Regulator gives nod to crowdfunding
Start-ups and small entrepreneurs will reach more potential investors through crowdfunding if the Securities and Exchange Commission (SEC) implements its plan this year to allow online fund-raising.
The move would prompt a major shift in how innovative companies raise funds from the equity market to help their projects succeed.
Crowdfunding is an alternative way for businesses or projects to raise money from a large number of people, usually via the internet.
The SEC is drafting regulations governing offering equity through crowdfunding to support small businesses and start-ups, said secretary-general Vorapol Socatiyanurak.
The securities watchdog aims to use the local capital market to widen funding sources for small and medium-sized enterprises (SMEs), particularly start-ups, for their business expansion.
A crowdfunding portal could also help small businesses to catch the eye of their international counterparts to pave the way for penetrating the global market.
Mr Vorapol said crowdfunding would create a win-win situation for all parties. Entrepreneurs would have a greater chance to access funding to make their innovative ideas or products viable, while investors would have more choices, the Thai capital market could become a regional financial centre and the country could move towards becoming a value-driven economy in the near future.
He said the SEC would take responsibility for governing crowdfunding, while a website would publicise new ideas and solicit retail investors.
The SEC would govern funding portals to prevent any fraud, while the portals should conduct due diligence of investments as a guideline for investors.
"Investors must understand well the innovative ideas that could be a success or failure commercially, so they must evaluate and predict possible profits," said Mr Vorapol.
"However, the SEC will limit the investment amount for each person who can join the investment in order to minimise risk. This concept is also in line with other countries."
A World Bank study found that crowdfunding will continue to grow and estimated that the global market could reach US$90-96 billion by 2025.
Crowdfunding allows start-ups to connect easily with investors without going through a costly middleman, while entrepreneurs can reach people beyond their networks.
Mr Vorapol said crowdfunding could be done via four platforms — donations, rewards, lending and investing in equity.
Participants at the CrowdFunding Asia Thailand Summit 2015 in Bangkok today and yesterday include Chi Eco-Plastic Home & Decoration, Cookeattravel.com, Dipify.com, Foodstory, Gift from Java: Punokawan Pilot Episode and Art and Book Publishing, ISO Basecamp, Juice Queen – Mobile Juice Bar & Organic Cafe, Parking Duck, Peakable, Sellsuki, Sinwattana, Smartroad Tools and Wassadu Application.
Prapan Charoenprawat, president of the Market for Alternative Investment (MAI), said the bourse would support crowdfunding as a crucial tool to help SMEs grow but it would take time.
Many ideas could become economically viable and big enough to list on the stock exchange, allowing investors to exit their investment with a high profit.
Mr Prapan said the MAI, a bourse for small businesses, had grown rapidly as entrepreneurs recognised its value for mobilising funds for expansion.
The second-tier exchange aims to increase its market capitalisation by 15 billion baht through the listing of 20 companies this year. Four will go public in the first half and the rest in the latter half.