If you were tasked to raise half a million dollars, would you ask a hundred people to offer $5,000 each, or bug one tight-fisted millionaire to part with the full sum?
The way Agnes Siaw, executive director for FundedHere, sees it, the former is more probable for success.
“If everybody puts in $5,000, they’re not going to lose sleep and you know how to manage that. It can be a lot faster than getting one guy to give you $500,000,” says Siaw. “The whole idea is to democratise ownership.”
Founded in 2016, FundedHere is the first private equity and lending-based crowdfunding platform licensed by the Monetary Authority of Singapore (MAS).
Several others have followed, including most recently, Fundaztic.com, which launched in early July.
FundedHere offers start-ups the tools and expertise required to run a successful crowdfunding campaign. From the investors’ perspective, FundedHere is democratising private equity and young professional investors get the opportunity to build a diversified portfolio of private investments from investments as low as $5,000.
In the past five years, FundedHere has helped raise more than $18 million from over 30 fundraising campaigns. To date, 200 investors have invested in at least one campaign on FundedHere, with an average investment size of $75,000 for start-up equity campaigns and $145,000 for debt campaigns.
See: Crowdfunding platform FundedHere raises capital for F&B mobile ordering and payments app
See also: Professional Investors can now get into the crowdfunding game with FundedHere
In stark contrast to the often drawn-out venture capital (VC) route, one company in the business of replacing windows for skyscrapers even closed a $1.5 million round on FundedHere in just three days.
But before start-ups can debut on FundedHere’s website, they must undergo rigorous due diligence tests. According to Siaw, only some 3% of start-ups screened have made it in front of the platform’s investors.
How did FundedHere whittle down a list of over 1,500 start-ups to just a handful of investment-grade picks? First, there is the pre-qualification stage, where founders are asked three questions. “We ask them if they are the directors of the company, we ask how long they have been operating and how much money they have put into the company,” says Siaw.
While the questions may appear “fairly arbitrary”, the team believes it addresses some key issues when examining start-ups. “If I look at how much a founder has put into his company, for example, it is usually an indication of how much he or she is prepared to lose with the company.”
FundedHere also believes that companies incorporated in Singapore, with the founders as directors, appreciate and understand the legal framework here. “It also makes sure that they are compliant before the different regulatory bodies.”
Finally, companies younger than six months place “too much risk on the table”, says Siaw. “In the first six months, companies face all the incorporation challenges, issues with making that first hire or even getting out of the ideation stage.”
Companies that make the cut go on to face a “scorecard” that considers 20 factors. According to Siaw, these include the experience of the founder in the industry, the potential for more revenue streams across multiple countries and their desired valuation.
“We look at all these factors to try to provide a best guess as to whether we are able to support them on this journey,” says Siaw.
A syndicate of investors
From there, the lucky few start-ups are thrust into a “very strict” 30-day campaign, says Siaw. “When investors come in, they come in fast, and they ask questions. The secret sauce is making sure that the founders are extremely well-prepared before they go for a campaign.”
In that short 30-day window, FundedHere helps investors unpack the story of the startup, meet the founders and understand their motivations, says Siaw. “More importantly, how do they see themselves making good returns on investment, and how can [founders] be strategic to their companies?”
“The whole ethos is to get the investors in front of the founders as soon as possible. As a platform, I provide all the information, but you need to make the decision. With early-stage companies, a big part of that answer is in meeting the founder.”
To be sure, the fund-raising campaigns completed thus far have had varying degrees of success, based on statistics posted on FundedHere’s website. For example, Beam Storage tried to raise $200,000, but received subscriptions totalling $325,500 or 163%. At the other extreme, Kitchen Culture Holdings, a Singapore-listed company, tried to raise $2 million but attracted only $750,000.
The subscription rate of the other campaigns, as seen on FundedHere’s website, varied between 40% and 115%.
In any case, the rapid process in which this platform can help turn a pitch into cash makes FundedHere an attractive alternative to traditional VC firms, says Siaw. What would have typically taken at least three months to complete can be done in between five to seven weeks with FundedHere, she claims.
“In terms of disbursement and deployment of capital, I think there is value in being faster because we are a syndicate of investors, as opposed to a VC, which is usually a gatekeeper.”
Alvin Tan, Minister of State in the Ministry of Culture, Community and Youth & Ministry of Trade and Industry, giving his speech at FundedHere’s fifth anniversary
But who are these investors with such deep pockets? Siaw describes two distinct profiles of investors on FundedHere.
One is the “time-poor” professional investor who is between 27 and 35 years’ old, says Siaw.
They could be young lawyers, auditors or junior partner-types making between $150,000 and $200,000 annually. They might have the financial savvy, but still fall short of the definition of so-called accredited investors (AI), deemed to have higher risk tolerance and therefore allowed access to riskier products.
To be an AI requires an annual income of at least $300,000 and net worth of at least $2 million. “By MAS’s standards, however, they are still considered retail investors,” says Siaw.
Then there are the “evergreens”, aged between 55 and 70. “They have obviously made their marks in their careers and are looking to invest in the next generation,” says Siaw. “These guys cut $50,000 or $100,000 cheques and make about 20 investments over a threeto five-year horizon.”
The “evergreens” category can also be applied to a group of “mentors” that are onboard FundedHere’s platform.
They include Professor Wong Poh Kam, Director for NUS Entrepreneurship Centre; Andy Lim, co-founder of private equity firm Tembusu Partners; public health expert Dr Jeremy Lim; former CEO of the Singapore Science Centre Dr Chew Tuan Chiong and award-winning entrepreneur Susan Chong, CEO of sustainable packaging provider Greenpac.
The FundedHere team of seven portfolio managers engage the two groups differently. While the young professionals understand the crowdfunding structure and invest along with their peers, more hand-holding is needed for the mature investors, such as holding in-person meetings and providing paper documentation.
As part of the company’s recent fifth anniversary celebrations in March, FundedHere worked with crowdfunding alumnus and digital mental healthcare provider Safe Space to hold a charity spin cycling class.
See also: Safe Space provides easy access to mental healthcare
“We aimed to provide subsidies for young people who may not be able to pay the full cost of therapy sessions. We raised $5,000 to provide 100 subsidised sessions, all of which have already been taken up,” says Siaw.
Siaw hopes to welcome more investors into FundedHere’s space in the financial world. “The aspiration is always to get more people to be part of that process of making the world a more interesting space.”
“There are amazing ideas coming out that most people are not aware of, and many of them are going to be MNCs in the next 20 years.”
Photo: FundedHere
