Crowdfunding is changing the face of traditional financing, and the practice — which enables individuals or companies to raise money from small investors over the Internet — has surfed on the rising popularity of handheld devices to make the alternative service desirable in Taiwan.
While still small, the crowdfunding market is quickly gaining momentum, with companies such as the pioneering Flying V offering donation-based funding for creative individuals and tech startups. On Friday, the Taiwanese version of Kickstarter released its annual report showing it brought in NT$133.33 million (US$3.96 million) for 282 projects last year. That amount was 16.4 percent higher than the NT$114.59 million raised for 238 projects in 2014 and more than the NT$41.6 million obtained for 110 projects in 2013.
Crowdfunding is a relatively new way to raise money from individuals who believe in what other people are trying to accomplish or support endeavors initiated by micro businesses. It reflects a new culture and mentality of people willing to engage in other people’s innovative ideas and business development activities. At the same time, the emergence of crowdfunding allows ordinary people, rather than banks, to have a greater say in the projects they care about. It resembles a kind of democracy in the financial arena.
Statistics compiled by Flying V, Taiwan’s largest crowdfunding platform, show that donors on average are about 30 years old. The prime time slot to make donations is from 9pm to 11pm on Tuesday’s and Wednesday’s. People have donated more money to projects focusing on technological applications (on average NT$2,899 per donation) and designing products (on average NT$2,311 per donation) than any other projects.
As more business startups embrace the Internet trend, crowdfunding has also gradually secured a place in the entrepreneurial landscape versus traditional venture capital and angel investing in fledging firms. Apart from attracting investors at lower investment thresholds, such online platforms also help collect feedback from early adopters before they introduce their final products or services. Accordingly, many new crowdfunding platforms have emerged in rapid succession over the past few years with investments in business startups, education and philanthropic projects to films, music and other creative industries.
Crowdfunding has also gained government attention, with the Financial Supervisory Commission announcing rules for equity crowdfunding platforms operated by local securities brokers last year, after launching a crowdfunding platform for fledgling firms listed on the Taipei Exchange’s Go Incubation Board in 2014. Overall, this type of equity-based crowdfunding provides investors with opportunities to hold shares in their interested startups or small businesses in exchange for their money, while business startups can obtain initial seed funding prior to approaching angel investors or venture capital firms for long-term development.
However, the commission’s regulations for equity crowdfunding platforms — such as a maximum of NT$50,000 per person; a maximum NT$100,000 investment in one crowdfunding platform per year; and a NT$15 million per year cap on fundraising on crowdfunding platforms — are intended to protect investors and maintain market order, but might end up dampening interest from both investors and businesses.
Therefore, although it is a milestone for the commission to begin equity-type crowdfunding to fill the gap in local capital markets, there remain problems. A NT$15 million cap per year is too small to help many entrepreneurs to start their business. Investors might not be as interested in low returns. The commission’s protective mentality could be a drag on the government’s effort to promoting crowdfunding in the long-term.
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