What Is Crowdfunding?

Crowdfunding is one of the method of increasing fund or capital through the help of family member, friends, individual investors or even customers. This method involved large group of individual who mainly are lender online from social media in which crowdfunding platform is used for greater exposure. Crowdfunding is also a form of crowdsourcing and of alternative finance (What is Crowdfunding?, 2018). Based on the wedsite “Fundable”, there are four type of crowdfunding which are equity crowdfunding, reward crowdfunding, lending crowdfunding and donation crowdfunding (Type of Crowdfunding, 2018). Crowdfunding techniques have contributed millions of money through websites such as Kickstarter and IndieGogo besides been used for scientific research, philanthropic enterprises, and other purposes.  

Peer-to-peer lending, also known as P2P lending is a also a way of debt financing which enable people to lend and borrow money or funds without financial institution. Harnessing big data and technology, P2P platforms enable borrowers to connect to investors cheaper and faster than any bank (Galland, 2017). Although it involved more time, effort and also risk than general direct approach lending situation, middleman was eliminated during the process of P2P lending (Peer-To-Peer Lending (P2P), 2018). P2P investments have low correlation and less volatility when compared to stock markets and able to link investor to borrowers with agreeable interest rate (Galland, 2017).”

These two method related to global corporate finance as crowdfunding and P2P will involve in financing activities through the issuance of securities. “A cost effective way provided by crowdfunding for business to solicit potential investors and provide investors ways to diversify their risk by making purchases of shares in private company that only used to hedge funds, private equity concerns and other large investors (LLP, 2014).” Example of one of the most successful campaign include development of “smart watch” by Pebble Technology Corporation in which US$10.2 million been raised by 68,928 contributors. “Furthermore, equity based crowdfunding is becoming popular nowadays because it allows start-up companies to raise funds without giving up control to venture capital investors besides offering investors the opportunity to earn equity position in the venture” (Crowdfunding, 2018). “Reward-based crowdfunding is when investors have the chance to participate in the opening of a new product or receive gift from their investment” (Crowdfunding, 2018). For example, investors who invest in the maker of a new soap receive a free bar of soap made out of bacon fat and investors rewarded with copies of new games for investing in new video games. P2P lending is referring to an online platform like Lending Club which was introduced by Zopa that matches lenders to borrowers. In 2016, Securities Commission Malaysia issued the framework for P2P lending in Malaysia and this enables Malaysia became the first ASEAN country to regulate P2P lending (Fong, 2018). Other than expanding the number of people you can borrow through Lending Club, international P2P lending sites can offer attractive return in US Dollar through some fintech crowdfunding like CrowdPlus.asia, Mystartr and pitchIN.