Equity Crowdfunding (ECF)
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Understanding Campaign Deal Terms
pitchIN allows startups and businesses to determine the deal terms when selling their securities. Here are some definitions and explanations that can assist you in making informed investment decisions.
Funding Goal: All or nothing
- Minimum funding goal: If the startup or businesses fails to reach the minimum funding goal before the end of the campaign, the campaign is considered unsuccessful, and all investors' investments are refunded.
- Maximum funding goal: Once the funding target is met, the startup or businesses will halt accepting further investments. This target is known as the maximum amount that they intends to raise.
- Conventional ECF: Open to all investors.
- Shariah Compliance: Adheres to Islamic principles and is restricted to investors who comply with those principles.
Typically, startups or businesses decide the amount of equity they are willing to offer, but it usually does not exceed 30%.
Issuers have several methods to determine their valuation, such as:
- Qualitative methods like scorecard and checklist methods.
- VC and DCF methods depending on their financial projections.
It is important to note that pitchIN cannot advise companies on their valuations, as they are mostly determined by the companies themselves. As an investor, it is recommended to ask the founder about their justification for the valuation and to only invest an amount that you can afford to lose.
- Minimum amount: Minimum investment amount for an equity crowdfunding campaign is determined by the price per lot of share that is specified by the issuer. The lot size is the number of shares included in each unit of investment, and the minimum investment amount will depend on the price per share and the number of shares in each lot.
- Maximum amount: Refers to the upper limit set by the ECF platform for an investor's investment in a campaign. The limit is based on regulatory requirements or issuer's discretion, but investors can choose to invest more up to a certain extent. However, pitchIN will only accept investments up to a certain amount, and any excess funds will be returned. Investors should check investment limits before investing to avoid exceeding the allowed amount.
Regardless of the funding outcome, each startup campaign will have a fixed duration:
- Each campaign has a start and an end date: Typically a campaign runs for 3-6 months. Once the dates for a campaign are set, they are fixed and cannot be altered. Investors can invest in the startup or businesses until the end date of the campaign, regardless of whether or not the startup has reached its funding goal.
- Campaign can end earlier before end date: Startups and businesses have the option to conclude their campaign if they achieve their minimum funding goal before the set end date. Additionally, they have the flexibility to modify their campaign duration under certain circumstances.
The stages of the campaign
|Pre-live stage will take place for 30-45 days.
|The pre-live dates can be extended depending on the response from Investors. However, do note that if the dates are extended, the close campaign date will extend as well.
|Live stage will take place for 30-45 days.
|The live dates can be extended depending on the response from Investors and the finalization of due diligence matters. However, do note that if the dates are extended, the close campaign date will extend as well.
|Includes 6 days cooling-off period and MyCIF application.
|4-6 weeks after the campaign close date.
|This depends on the response of MyCIF and Company Secretary.
The status of the campaign
|The pre-live phase is aimed at converting early investors before the campaign goes live. The objective is to convert as many early investors as possible before the campaign goes live, ideally achieving a good percentage of the target before launch.
|If we are satisfied with issuer’s performance during the pre-live initiative and choose to proceed with the live launch, we will notify our investors once more and recommend that the issuer also reach out to them. At this stage, we will endeavor to finalize the round and promote issuer company's campaigns and direction through various press and media channels. Additionally, we will invite the issuers to participate in our pitchIN Thursday's session once again, where we will help them to engage with the press and media to produce public releases that will encourage more investors to join the platform.
|The cooling off period marks the final opportunity for you as investors to either withdraw from or increase your investment.
|During the share allotment stage, the legal team will work with the issuer to finalize the share allotment process. At this point, the issuers are in the process of completing the required administrative procedures for issuing the shares.
|Following the completion of share allotment, the campaign is deemed successful, and investors can obtain their digital share certificate through their investor dashboard. This certificate will indicate the number of shares they possess in the company they invested.
|Equity crowdfunding campaigns require a minimum investment target to be reached before the campaign deadline to be considered successful. Failing to meet the target within the deadline renders the campaign unsuccessful, and the issuer may extend the deadline or withdraw the campaign if necessary. If the issuer faces unavoidable issues, they can withdraw from the ECF campaign. Regardless of the reason for withdrawal, investors will receive a refund of their investments.
Here are the share types that are frequently utilized in pitchIN ECF campaigns:
|These are the most common type of shares issued by companies, and represent ownership in the company. Ordinary shareholders typically have the right to vote on company matters and receive dividends if the company is profitable. They are also last in line to receive assets if the company goes bankrupt.
|These shares come with certain rights and privileges that are not available to ordinary shareholders, such as a fixed dividend or priority in receiving assets if the company goes bankrupt. However, preference shareholders usually do not have voting rights.
|These shares can be bought back by the company at a fixed price, either on a specific date or at the discretion of the company. They are typically used as a way for companies to raise capital without diluting the ownership of existing shareholders.
|These shares can be converted into another type of security, such as ordinary shares or preference shares, at a certain point in the future. They are often used as a way for companies to offer investors the potential for future upside while also providing some downside protection.
|These shares cannot be bought back by the company at a fixed price, and typically represent a more permanent ownership stake in the company.
|Redeemable Cumulative Shares
|These shares are similar to redeemable shares, but also come with a cumulative dividend that must be paid before any other dividends are paid out. This can make them a more attractive investment option for investors seeking regular income.
To learn more about the different share types and what they mean for investors, check out our guide to ECF share types for issuers.