Equity Crowdfunding

Equity crowdfunding innovated on the first rewards-based crowdfunding model by offering individuals the opportunity to invest in companies in return for a direct equity stake in that company.

Entrepreneurs offer a slice of their company's equity for a set period of time. Registered investors can take up the investment block they are comfortable with. Once the exercise is completed, the investor becomes a shareholder of the company with all the associated rights and benefits.

Why Is Equity Crowdfunding So Exciting?

The most common kind of crowdfunding is reward-based crowdfunding. Popular rewards-based crowdfunding sites such as Kickstarter and Indiegogo in US list many projects where backers pledge money in return for 'rewards' from the project founders. pitchIN operates a Rewards-based platform at reward.pitchin.my.

The popularity of rewards-based crowdfunding led to innovation in the crowdfunding industry. Today there are platforms that have taken different approaches to crowdfunding like equity crowdfunding, property and debt crowdfunding.

Is Equity Crowdfunding Legal And Safe?

All investments carry risks and equity crowdfunding is no exception. The typical company raising capital of an equity crowdfunding platform is an early stage company with all the inherent risks a new business goes through. Companies can fail or perform below expectations. Fraud may be a risk too but this is where regulations come into play.

All over the world, equity crowdfunding is regulated by securities regulators. Locally, the Securities Commission of Malaysia only allows approved platforms to offer equity crowdfunding. In addition to that, the Securities Commission has set rules and guidelines that must be followed by all approved platforms. pitchIN is registered with the Securities Commission of Malaysia as a Recognized Market Operator (RMO) for the purpose of offering Equity Crowdfunding related services. You can also download the rules and guidelines in relation to Equity Crowdfunding by the Securities Commission of Malaysia here

ECF & The Angel Tax Incentive (ATI)

Equity Crowdfunding is an eligible avenue of investment for the Angel Tax Incentive (ATI). Both the investee and the investor must be registered with and accredited by the Malaysian Business Angel Network (MBAN).

The minimum amount per investment is RM5,000.00 and up to a maximum of RM500,000.00 investment per annum in total.

The eligibility criteria consists of the following:

  • Must be a tax resident in Malaysia;
  • Either considered a High Net Worth Individual or High Income Earner
    • High Net Worth Individual — Total wealth or net personal assets of RM3 million and above or its equivalent in foreign currencies; OR
    • High Income Earner — The gross annual income of not less than RM180,000.00 in the preceding twelve (12) months; OR
    • High Income Earner — Jointly with one’s spouse, a gross amount total annual income of RM250,000.00 in the preceding twelve (12) months.

For more info, visit https://www.mban.com.my/angel-tax-incentive

What Is CFVC?

Crowd-Funded Venture Capital (CFVC) are Microfunds that will be set up on pitchIN. Only registered venture capital funds are allowed to raise MicroFunds on the platform. These CFVCs can raise money for investments on pitchIN only from sophisticated investors.

The eligibility criteria consists of the following:

  • VCs must be registered with the Securities Commission.
  • Only sophisticated investors can join a CFVC.
  • Funds raised by a CFVC must only be used to invest in Issues listed on pitchIN.
Equity Crowdfunding is risky. You are investing in early stage companies which may not do well and could even fail. You could lose part or all of your investment. You may not be able to sell your shares easily. Learn more