Many hands make light work in the world of equity crowdfundingApril 3rd, 2017 by Team Ata Plus
It’s always difficult for a startup to, well, start up. Dreaming, as Blondie once sang, is free – but cold hard cash is a little harder to come by.
The average startup is run by people who are decidedly not average. To pour time, effort and money into a project you believe in is one thing, but to have to try and convince others that you’re pushing the best thing since sliced bread is quite another. Angel investors are as rare as their namesakes, and the hours put into looking for funding can be exhausting and detract from building the business and working on the product itself.
Not every business will sell well on paper or PowerPoint, and, it takes work to decide what sort of investor best suit the company. Once you’ve figured that out, the selling begins – meetings, presentations, sweaty palms, earnest emails. And success isn’t guaranteed, regardless of how brilliant your idea may be. The challenges include building interest, setting realistic goals, and finding the right platform. For social enterprises, the challenge is even greater.
“Some social enterprises can earn a profit that is sufficient to get the business funded by investors. They might provide goods and services to customers willing to pay a premium for a socially beneficial product—green energy, say, or organic food. They might sell an essential service to poor customers at a decent profit while still providing that service more affordably than other suppliers do. But many, if not most, social enterprises cannot fund themselves entirely through sales or investment.”
Education crowdfunding startup Skolafund’s founders know the struggle all too well. Tengku Syamil and Syakir Hashim are pretty sure that crowdfunding isn’t an art – it’s a science. “It all boils down to numbers,” said Syakir.
Tengku Syamil & Syakir Hashim, Co-Founders of Skolafund.com
As South-East Asia’s first education crowdfunding platform, Skolafund wanted to tackle the increasing budget cuts in universities by empowering students and making higher education accessible.
But they had to deal with budget issues themselves. When the company was based in Singapore in 2015, says Syakir, they had to meet “like ten to twenty potential investors every day over three months. This didn’t earn us a revenue, it was just for survival. Fundraising is a full time job and it takes the founders away from building the business itself.”
Recently, Skolafund successfully reached its funding target through Ata Plus’ equity crowdfunding platform. While the team, too, started out seeking VCs, PEs and Angels, they soon realised that perhaps it was time to take a bold step and bank on their biggest supporters: the man on the street.
Skolafund joined hands with Ata Plus to raise RM300,000. The founders felt this minimum target was a realistic expectation for the given time period.
Of course, there’s still a lot of work involved. For Syamil, the work that goes into crowdfunding starts before day one of the fundraising campaign: positioning, videos and other promo materials and finding potential investors to commit before the official launch of the campaign.
“That’s so that when other potential investors go to your page, they see an amount has already been contributed and are more motivated to invest themselves. We had a range of investment sizes, those who stumped in RM15k and above we met with. Those in the lower thousands, we didn’t meet them,” said Syakir.
The benefit of equity crowdfunding, the founders emphasised, is the element of support for businesses with a large customer base.
And working with an equity crowdfunding platform like Ata Plus ensures that the first level of filtering is outsourced.
“They do the basic checks, whether the companies have records or are bankrupt – Ata Plus is a channel for people to provide funding instead of us giving out our bank accounts. We also really gained from their networks. From those connections, they linked us with others. They expanded our network exponentially when we partnered with them. It was a chain reaction.”
Crowdfunding also allowed for a wide range of investment amounts – while the highest was a cool RM50,000; the lowest was just RM10. “But honestly,” said Syamil, “because of this investor’s faith we want him onboard. Equity crowdfunding is all about democratising investment, and we are democratising scholarships. So based on this principle, we accepted that RM10 investment. Even with the headache of sorting out the shares, it is worth doing, because it sends the message that EVERYONE can take part in equity crowdfunding.”
Skolafund first looked into equity crowdfunding when they heard of licenses being issued to six platforms, including Ata Plus. While it wasn’t their first choice – the ease of only one signature required from an angel investor or a VC was far more appealing – it became relevant in their journey.
But first choice or not, the benefits of equity crowdfunding are well-acknowledged. Startups get to retain their integrity because they are beholden to a crowd of investors who believe in the cause rather than one main man or entity who calls the shots. It gives entrepreneurs a link with those who have faith in their products and prioritise social impact, rather than a VC who may just want profits. And a person who believes in a product enough to invest, will be sure to publicise it as well, creating word of mouth buzz.
It’s streamlined: forget drawn out discussions over expensive coffee and long Skype sessions. Skolafund did their own marketing activities to drive awareness through mailing lists, social media and the odd meet-ups.
The Huffington Post has praised equity crowdfunding as more transparent and far-reaching, as well as seamless; thanks to online systems. It creates a breed of “super supporters”, combining the support of friends with the funds from professionals into one target market.
So what’s next for Skolafund?
Having proven that it pays to believe in the crowd, they’re still working to bring in as many scholarships as possible for Malaysian students, targeting RM8 million annually in education funding. This is in-line with their mission of making higher education affordable and accessible to deserving students.
“We will probably have another round of fundraising next year,” said Syakir.
They will be using the money gained from crowdfunding though Ata Plus on product development: namely, hiring the manpower required to build the platform and improving the current crowdfunding platform to be more engaging and with a higher retention rate. They also intend to a create a scholarship feature. This enables SMEs and philanthropists create their own individual scholarships by just heading to Skolafund and filling out a form detailing who they are targeting to sponsor. “We will then work with the sponsors to promote and get applications. They’ll need to commit the money before the scholarship is launched, of course.”
Syamil said Skolafund was also aiming to launch 120 campaigns monthly a year from now. “We are building the technology to do this. We are also branching into funding for graduate student projects. We want to accommodate such campaigns.”
At this time, a year ago, Skolafund may have been daunted by the magnitude of their goals, now they’re equipped with a new weapon – the firm knowledge that the crowd has spoken – and the crowd has equity.