The changing crowdfunding landscape in Southeast Asia

Photo credit: Michael Siebert.

The financial industry was once controlled by gatekeepers who restricted the flow of capital to select businesses. But today, the technological possibilities for obtaining capital are almost endless.

As other industries struggle to adapt their businesses to a changing world, crowdfunding has become a thriving and durable growth industry.

Entrepreneurs and startups no longer need to rely exclusively on a relatively small number of investors with deep pockets and lots of cash. They can fund their projects by accumulating capital from a large number of people. Many have actually benefited a great deal from the diffusion of capital and the fluidity and flexibility of the crowdfunding model.

As other industries struggle to adapt their businesses to a changing world, crowdfunding has become a thriving and durable growth industry.

Southeast Asia probably stands to benefit the most from the proliferation of crowdfunding platforms and other financing methods simply because these funding sources address the needs of local businesses in a much more intimate and consistent manner than traditional banking.

According to Benjamin Twoon and Justin Chow, co-founders of the crowdfunding platform Fundnel, many small-to-medium enterprises in Southeast Asia, even with their voracious need for more capital, still face prohibitive barriers to raising money from angel investors, venture capital funds, or banks. Due to the paucity of good funding options, they must resort to other means.

The growth of crowdfunding in Asia

Although crowdfunding is still in its infancy, Asia is poised to catch up quickly. In 2015, crowdfunding ventures in the region grew at more than twice the rate of crowdfunding in Europe, Africa, or the Americas.

In the coming years, Asia will inevitably eclipse North America to become the world leader in crowdfunding. Yet compared to the size of its population, the region still remains a relative laggard.

Between China and Southeast Asia, only a few billion dollars flow into crowdfunding projects every year—a comparatively small part of the global US$34 billion market.

Crowdfunding needs the right conditions in which to thrive. If those conditions are ever met, Southeast Asia could witness an explosion in new financing opportunities. However, that grandiose vision may or may not ever materialize. Nevertheless, crowdfunding can certainly serve to improve the persistent funding gap in Southeast Asia.

The governments in the region would certainly like to attract more equity crowdfunding capital in the hopes of fostering entrepreneurs who could expand the region’s comparatively meager base of tech companies and startups.

Signs that the landscape is changing