audience
It is not always what you say but how you say it. In order to maximise the full potential of ECF as a marketing tool, Companies have to be mindful of focusing their marketing efforts to the right target audience most suitable for their business, rather than just blindly promoting. This can be done by capitalising on the right marketing and social media channels and tailoring the pitch to suit the Companies’ targeted market / class of investors.
Love your Operator as yourself
Apart from being an ECF Platform Operator, we at Ata Plus play many roles in guiding and assisting Companies with their ECF campaigns. This includes working side-by-side with Companies in the preparation of their campaign materials, the scripting and strategising of their marketing efforts, and providing Companies with opportunities to pitch and promote their ECF campaign to investors. This is to ensure that all our Companies’ ECF campaigns are as impactful and successful as possible. Naturally, this involves a lot of time spent working together, so it is important that our Companies feel comfortable working with us as well.