• Thu
  • Nov 27, 2014
  • Updated: 11:11pm
Lai See
PUBLISHED : Wednesday, 30 October, 2013, 3:35am
UPDATED : Wednesday, 30 October, 2013, 2:31pm

Crowdfunding phenomenon is coming to Hong Kong

BIO

Howard Winn has been with the South China Morning Post for two and half years after previous stints as business editor and deputy editor of The Standard, and business editor of Asia Times. His writing has also been published in the Far Eastern Economic Review, the Wall Street Journal, and the International Herald Tribune. He writes the Lai See column which focuses on the lighter side of business.
 

Hong Kong-based entrepreneurs Simon Karner and Mathias Krostewitz are poised to launch fund2.me, a crowdfunding site that will open for business on December 1.

Readers will doubtlessly have heard of crowdfunding - the new big thing for raising capital. It involves using the web to raise funds by getting relatively small amounts of money from a large number of people.

According to a report by US research firm Massolution, about US$2.7 billion was raised from crowdfunding globally last year involving more than a million projects. This year, the amount is likely to exceed US$5 billion. A recent World Bank report said that by 2025 there could be US$93 billion available annually for crowdfunding, with US$50 billion coming from mainland China alone.

Currently, most crowdfunding occurs in the US and to a lesser extent in Europe and Australia. There are a handful of sites in Hong Kong. Fund2.me, which is both the name of the company and its website address, aims to service Hong Kong and the mainland.

"We expect most ideas to come from Hong Kong and from expatriates in China looking to set up businesses there," says Krostewitz.

Not all crowdfunding sites operate in the same way. Fund2.me offers three forms of funding. The most basic is "backing", which means that in return for committing, say, US$50 to a start-up, investors receive a service from the company or a product. Typically, this form of funding is for less than US$100,000.

Companies may also offer their stock directly to accredited investors in exchange for funding commitments. This may include options for convertible debt and debt funding.

A third form of funding arises when an inventor has an idea that he may have patented but doesn't want to develop as a business. Instead, he wants to sell the business rights or franchise it.

Sites vary as to the amount of project details they show. One of the interesting aspects of fund2.me is the extensive support that is being built into the site for entrepreneurs.

In the first place, there are strict guidelines for what can and cannot be submitted. So there's no porn or get-rich-quick ideas or those involving money laundering. Every funding campaign that is launched on the site requires pre-approval from the operators. Getting this requires a serious amount of work in providing a business plan, marketing strategy, competitor analysis and so on.

"We don't say whether the project is good or bad, but we insist that we see evidence of work that shows it is a serious project," says Karner.

There is plenty of support on the website for aspiring entrepreneurs. There is a "fundwiki" section, which spells out the process and over time will be added to by knowledge from other forums on the site.

Another interesting aspect of the site is that in addition to entrepreneurs and investors, there is a third category of participants - supporters. These include lawyers, business consultants and other industry participants. They will be expected to offer a certain amount of free guidance and advice to the entrepreneurs. In return, they can get "endorsed" for their advice and are able to promote themselves. At the same time, there is the prospect of cultivating future customers.

In this way, Karner and Krostewitz hope to develop a social network of collaborative knowledge and expertise - what they call "crowdpower". Indeed, 135 industry participants have already signed on.

This "crowdpower", together with assistance from the two owners of fund2.me, will help entrepreneurs improve the quality of the pitch and the chance of successful funding.

Fund2.me takes a 5 per cent commission for every successful funding.

But is there a demand for this kind of funding in Hong Kong? The owners say they have been to many start-up events in Hong Kong organised by venture capitalists from the US or by InvestHK. "There are lots of people with ideas in Hong Kong looking for funding," says Karner. There are apparently also lots of investors particularly from the US and Europe who want to invest in this region but don't have a good overview of the ideas and entrepreneurs in Hong Kong. So far, two projects have signed up, and when fund2.me goes live in December, there should be five projects for investors to consider.

 

Have you got any stories that Lai See should know about? E-mail them to howard.winn@scmp.com

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4

This article is now closed to comments

dienw
This is not as easy as it seems. There are difficult regulatory hurdle to negotiate.
raysun2005
Please talk to the SFC first, you might need to get an approval for CIS (Collective Investment Scheme........
MKrostewitz
Hi Dienw, you speak of my mind and we had a taff time to get everything in order. That's why we are very proud to ensure you that we've done our homework and managed to confirm with all regulatories + even more...
Regards
Mathias
tranquilben
make sure the site is in Chinese. in case you didn't do your homework, 99.9% of people in HK and China is Chinese. do your homework, make sure the site is not simply localized in Chinese but it's the look and feel of a Chinese website. why? you figure that out.
 
 
 
 
 

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