Crowdfunding in Singapore is a relatively young sector. Whether it’s a cutting-edge social enterprise or gadget, a mobile application video game, or anything else, crowdfunding in Singapore is a method for anybody to gather money for an idea or project and help bring it to reality. As a result, both your presentation and the way the idea is presented should be engaging to the audience.
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CROWDFUNDING IN SINGAPORE
CROWDFUNDING IN SINGAPOREThe simplicity of crowdfunding in Singapore is what makes it appealing to entrepreneurs. Instead of dealing with the extensive paperwork, cumbersome procedures, and high fees associated with an investment banking institution, entrepreneurs can quickly and easily raise money through an online crowdfunding platform in Singapore.
Generally speaking, venture capitalists (VCs), investment banks (IBs), and angel investors (AI) favor businesses & industries where they may spend sizable sums that are worthwhile of their due diligence costs & efforts. They stay away from startups in their early phases due to the hazards.
Platforms for crowdsourcing can fulfill this requirement by acting as intermediaries between investors and businesses looking for small amounts of capital. The target market for crowdfunding platforms is often start-ups and small- to medium-sized businesses.
REGULATIONS FOR CROWDFUNDING INVESTORS
Crowdfunding in Singapore is a new industry and it carries some risk of fraud. The scam may be committed by investors, company owners, or individuals who utilise platforms for crowdfunding.
Crowdfunding operations are governed under the Securities and Futures Act (Cap. 289) and the Financial Advisers Act (Cap. 110) by the Monetary Authority of Singapore (MAS). A platform might be penalised for breaking the MAS guidelines. If problems continue, MAS may opt to conduct an expanded audit or cancel the operator’s licence.
A person who lends money via a crowdfunding website is referred to as a “money-lender” under Singaporean law. The Registrar of Moneylenders in Singapore issues moneylender licences to anybody engaged in the money-lending industry.
A deposit of S$20,000 is needed for this licence, along with a competent and experienced manager for the money lending operation.
There is an exemption if the financing is made only to businesses or authorised investors. An “excluded moneylender” is one who lends in this way. This exemption is typically used by crowdfunding platforms for its investors.
Types of Crowdfunding
| Type | How does it work | Returns |
| Lending-based (debt-based) | A business receives loans from individuals. | Rate of interest and periodic repayment of the loaned amount. |
| Equity-based | Shares offered by a firm are purchased by individuals. | Dividends as a means of profit-sharing. |
| Donation-based | People combine their resources to donate to a good cause. | None |
| Reward-based | In exchange for a "reward," people donate money to a business | Non-monetary. Typically, it is a corporate product. |
The MAS’ laws do not apply to crowd financing arrangements that do not include the offering of securities, such as those where contributions take the form of donations or advance payments for goods under donation-based and reward-based crowdfunding, respectively.
Securities-based crowdfunding (SCF), also known as lending-based or equity-based crowdfunding, refers to several types of crowdfunding that include corporate securities offerings. Unlike lending-based crowdfunding which takes place directly between people, SCF is exempt from securities restrictions.
RISKS OF CROWDFUNDING IN SINGAPORE
Typical risks involved in crowdfunding include:
| Capital loss | Start-ups and SMEs with little to no history typically adopt SCF. Startup failure rates are high. You can lose part or all of your money. |
| Fraud | Since fundraising is done via internet platforms, you might not be in direct touch with the person who is offering you stocks. There is a chance that the projects or ideas won't be legitimate, and that the anticipated benefits or returns won't show up. |
| Failure of the platform | You run the risk of losing every penny if the SCF platform operator you depend on to make sure your payments are transferred to the project owner fails. You should learn your options if the SCF platform shuts down or fails. Look into the possibility of appointing a party to help with debt recovery. |
| Foreign issuers | Your investment will be governed by local regulations if you purchase securities from foreign issuers. Additional taxes, expenses, and fees might need to be paid. |
| Lack of liquidity | There is a chance that you won't be able to sell the securities when you want to leave the investment or that you'll have to do so at a big loss. |
CROWDFUNDING IN SINGAPORE: A STEP-BY-STEP GUIDE
Step 1: Determine your needs for fundraising
Establish the amount you will require to make the endeavor a success. Before you start approaching someone for money, be sure you have the appropriate financial information. Plan out your business. Define the campaign’s organizational structure. Next, consider the advantages you can provide for possible investors.
Step 2: Create a program
The strategy should not just outline a stunning campaign but also the measures needed to carry it out successfully. Since the public is more likely to donate if they can see the end outcomes are imminent, skilled crowd-funders will post their projects online starting at the third or second stage of their plans.
Step 3: Select a relevant platform
Look at the available crowdfunding platforms and choose those that are a good fit for the market your company idea is targeting.
Although it’s not the only thing that might affect your project’s outcome, it’s crucial to be prepared to satisfy any demands made by possible investors. Find out how other comparable efforts have fared financially, then use that knowledge to hone your approach.
Step 4: Create a convincing proposal
Your pitch has to persuade potential funders about:
- What you are
- How much you need it
- What you want to achieve with your campaign
- What makes your project important
The creation of a compelling proposal might serve as a full-fledged marketing campaign to advance your venture or business. Your business should interact with potential contributors on social media platforms to keep their attention. You might need to often update your project to keep people interested.
Step 5: Share your story thoughtfully
Make sure your potential customers are aware of how your service or concept may help them. Create a prototype, a video, a schematic drawing, and other materials. Spend the appropriate time on this as it is a crucial component.
When writing an essay, creating a website, or creating a video introduction, be careful to communicate your thoughts properly. Be true to yourself, share your experience, and make it unforgettable.
Step 6: Approach individual donors
If you explain your story and demonstrate your commitment to your cause, individual contributors will be compelled to contribute.
Keep in mind that your supporters are funding you in the anticipation of obtaining something in return, whether it be a physical good or the implementation of an urgent relief effort.
Hence, in order to raise awareness of an issue, you need to do more than merely write about it on social media. Also, you want to approach individuals directly and write emails to organisations that have a reason to be interested in your cause.
Step 7: Look professional
An investor who is interested in your project is more likely to view it as serious and to view you as more trustworthy if your website has a professional appearance than other similar ventures.
Step 8: Consider promotion
One of the most important yet difficult problems you’ll encounter is getting people to like your idea. Your business’s promoters should ideally be investors who are motivated by a desire to see the initiative succeed. Consider cross-promotion with other related campaigns as well.
Step 9: Give rewards
Many prosperous campaigns demonstrate their gratitude for the funds invested by giving rewards to their supporters. Think about the prospect of dwindling incentives to motivate investors: they gain greater benefits the more they offer.
Step 10: Get your campaign moving in the right direction
Even after reaching your financing goals, it’s crucial to keep your excitement high. The following long-term goals should be kept in mind:
- You need to create a loyal customer base that will stick with you throughout and beyond the campaign.
- You will need to continue using your email list because you put so much work into building it.
Inform people of your work, convey your passion by releasing behind-the-scenes material, and get feedback from investors.
Step 11: Welcome feedback
Before launching your campaign, make sure you take the required time to evaluate, test, and refine your prototype product or idea. However, take feedback carefully since unexpected things will happen. Additionally, it will demonstrate your dedication and may bring in extra funding.
Step 12: Update your audience
Updates should be frequent and truthful. People will lose interest in your project if you don’t keep them informed of your development, and you won’t continue to draw in investors. Being honest is essential if things aren’t working out precisely how you had hoped. Clearly describe the issues.
CONCLUSION
Crowdfunding efforts are labor-intensive and sometimes risky. But you can accomplish your objectives if you have the proper framework and plan. Keep in mind that the founder is the sole reason the crowdfunding campaign succeeds. Therefore, carefully consider your strategy before moving forward.
Relin Consultants offers a full range of company incorporation, immigration, accounting, tax filing, and compliance services in Singapore and equips entrepreneurs with the knowledge and resources they need to discover Singapore as a location for starting or moving their startup venture. Get in touch with us right away!
FAQs
Are you supposed to pay back the crowdfunding?
Investors can receive their money back, usually with interest, through a crowdfunding scheme that depends on loans. When crowdsourcing is based on investments, investors put up the money, typically in exchange for a stake in the company.
Are the funds offered by crowdfunding free of cost?
Although most crowdfunding websites offer a fully free campaign setup, there are two separate fees associated with receiving donations from a crowdsourcing platform- the platform charge and the payment processing cost.
