Singapore wants to make it easier to invest in startups through crowdfunding

Photo credit: epSos.de.

The Monetary Authority of Singapore (MAS) is the grand czar of what’s possible and what’s not when it comes to money in the city-state. As arbiters go, it seems to be down with the times. Yesterday it announced it wants to make access to securities-based crowdfunding easier for startups and small- and medium-sized enterprises (SMEs).

These are the most important changes that MAS is making:

Equity-based crowdfunding platforms can rely on “small offers” regulations

Platforms that use crowdfunding to invest in startups and SMEs can now raise funds using existing regulations. These regulations allow issuers who raise less than US$3.71 million within 12 months to do so without a prospectus – what’s known under Singapore law as the small offers exemption.

Crowdfunding platform operators will be required to disclose the risks of such investments to investors and make sure they acknowledge those risks.

Lower requirements for intermediaries

The new regulations will allow crowdfunding platform operators to be licensed as dealing intermediaries, raising funds only through accredited and institutional investors. The base capital and minimum operational risk requirement is lowered from US$185,440 to US$37,100. A requirement for a US$74,000 security deposit is waived.

New guidelines on advertising and FAQs

The new guidelines will allow crowdfunding platform operators to advertise their services and will provide guidance in how they can do so. This exempts these sites from restrictions outlined in Singapore’s Securities and Futures Act. Frequently asked questions lists will also help educate interested parties about such investments.

The move by MAS acknowledges the crowdfunding market that has been growing in Singapore with companies like Fundnel that invest in startups and SMEs using fundraising campaigns, offering rewards like revenue sharing and even equities and bonds.

By normalizing the practice like this and offering some manner of oversight, it encourages investors who felt reluctant to join in and opens up another avenue for funding to smaller businesses.

Converted from Singapore dollars. US$1 = S$1.35