Lai See | The colourful world of crowdfunding
We recently wrote about how crowdfunding was getting under way in Hong Kong. Last week, another site, Bigcolors.com went live. "The reason we call it Bigcolors is that we love big ideas, we love big inspiration, and we want to make colourful ideas reality," says co-founder Australian James Giancotti.
Giancotti has a law degree and worked in management consulting in Australia before coming to Hong Kong where he joined JPMorgan before spending three years with Goldman Sachs. He credits Goldman with teaching him about risk, a key element in investing in start-ups.
He has been involved in start-ups for some years and invested in what has been a Hong Kong success story - 3-D printing manufacturer Makible. He invested HK$200,000 for 13 per cent of the company and it grew in a short period to become a US$30 million to US$40 million company.
Giancotti started Bigcolors because he was getting requests for funding from start-ups but he turned down a lot of them because he did not like the concept or feel passionate about them. But he realised others might feel differently about them.
Bigcolors will raise a maximum of US$100,000 for an idea, and for that entrepreneurs will give up 20 per cent of the company. But they can alternatively just raise US$25,000 or US$50,000 and part with respectively 5 per cent and 10 per cent. When the idea is posted on the site, it then undergoes a two-week due diligence process by Bigcolors. Once approved, the idea is open to funding for eight weeks.
In a novel variation, should the funding be completed ahead of this period, investors can trade options, that is, trade the rights to own shares in the future company. Giancotti says this is a grey area and there are no regulations in the city that prevent this. At the end of the period, if the company reaches its target, those holding the options become shareholders. At this stage, only accredited investors can invest. Under Securities and Futures Commission regulations, they are required to have assets of HK$8 million with revenue of about HK$2 million a year, and must also be conversant with the risks of investing in start-ups.